<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
                    FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                        OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                    COMMISSION FILE NUMBER 0-22790

                         STATEFED FINANCIAL CORPORATION
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

               Delaware                                           42-1410788
--------------------------------------------                 -------------------
      (State or other jurisdiction of                        (I.R.S. Employer
       incorporation or organization)                        Identification No.)

    13523 University Avenue Clive, Iowa                             50325
--------------------------------------------                 -------------------
  (Address of principal executive offices)                        (Zip Code)

   Registrant's telephone number, including area code:         (515) 223-8484
                                                             -------------------

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
--------------------------------------------------------------------------------
           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
--------------------------------------------------------------------------------
                                (Title of class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. YES X . NO ___.

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X] State the issuer's revenue for the
most recent fiscal year: $8.8 million.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the average of the bid and asked
prices of such stock on the NASDAQ System as of September 4, 2001, was $11.9
million. (The exclusion from such amount of the market value of the shares owned
by any person shall not be deemed an admission by the registrant that such
person is an affiliate of the registrant.)

         As of September 4, 2001, there were issued and outstanding 1,277,326
shares of the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form 10-KSB - Annual Report to Stockholders for the fiscal year ended
June 30, 2001.

Part III of Form 10-KSB - Proxy Statement for 2001 Annual Meeting of
Stockholders.

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

GENERAL

         THE COMPANY. StateFed Financial Corporation (the "Company" or the
"Holding Company"), a Delaware corporation, was formed in September, 1993 to act
as the holding company for State Federal Savings and Loan Association of Des
Moines ("State Federal" or the "Association") upon the completion of the
Association's conversion from the mutual to the stock form (the "Conversion").
The Company received approval from the Office of Thrift Supervision (the "OTS")
to acquire all of the common stock of the Association to be outstanding upon
completion of the Conversion. The Conversion was completed on January 4, 1994.
Unless the context otherwise requires, all references to the Company include the
Company and the Association on a consolidated basis.

         At June 30, 2001, the Company had $107.5 million of assets and
stockholders' equity of $14.1 million (or 13.1% of total assets).

         State Federal is a federally chartered savings and loan association
headquartered in Des Moines, Iowa. Its deposits are insured up to applicable
limits by the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation (the "FDIC"), which is backed by the full faith and credit
of the United States.

         The principal business of the Association consists of attracting retail
deposits from the general public and investing those funds primarily in
one-to-four family residential mortgage and commercial and multi-family real
estate loans, and, to a lesser extent, construction and consumer loans primarily
in the Association's market area. The Association also invests in U.S.
Government and agency obligations and other permissible investments. At June 30,
2001, substantially all of the Association's real estate mortgage loans were
secured by properties located in Iowa.

         The Association's revenues are derived primarily from interest on
mortgage loans and investments, income from service charges and loan
originations, and income from real estate operations. The Association does not
originate loans to fund leveraged buyouts and has no loans to foreign
corporations or governments.

         The Association offers a variety of accounts having a wide range of
interest rates and terms. The Association's deposits include savings accounts,
money market savings accounts, checking accounts and certificate accounts with
terms of three months to 60 months. Currently, the Association only solicits
deposits in its primary market area and does not accept brokered deposits,
although management may on occasion accept brokered deposits in the future as
market conditions may dictate.

         The main office of the Association is located at 13523 University
Avenue Clive, Iowa 50325, which is located in Polk County. Its telephone number
at that address is (515) 223-8484. The Association maintains two other offices
in Des Moines, Iowa. The Association considers its primary market area to
comprise parts of Polk, Dallas and Warren Counties.

FORWARD-LOOKING STATEMENTS

         When used in this Form 10-KSB and in future filings by the Company with
the Securities and Exchange Commission (the "SEC"), in the Company's press
releases or other public or shareholder communications, and in oral statements
made with the approval of an authorized executive officer, the words or phrases
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including, among other things, changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to

                                       1
<PAGE>

place undue reliance on any such forward-looking statements, which speak only as
of the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.

         The Company does not undertake--and specifically declines any
obligation--to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.

LENDING ACTIVITIES

         GENERAL. Historically, the Association has originated fixed-rate,
one-to-four family residential mortgage loans. In the early 1980's, the
Association began to focus on the origination of adjustable-rate mortgage
("ARM") loans, in order to increase the percentage of loans in its portfolio
with more frequent repricing than fixed-rate mortgage loans. While the
Association has continued to originate fixed-rate mortgage loans in response to
customer demand, it also continues to offer ARMs. The Association also, from
time to time, purchases loans.

         While the Association primarily focuses its lending activities on the
origination of loans secured by first mortgages on owner-occupied one-to-four
family residences, it also originates multi-family and commercial real estate
and, to a lesser extent, construction and consumer loans in its primary market
area. At June 30, 2001, the Association's net loan portfolio totaled $87.9
million.

         The Loan Committee of the Association, comprised of executive officers
Wood and Black and Chairman Bray has the immediate responsibility for the
supervision of the Association's loan portfolio. The Association's loan policy
requires full Board approval on all loans. The Board of Directors has
responsibility for the overall supervision of the Association's loan portfolio
and in addition, reviews all foreclosure actions or the taking of deeds-in-lieu
of foreclosure.

         The aggregate amount of loans that the Association is permitted to make
under applicable federal regulations to any one borrower, including related
entities, or the aggregate amount that the Association could have invested in
any one real estate project is generally the greater of 15% of unimpaired
capital and surplus or $500,000. See "Regulation - Federal Regulation of Savings
Associations." At June 30, 2001, the maximum amount which the Association could
have lent to any one borrower and the borrower's related entities was
approximately $1.6 million. At that date the largest loan to one borrower or
group of related borrowers consisted of 57 loans to one borrower totaling $1.4
million. All of such loans were performing in accordance with their terms.
Currently, it is the Association's policy to limit its loans to one borrower to
the maximum regulatory limit. The Association reserves the right to discontinue,
adjust or create new lending programs to respond to its needs and to competitive
factors, and on occasion the Association's holding company has participated in
loans with the Association, which loans would have exceeded the limit on loans
to one borrower had such loans been made by the Association.



                                       2
<PAGE>

         LOAN PORTFOLIO COMPOSITION. The following table presents the
composition of the Company's loan portfolio in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and the
allowances for loan losses) of total loans as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                     June 30,
                                                 -----------------------------------------------------------------------------------
                                                           2001                        2000                         1999
                                                 -----------------------------------------------------------------------------------
                                                  Amount      Percent          Amount         Percent        Amount        Percent
                                                 -----------------------------------------------------------------------------------
                                                                                (Dollars in Thousands)
Real Estate Loans
-----------------
<S>                                                  <C>           <C>          <C>            <C>           <C>            <C>
 One-to-four family .............................    $55,179       61.77 %      $54,078        61.95 %       $46,178        62.55 %
 Multi-family and Commercial ....................     31,243       34.97         31,071        35.59          24,340        32.91
 Construction or development ....................      1,309        1.46            719         0.83           2,025         2.74
                                                     -------     -------        -------      -------         -------      -------
     Total real estate loans ....................    $87,731       98.20         85,868        98.37          72,543        98.26

Other Loans:
------------
 Consumer Loans:
  Deposit account ...............................        117        0.13            186         0.21             141         0.19
  Other .........................................      1,489        1.67          1,240         1.42           1,140         1.55
                                                     -------     -------        -------      -------         -------      -------
     Total consumer loans .......................      1,606        1.80          1,426         1.63           1,281         1.74
                                                     -------     -------        -------      -------         -------      -------

     Total loans ................................     89,337      100.00 %       87,294       100.00 %        73,824       100.00 %
                                                                 =======                     =======                      =======
Less:
----
 Loans in process ...............................       (717)                      (141)                        (963)
 Deferred fees and discounts ....................       (339)                      (321)                        (288)
 Allowance for losses ...........................       (382)                        259                        (242)
                                                      -------                    -------                      -------
 Total loans receivable, net ....................     $87,899                    $86,573                      $72,331
                                                      =======                    =======                      -------
</TABLE>

                                       3
<PAGE>


         The following table shows the composition of the Company's loan
portfolio by fixed and adjustable rate at the dates indicated.

<TABLE>
<CAPTION>
                                                                                         JUNE 30,
                                                    --------------------------------------------------------------------------------
                                                               2001                        2000                        1999
                                                    --------------------------------------------------------------------------------
                                                        AMOUNT      PERCENT         AMOUNT       PERCENT        AMOUNT      PERCENT
                                                    --------------------------------------------------------------------------------
                                                                                       (Dollars in Thousands)
Fixed Rate Loans:
----------------
<S>                                                   <C>             <C>           <C>           <C>          <C>           <C>
 Real estate:
  One-to-four family .............................    $  42,100       47.13%        $37,398       42.84%       $28,310       38.35%
  Multi-family and Commercial ....................       15,402        17.24         15,286        17.51        14,330        19.41
  Construction or development ....................        1,309         1.46            719          .83         2,025         2.74
                                                      ---------     --------      ---------     --------       -------      -------
     Total real estate loans .....................       58,811        65.83         53,403        61.18        44,665        60.50
 Consumer ........................................        1,606         1.80          1,426         1.63         1,281         1.74
                                                      ---------     --------      ---------     --------       -------      -------
     Total fixed-rate loans ......................       60,417        67.63         54,829        62.81        45,946        62.24

Adjustable Rate Loans:
---------------------
 Real estate:
  One-to-four family .............................       13,079        14.64         16,680        19.11        17,868        24.20
  Multi-family and Commercial ....................       15,841       17.73          15,785        18.08        10,010        13.56
                                                      ---------     --------      ---------     --------       -------      -------
     Total real estate loans .....................       28,920        32.37         32,465        37.19        27,878        37.76
 Consumer ........................................          ---          ---            ---          ---           ---          ---
                                                      ---------     --------      ---------     --------       -------      -------
     Total adjustable rate loans .................       28,920        32.37         32,465        37.19        27,878          ---
                                                      ---------     --------      ---------     --------       -------      -------
     Total loans .................................       89,337      100.00%         87,294       100.00%       73,824       100.00%
                                                                     ======                       ======                     ======
LESS:
----
 Loans in process ................................         (717)                       (141)                      (963)
 Deferred fees and discounts .....................         (339)                       (321)                      (288)
 Allowance for loan losses .......................         (382)                       (259)                      (242)
                                                        -------                     -------                    -------
    Total loans receivable, net ..................      $87,899                     $86,573                    $72,331
                                                        =======                     =======                    =======
</TABLE>

                                       4
<PAGE>

         The following schedule illustrates the interest rate sensitivity of the
Company's loan portfolio at June 30, 2001. Mortgages which have fixed,
adjustable or renegotiable interest rates are shown as maturing at the
contractual maturity date. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
                                                                                    Real Estate
                                     -----------------------------------------------------------------------------------------------
                                                          Multi-family and   Construction
                                     One-to-four family     Commercial       or Development        Consumer          Total
                                     ------------------ ------------------- ------------------ ------------------ ------------------
                                              Weighted            Weighted           Weighted           Weighted           Weighted
                                              Average             Average            Average            Average            Average
                                      Amount   Rate      Amount   Rate       Amount  Rate       Amount  Rate       Amount  Rate
                                     -------- --------- --------  --------- -------- --------- -------- --------- -------- ---------
                                                                                            (Dollars in Thousands)
<S>                                  <C>        <C>       <C>       <C>       <C>       <C>      <C>       <C>     <C>        <C>
Due During Years Ending
June 30, (1)
2002 .............................   $ 1,205    8.82%     $9,967    8.93%     $1,309    9.49%    $223      9.45%   $12,704    8.99%
2003 .............................     5,276    8.56       4,900    8.53         ---     ---      237      9.47     10,413    8.57
2004 .............................     9,407    8.34       3,314    8.86         ---     ---      277      9.20     12,998    8.49
2005-2009 ........................    11,377    8.30       7,110    8.86         ---     ---      829      9.13     19,316    8.54
After 2009 .......................   $27,914    8.28%     $5,952    8.64%     $  ---     ---%    $ 40      9.50%   $33,906    8.34%

</TABLE>
-------------
         (1)  Includes construction loans which the Association reclassifies as
permanent loans once the construction phase is completed.

         The total amount of loans due after June 30, 2002 which have fixed
interest rates is $56.9 million, while the total amount of loans due after such
dates which have floating or adjustable interest rates is $19.7 million.




                                       5
<PAGE>

         ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE LENDING. Loans of this type are
generated by the Company's marketing efforts, its present customers, walk-in
customers and referrals from real estate agents and builders. The Company
focuses its lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied, one-to-four family residences. At June 30,
2001, the Company's one-to-four family residential mortgage loans totaled $55.2
million, or approximately 61.8% of the Company's total gross loan portfolio.

         The Company currently offers ARM payment and fixed-rate mortgage loans.
During the year ended June 30, 2001, the Association originated $1.0 million of
adjustable-rate real estate loans, which were secured by one-to-four family
residential real estate. During the same period, the Company originated $12.1
million of fixed-rate real estate loans, secured by one-to-four family
residential real estate. The Company's one-to-four family residential mortgage
originations are primarily in its market and surrounding areas, and no such
loans were sold during the three year period ended June 30, 2001.

         The Company currently originates up to a maximum of 30-year,
fixed-rate, one-to-four family residential mortgage loans in amounts up to 90%
of the appraised value of the security property provided that private mortgage
insurance is obtained in an amount sufficient to reduce the Company's exposure
to at or below the 80% loan-to-value level. The Company may consider raising the
loan-to-value ratio in the future as regulations permit. Due to consumer demand,
the Company also has offered fixed-rate 10- through 15-year mortgage loans, most
of which conform to secondary market standards (i.e., Federal National Mortgage
Association ("FNMA"), Government National Mortgage Association ("GNMA"), and
Federal Home Loan Mortgage Corporation ("FHLMC") standards).

         Interest rates charged on these fixed-rate loans are priced according
to market conditions, although management does not currently anticipate offering
rates at the most competitive end of the market. Residential loans generally do
not include prepayment penalties. As with all loans the Company originates, the
Company retains its fixed-rate loans in its portfolio.

         The Company also currently offers thirty year amortization ARM loans
with interest rate adjustments occurring after one, and to a lesser extent,
three, five and seven year terms with an interest rate margin generally 300
basis points over one year Treasury rates. These loans have a fixed-rate for the
stated period and, thereafter, such loans adjust periodically, pursuant to the
contractual term. These loans provide for up to a 100 basis point annual cap and
a lifetime cap of 600 basis points over the initial rate although the bulk of
the Association's ARMs are estimated by management to have 500 basis point
lifetime caps. Under the current ARM program, a 500 basis point lifetime cap is
being utilized. Under the contractual terms, the majority of such loans do not
adjust below the initial rate. As a consequence of using an initial fixed-rate
and caps, the interest rates on these loans may not be as rate sensitive as is
the Association's cost of funds. The Company's ARMs do not permit negative
amortization of principal. The Association generally qualifies borrowers above
the fully indexed rate.

         In underwriting one-to-four family residential real estate loans, State
Federal evaluates, among other things, both the borrower's ability to make
monthly payments and the value of the property securing the loan. Currently, all
properties securing real estate loans made by State Federal are appraised by
independent fee appraisers approved by the Board of Directors or by in-house
appraisers. State Federal generally requires borrowers to obtain an attorney's
title opinion, and fire and property insurance (including flood insurance, if
necessary) in an amount not less than the amount of the loan. State Federal now
requires title insurance. Real estate loans originated by the Association
generally contain a "due on sale" clause allowing the Association to declare the
unpaid principal balance due and payable upon the sale of the security property.

         MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The Company has also
engaged in commercial and multi-family real estate lending in its market area
and surrounding areas and has purchased participation interests in such loans
from other financial institutions throughout Iowa. At June 30, 2001, the Company
had $31.2 million of commercial and multi-family real estate loans, which
represented 35.0% of the Company's gross loan portfolio. There were four
multi-family and commercial real estate loans 30-89 days delinquent and three
non-performing loans totaling $1.1 million and $517,000, respective (five of the
loans were on properties located in the Des Moines area, one in Iowa City and
one commercial property located in Illinois). The commercial property in
Illinois for


                                       6
<PAGE>

$705,000 is paying as agreed and now current. The Company had multi-family and
commercial real estate loans, with an aggregate balance of $9.5 million at June
30, 2001, secured by real estate located in Texas, Colorado, Nebraska,
Minnesota, Nevada, California, Illinois, Wisconsin and Florida.

         Loans secured by commercial and multi-family real estate properties are
generally larger and involve a greater degree of credit risk than one-to-four
family residential mortgage loans. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to adverse conditions in the real estate market or the economy. If the
cash flow from the project is reduced (for example, if leases are not obtained
or renewed), the borrower's ability to repay the loan may be impaired.

         The Company's commercial and multi-family real estate loan portfolio is
secured primarily by apartment buildings and office buildings and, to a lesser
extent, strip shopping centers, motels, nursing homes and churches. Multi-family
and commercial real estate loans generally have terms that do not exceed 30
years. The Company has a variety of rate adjustment features and other terms in
its commercial and multi-family real estate loan portfolio. Generally, the loans
are made in amounts up to 80% of the appraised value of the security property.
Multi-family and commercial real estate loans provide for a margin over a
designated index which is generally the one-year Treasury bill rate. The Company
currently analyzes the financial condition of the borrower, the borrower's
credit history, and the reliability and predictability of the cash flow
generated by the property securing the loan. The Company requires personal
guaranties of the borrowers. Appraisals on properties securing commercial real
estate loans originated by the Association are performed by independent
appraisers.

         The following table breaks out the Company's commercial loan portfolio
by type of loan at the dates indicated.

<TABLE>
<CAPTION>
                                                                 June 30,
                                        ---------------------------------------------------------
                                                2001               2000                1999
                                        -------------------  ------------------  ----------------
                                                               (In Thousands)
            <S>                                  <C>                <C>               <C>
            Multi-family ..............           $10,956            $9,388            $9,222
            Nursing homes .............             2,030             1,653             1,697
            Churches ..................               525               598             1,129
            Motels ....................             6,037             5,097             3,321
            Shopping Centers ..........             1,305             2,056             1,136
            Commercial Buildings ......            10,390            12,279             7,835
                                                  -------           -------           -------
                 Total ................           $31,243           $31,071           $24,340
                                                  =======           =======           =======
</TABLE>

         This portfolio grew by $172,000 from fiscal 2000 to fiscal 2001, and
the portfolio comprised 35 percent of total loans in fiscal 2001 compared to 36
percent of total loans in fiscal 2000.

         CONSTRUCTION LENDING. The Company engages in limited amounts of
construction lending to individuals for the construction of their residences as
well as to builders for the construction of single family homes and commercial
properties in the Company's primary market area and surrounding areas. At June
30, 2001, the Company had $1.3 million of gross construction loans.

         Construction loans to individuals for their residences are structured
to be converted to permanent loans at the end of the construction phase, which
typically runs for twelve months. During the construction phase, the borrower
pays interest only. Residential construction loans are generally underwritten
pursuant to the same guidelines used for originating permanent residential
loans.

         All construction loans to builders require payment of interest only for
up to 12 months. At June 30, 2001, all of the Company's construction loans were
performing in accordance with their repayment terms.

                                       7
<PAGE>

         Because of the uncertainties inherent in estimating construction costs
and the market for the project upon completion, it is relatively difficult to
evaluate accurately the total loan funds required to complete a project, the
related loan-to-value ratios and the likelihood of ultimate success of the
project. Construction loans to borrowers other than owner-occupants also involve
many of the same risks discussed above regarding multi-family and commercial
real estate loans and tend to be more sensitive to general economic conditions
than many other types of loans. Also, the funding of loan fees and interest
during the construction phase makes the monitoring of the progress of the
project particularly important, as customary early warning signals of project
difficulties may not be present.

         CONSUMER LENDING. To a lesser extent, State Federal offers secured
consumer loans, including auto loans, home equity loans, and loans secured by
savings deposits. The Association currently originates all of its consumer loans
in its primary market area. The Association originates consumer loans on a
direct basis by extending credit directly to the borrower.

         Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans which are unsecured.
In such cases, any repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment of the outstanding loan balance as a
result of the greater likelihood of damage, loss or depreciation. In addition,
consumer loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be affected by adverse personal
circumstances. Furthermore, the application of various federal and state laws,
including bankruptcy and insolvency laws, may limit the amount which can be
recovered on such loans. At June 30, 2001, eight auto loans totaling $52,600 in
the consumer loan portfolio were non-performing. There can be no assurance as to
the delinquencies in the future.

         The largest component of State Federal's consumer loan portfolio
consists of auto loans. At June 30, 2001, such loans totaled $1.3 million or
approximately 1.5% of the Association's gross loan portfolio. During the fiscal
year ended June 30, 2001, the Association originated $1.1 million in auto loans
as compared to $814,000 originated in the same period ended June 30, 2000. At
June 30, 2001, the Association's consumer loan portfolio totaled $1.6 million or
1.8% of its total gross loan portfolio.

         Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. Loans secured by
deposit accounts at the Association are currently originated for up to 90% of
the account balance with a hold placed on the account restricting the withdrawal
of the account balance. The interest rate on such loans is typically equal to
200 basis points above the deposit contract rate.

         The underwriting standards employed by the Association for consumer
loans, other than loans secured by deposits, include an application, a
determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. Although creditworthiness of the applicant is a primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.

ORIGINATIONS AND PURCHASES OF LOANS

         Real estate loans are generally originated by State Federal's staff of
salaried loan officers. Loan applications are taken and processed in the office
and the branch of the Association.

         While the Company originates both adjustable-rate and fixed-rate loans,
its ability to originate loans is dependent upon the relative customer demand
for loans in its market. Demand is affected by the interest rate environment.
The Company is currently a portfolio lender.

         In fiscal 2001, the Company originated $18.2 million of loans, compared
to $18.0 million and $16.6 million in fiscal 2000 and 1999, respectively.
Principal repayments in fiscal 2001 increased by $10.5 million from $8.2 million
in fiscal 2000.

                                       8
<PAGE>

         In periods of economic uncertainty, the ability of financial
institutions, including State Federal, to originate large dollar volumes of real
estate loans may be substantially reduced or restricted, with a resultant
decrease in related loan origination fees, other fee income and operating
earnings.

         The following table shows the loan origination, purchase and repayment
activities of the Company for the periods indicated.

<TABLE>
<CAPTION>
                                                                        Year Ended June 30,
                                                           ------------------------------------------
                                                               2001            2000          1999
                                                           -------------- -------------- ------------
                                                                         (In Thousands)
Originations by type:
---------------------
<S>                                                             <C>          <C>             <C>
 Adjustable rate:
  Real estate - one-to-four family ................             $   896       $ 1,585         $ 2,093
              - multifamily and commercial ........               1,416           ---             ---
  Non-real estate - consumer ......................                 ---           ---             ---
                                                                -------       -------         -------
         Total adjustable-rate ....................               2,312         1,585           2,093
 Fixed rate:
  Real estate - one-to-four family ................              12,069        12,873           9,077
              - multifamily and commercial ........               2,486         2,236           4,396
  Non-real estate - consumer ......................               1,314         1,317           1,034

         Total fixed-rate .........................              15,869        16,426          14,507
                                                                -------       -------         -------
         Total loans originated ...................              18,181        18,011          16,600

Purchases:
---------
  Real estate - one-to-four family                              $   ---       $   ---         $   ---
              - commercial ........................               2,472         5,238           2,416
  Non-real estate - consumer ......................                 ---           ---             ---
                                                                -------       -------         -------
         Total loans ..............................               2,472         5,238           2,416
  Mortgage-backed securities ......................                 ---           ---             ---
                                                                -------       -------         -------
         Total purchases ..........................               2,472         5,238           2,416
                                                                -------       -------         -------

Repayments:
----------
  Principal repayments ............................            $ 18,713       $ 8,232         $17,650
                                                               --------       -------         -------
         Total reductions .........................              18,713         8,232          17,650
                                                               --------       -------         -------
Increase (decrease) in other items,
 net ..............................................               (614)         (775)           1,985
                                                               --------       -------         -------
         Net increase (decrease) ..................            $ 1,326        $14,242         $ 3,351
                                                               ========       =======         =======
</TABLE>

NON-PERFORMING ASSETS AND CLASSIFIED ASSETS

         When a borrower fails to make a required payment on real estate secured
loans and consumer loans at fifteen days a late charge is automatically assessed
and a notice is sent. At 30 days after the payment is due, the Company generally
institutes collection procedures by mailing a delinquency notice. The customer
is contacted again, by notice and/or telephone, when the payment is 60 days past
due. In most cases, delinquencies are cured promptly; however, if a loan secured
by real estate or other collateral has been delinquent for more than 90 days,
satisfactory payment arrangements must be adhered to or the Company will
initiate foreclosure or repossession.

         Generally, when a loan becomes delinquent 90 days or more or when the
collection of principal or interest becomes doubtful, the Company will place the
loan on a non-accrual status and, as a result, previously accrued interest
income on the loan is taken out of current income. The loan will remain on a
non-accrual status as long as the loan is 90 days delinquent.

                                       9
<PAGE>

         The following table sets forth information concerning delinquent
mortgage and other loans at June 30, 2001. The amounts presented represent the
total remaining principal balances of the related loans, rather than the actual
payment amounts which are overdue.

<TABLE>
<CAPTION>
                                                                         Real Estate
                                             -----------------------------------------------------------------------
                                                                                         Commercial and
                                                      One-to-four family                  Multi-family
                                             ----------------------------------  -----------------------------------
                                               Number      Amount     Percent      Number      Amount      Percent
                                             ----------  ---------- -----------  ----------  ----------  -----------
                                                                     (Dollars in Thousands)
<S>                                             <C>      <C>            <C>           <C>      <C>         <C>
Loans delinquent for:

 30-59 days ..............................        27       $ 1,742        3.16%         3        $392        1.25%
 60-89 days ..............................        10           725        1.31          1         705        2.26
 90 days and over ........................        19         1,580        2.86          3         517        1.65
                                                  --       -------        ----         --        ----

     Total delinquent loans ..............        56       $ 4,047        7.33%         7      $1,614        5.16%
                                                 ===       =======       -----         ==      ======        -----
</TABLE>

         At June 30, 2001 there were 8 delinquent consumer loans totaling
$52,600. The ratio of delinquent loans to total loans (net) was 0.06% at
June 30, 2001.

         The table below sets forth the amounts and categories of non-performing
assets in the Association's loan portfolio at the dates indicated. Loans are
generally placed on non-accrual status when the collection of principal and/or
interest become doubtful or when the loan is in excess of 90 days delinquent.
Foreclosed assets include assets acquired in settlement of loans.

<TABLE>
<CAPTION>
                                                                            June 30,
                                                        -----------------------------------------------
                                                             2001            2000              1999
                                                        -------------    ------------     -------------
                                                                     (Dollars in Thousands)
<S>                                                        <C>             <C>
Non-accruing loans:
  One-to-four family                                       $   1,218       $    717         $   ---
  Multi-family and commercial real estate                         48            ---             ---
  Consumer                                                        53             14             ---
                                                           ---------       --------         -------
     Total                                                     1,319            731             ---

Accruing loans delinquent more than 90 days:
  One-to-four family                                             362            244             353
  Multi-family and commercial real estate                        469            ---             525
                                                           ---------       --------         -------
     Total                                                       831            244             878

Foreclosed assets:
  One-to-four family                                             ---            ---             345
  Multi-family and commercial real estate                      1,320          1,338             788
                                                           ---------       --------         -------
     Total                                                     1,320          1,338           1,133

Total non-performing assets                                $   3,470       $  2,313         $ 2,011
                                                           =========       ========         =======
Total as a percentage of total assets                           3.23%          2.30%           2.21%
                                                           =========       ========         =======
</TABLE>

         NON-PERFORMING ASSETS. Included in total non-performing assets are 19
mortgage loans secured by one-to-four family dwellings totaling $1.6 million and
eight consumer auto loans for $52,600. One loan totaling $1.3 million on a
commercial building acquired in settlement of loans, and has been sold on
contract with closing scheduled for July 2001.

         CLASSIFIED ASSETS. Federal regulations provide for the classification
of loans and other assets such as debt and equity securities considered by the
OTS to be of lesser quality as "substandard," "doubtful" or "loss." An asset

                                       10
<PAGE>

is considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the savings association will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.

         When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or
to charge-off such amount. An association's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the association's District Director at the regional OTS
office, who may order the establishment of additional general or specific loss
allowances.

         In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Association
regularly reviews the loans in its portfolio to determine whether any loans
require classification in accordance with applicable regulations. On the basis
of management's review of its assets, at June 30, 2001, the Association had
classified a total of $1.6 million of its assets as substandard, none were
classified as doubtful, and none were classified as loss.

         At June 30, 2001, total classified assets comprised $1.6 million or
22.6% of the Association's capital, or 1.6% of the Association's total assets.

         At June 30, 2001 the Association had a total of $1.3 million in
property acquired in settlement of loans, which consisted of commercial real
estate. The property has been sold on contract with closing scheduled for July
2001.

         ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters the
estimated fair value of the underlying collateral, economic conditions,
historical loan loss experience and other factors that warrant recognition in
providing for an adequate loan allowance.

         Real estate properties acquired through foreclosure are recorded at
fair value. If fair value at the date of foreclosure is lower than the balance
of the related loan, the difference will be charged-off to the allowance at the
time of transfer. Valuations are periodically updated by management and if the
value declines, a specific provision for losses on such property is established
by a charge to operations.

         Although management believes that it uses the best information
available to determine the allowances, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance. At June 30, 2001, the Company had a total allowance for loan losses
of $382,000 or 0.43% of loans receivable, net. See Notes A and E of the Notes to
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Annual Report to
Stockholders attached hereto as Exhibit 13.

                                       11
<PAGE>

         The following table sets forth an analysis of the Association's
allowance for loan losses.

<TABLE>
<CAPTION>
                                                                                 Year Ended June 30,
                                                       ---------------------------------------------------------------
                                                                2001                  2000                 1999
                                                       ---------------------  --------------------  ------------------
                                                                             (Dollars in Thousands)
<S>                                                           <C>                 <C>                 <C>
Balance at beginning of period ........................         $259                $242                $206

Charge-offs ...........................................          (28)                (19)                ---
Recoveries ............................................          ---                 ---                 ---
                                                                ----                ----                ----
Net charge-offs .......................................          (28)                (19)                ---
Transfer to allowance for decline in
   value of foreclosed real estate ....................          ---                 ---                 ---
Additions charged to operations .......................          151                  36                  36
                                                                ----                ----                ----
Balance at end of period ..............................         $382                $259                $242
                                                                ====                ====                ====

Ratio of net charge-offs during the period to average
   loans outstanding during the period ................         0.03%               0.02%                ---%
                                                                ====                ====                ====

Ratio of net charge-offs during the period to average
   non-performing assets ..............................         0.96%               1.04%                ---%
                                                                ====                ====                ====
</TABLE>

         The distribution of the Association's allowance for losses on loans at
the dates indicated is summarized as follows:

<TABLE>
<CAPTION>
                                                                    June 30
                            --------------------------------------------------------------------------------------
                                      2001                            2000                           1999
                            ----------------------            ----------------------         ---------------------
                                          Percent                           Percent                       Percent
                                          of Loans                          of Loans                      of Loans
                                          in Each                           in Each                       in Each
                                          Category                          Category                      Category
                                          to Total                          to Total                      to Total
                             Amount        Loans               Amount         Loans           Amount        Loans
                            ---------    ---------            ---------    ---------         ---------   ---------
                                                            (Dollars In thousands)
<S>                        <C>          <C>                  <C>         <C>                  <C>       <C>
One- to four- family .....    $165         61.77%               $99         61.95%               $69       62.55%
Multi-family and
   commercial real
   estate ................     198         34.97               144          35.59                 61       32.97
Construction                   ---          1.46               ---           0.83                 --        2.74
Consumer and
   unsecured .............      19          1.80                16           1.63                 12        1.74
Unallocated ..............     ---           ---               ---            ---                100         ---
                             -----        ------             -----         ------               ----      ------
     Total ...............   $ 382        100.00%            $ 259         100.00%              $242      100.00%
                             =====        ======             =====         ======               ====      ======

</TABLE>

                                       12
<PAGE>

INVESTMENT ACTIVITIES

         State Federal must maintain minimum levels of investments that qualify
as liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Historically, the Association has generally
maintained its liquid assets above the minimum requirements imposed by the OTS
regulations and at a level believed adequate to meet requirements of normal
daily activities, repayment of maturing debt and potential deposit outflows. The
Association's investment policy objective in this regard sets the Association's
desired liquidity between 6% and 12%. As of June 30, 2001, the Association's
liquidity ratio (liquid assets as a percentage of net withdrawable savings
deposits and current borrowings) was 11.2%. See "Regulation - Liquidity."

         Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.

         Generally, the investment policy of the Association is to invest funds
among various categories of investments and maturities based upon the
Association's need for liquidity, to achieve the proper balance between its
desire to minimize risk and maximize yield, to provide collateral for
borrowings, and to fulfill the Association's asset/liability management
policies.

         CASH AND INVESTMENTS IN CERTIFICATES OF DEPOSIT AND OTHER INVESTMENTS.
At June 30, 2001, the Company's cash and interest-bearing deposits in other
financial institutions totaled $7.3 million, or 6.78% of its total assets.
Certificates of deposits invested in other institutions totaled $297,000 or .27%
of its total assets. The Association has a $1.8 million investment in the common
stock of the FHLB of Des Moines in order to satisfy the requirement for
membership in such institution. The Company has $1.6 million or 1.48% of its
total assets invested in corporate securities, which includes preferred common
stocks. The Company has $306,000 or .28% of its assets invested in federal
agency securities and municipal bonds. See Note D of Notes to Consolidated
Financial Statements in the Annual Report to Stockholders attached hereto as
Exhibit 13.

         OTS regulations restrict investments in corporate debt and most equity
securities by the Association. These restrictions include prohibitions against
investments in the federal agency debt securities of any one issuer in excess of
15% of the Association's unimpaired capital and unimpaired surplus as defined by
federal regulations, plus an additional 10% if the investments are fully secured
by readily marketable collateral. See "Regulation - Federal Regulation of
Savings Associations" for a discussion of additional restrictions on the
Association's investment activities.


                                       13
<PAGE>

         The following table sets forth the composition of the Bank's investment
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                                        June 30,
                                                   ---------------------------------------------------------------------------------
                                                            2001                         2000                         1999
                                                   ---------------------         ---------------------        ----------------------
                                                      Book         % of             Book         % of            Book         % of
                                                      Value       Value             Value       Value            Value        Value
                                                   ---------------------         ---------------------        ----------------------
                                                                                 (Dollars in Thousands)
<S>                                                  <C>          <C>             <C>           <C>             <C>           <C>
Investment Securities:
     Corporate equity securities .................   $1,619       43.92%          $1,685        45.59%          $1,438        46.51%
     Federal agency debt securities ..............      204        5.54              446        12.07              406        13.13
     Municipal bonds .............................      101        2.74              100         2.70              100         3.23
FHLB stock .......................................    1,762       47.80            1,465        39.64            1,148        37.13
                                                      -----       -----            -----        -----            -----        -----
     Total investment securities and FHLB
      stock ......................................   $3,686      100.00%          $3,696       100.00%          $3,092       100.00%
                                                     ======      ======           ======       ======           ======       ======

Other Interest-Earning Assets:
  Interest-bearing deposits with banks ...........   $6,691       95.75%          $2,196        81.58%          $8,212        90.28%
  Certificates of deposit invested
   in other institutions .........................      297        4.25              496        18.42              884         9.72
                                                      -----       -----            -----        -----            -----        -----
     Total .......................................   $6,988      100.00%          $2,692       100.00%          $9,096       100.00%
                                                     ======      ======           ======       ======           ======       ======
Average remaining life or term to repricing of
    certificates of deposit ......................   1-1/2 years                   2 years                      1 year
</TABLE>

Contractual maturities of federal agency debt securities and municipal bonds are
shown below:

                                                              June 30, 2001
                                                          ----------------------
                                                                       Weighted
                                                             Book      Average
                                                             Value      Yield
                                                          ----------- ----------
                                                          (Dollars in Thousands)
              Due in one year or less                        $ ---        ---%
              Due after one year through five years            ---        ---
              Due after five years through ten years           305       6.48
              Due after ten years                              ---
                                                             -----
                                                             $ 305
                                                             =====

                                       14
<PAGE>

                                SOURCES OF FUNDS

         GENERAL. The Company's primary sources of funds are deposits,
borrowings, repayment of loan principal, sales of loan participations, maturing
investments in certificates of deposit, and funds provided from operations.

         Borrowings, consisting of FHLB advances, may be used at times to
compensate for seasonal reductions in deposits or deposit inflows at less than
projected levels, and may be used on a longer-term basis to support expanded
lending activities.

         DEPOSITS. State Federal offers a variety of deposit accounts having a
wide range of interest rates and terms. The Association's deposits consist of
passbook savings accounts, NOW and money market accounts, and certificate
accounts ranging in terms from three months to 60 months. The Association only
solicits deposits from its market area and does not currently use brokers to
obtain deposits. The Association relies primarily on competitive pricing
policies, advertising and customer service to attract and retain these deposits.

         The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition.

         The variety of deposit accounts offered by the Association has allowed
it to be competitive in obtaining funds and to respond with flexibility to
changes in consumer demand. The Association has become more susceptible to
short-term fluctuations in deposit flows, as customers have become more interest
rate conscious. The ability of the Association to attract and maintain
certificate of deposit accounts and the rates paid on these deposits has been
and will continue to be significantly affected by market conditions.

         The following table sets forth the savings flows at the Association
during the periods indicated.

<TABLE>
<CAPTION>
                                                                   Year Ended June 30,
                                         ---------------------------------------------------------------
                                                  2001              2000                1999
                                         ---------------------------------------------------------------
                                                          (Dollars in Thousands)
<S>                                             <C>                 <C>                 <C>
Opening balance ........................           $53,648             $54,713             $53,672
Deposits ...............................            80,230              66,932              66,888
Withdrawals ............................          (73,984)            (70,762)            (68,735)
Interest credited ......................             3,093               2,765               2,888
                                                     -----               -----               -----

Ending balance .........................           $62,987             $53,648             $54,713
                                                   =======             =======             =======

Net increase (decrease) ................            $9,339            $(1,065)              $1,041
                                                    ======            =======               ======

Percent increase (decrease) ............              17.4%             (1.95%)               1.94%
                                                      ====               ====                 ====
</TABLE>


                                       15
<PAGE>

         The following table indicates the amount of the Association's
certificates of deposit and other deposits by time remaining until maturity as
of June 30, 2001.

<TABLE>
<CAPTION>
                                                                 Maturity
                                             ----------------------------------------------------
                                                               Over        Over
                                               3 Months       3 to 6      6 to 12        Over
                                               or Less        Months       Months       12 Months     Total
                                             ------------  -----------  -----------   -----------  -----------
                                                                (Dollars in Thousands)
<S>                                             <C>          <C>          <C>           <C>          <C>
Certificates of deposit less
 than $100,000 ...............................   $6,097       $11,183      $10,292       $14,986     $42,558
Certificates of deposit of $100,000 or more ..    1,345         3,254        1,843         2,736       9,178
                                                 ------       -------      -------       -------     -------
Total certificates of deposit ................   $7,442       $14,437      $12,135       $17,722     $51,736
                                                 ======       =======      =======       =======     =======
</TABLE>

         BORROWINGS. Although deposits are the Association's primary source of
funds, the Association's policy has been to utilize borrowings when they are a
less costly source of funds, can be invested at a positive interest rate spread
or when the Association desires additional capacity to fund loan demand.

         State Federal's borrowings historically have consisted of advances from
the FHLB of Des Moines upon the security of a blanket collateral agreement of a
percentage of unencumbered loans. Such advances can be made pursuant to several
different credit programs, each of which has its own interest rate and range of
maturities. At June 30, 2001, the Association had $29.2 million in FHLB
advances.

         At June 30, 2001, the Association had no repurchase agreements or other
borrowings not mentioned above outstanding.

         The following table sets forth certain information including the
maximum month-end balance and average balance of FHLB advances at the dates
indicated.

<TABLE>
<CAPTION>
                                                                       Year Ended June 30,
                                                        -----------------------------------------------
                                                              2001            2000           1999
                                                        -----------------------------------------------
                                                                     (Dollars In Thousands)
<S>                                                          <C>              <C>            <C>
Maximum Balance:
---------------
  FHLB advances                                              $35,235          $29,284        $19,000
                                                             =======          =======        =======

Average Balance:
---------------
  FHLB advances                                              $32,543          $21,716        $18,918
                                                             =======          =======        =======

 Weighted average interest rate of FHLB advances                5.21%            6.31%          5.70%
                                                                ====             ====           ====
</TABLE>



                                       16
<PAGE>

SERVICE CORPORATION ACTIVITIES

         Federal associations generally may invest up to 2% of their assets in
service corporations plus an additional 1% of assets if used for community
purposes. In addition, federal associations may invest up to 50% of their
regulatory capital in conforming loans to their service corporations. In
addition to investments in service corporations, federal associations are
permitted to invest an unlimited amount in operating subsidiaries engaged solely
in activities in which a federal association may engage directly.

         State Federal has one subsidiary which is a service corporation, State
Service Corporation, located in Des Moines, Iowa. State Service Corporation was
organized by State Federal in 1976. State Service Corporation owns and operates
a 60-unit apartment complex, in Pleasant Hill, Iowa.

         During the fiscal year ended June 30, 2001, State Service Corporation's
gross revenues from property management activities (consisting of rental income)
totaled approximately $331,700 and expenses (consisting of depreciation,
interest, property taxes, insurance, management fees, and maintenance) were
$270,450. Income tax expense totaled $30,000 for 2001. State Service Corporation
has not had significant capital expenditures with regard to its real estate
operation over the past three fiscal years. Revenues from State Service
Corporation's interest income on real estate contracts totaled $17,650.


                                   REGULATION

GENERAL

         State Federal is a federally chartered savings and loan association,
the deposits of which are federally insured and backed by the full faith and
credit of the United States Government. Accordingly, State Federal is subject to
broad federal regulation and oversight extending to all its operations. The
Association is a member of the FHLB of Des Moines and is subject to certain
limited regulation by the Board of Governors of the Federal Reserve System
("Federal Reserve Board"). As the savings and loan holding company of State
Federal, the Holding Company also is subject to federal regulation and
oversight. The purpose of the regulation of the Holding Company and other
holding companies is to protect subsidiary savings associations. The Association
is a member of the Savings Association Insurance Fund ("SAIF"), which together
with the Bank Insurance Fund (the "BIF") are the two deposit insurance funds
administered by the FDIC, and the deposits of the Association are insured by the
FDIC. As a result, the FDIC has certain regulatory and examination authority
over State Federal.

         Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.

FEDERAL REGULATION OF SAVINGS ASSOCIATIONS

         The OTS has extensive authority over the operations of savings
associations. As part of this authority, State Federal is required to file
periodic reports with the OTS and is subject to periodic examinations by the OTS
and the FDIC. The last regular examination of State Federal was as of March 31,
2001. When these examinations are conducted by the OTS and the FDIC, the
examiners may require the Association to provide for higher general or specific
loan loss reserves. All savings associations are subject to a semi-annual
assessment, based upon the savings association's total assets, to fund the
operations of the OTS. The Association's OTS assessment for the fiscal year
ended June 30, 2001 was approximately $27,800.

         The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including State Federal and the
Holding Company. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for violations of laws and regulations and

                                       17
<PAGE>

unsafe or unsound practices. Other actions or inactions may provide the basis
for enforcement action, including misleading or untimely reports filed with the
OTS. Except under certain circumstances, public disclosure of final enforcement
actions by the OTS is required.

         In addition, the investment, lending and branching authority of the
Association is prescribed by federal law and it is prohibited from engaging in
any activities not permitted by such laws. For instance, no savings institution
may invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of total capital, except with
approval of the OTS. Federal savings associations are also generally authorized
to branch nationwide. State Federal is in compliance with the noted
restrictions.

         The Association's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At June 30, 2001, the Association's lending
limit under this restriction was approximately $1.6 million.

         The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these standards must submit a compliance plan. A
failure to submit a plan or to comply with an approved plan will subject the
institution to further enforcement action.

INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC

         State Federal is a member of the SAIF, which is administered by the
FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious risk
to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement
actions against savings associations, after giving the OTS an opportunity to
take such action, and may terminate the deposit insurance if it determines that
the institution has engaged in unsafe or unsound practices, or is in an unsafe
or unsound condition.

         The FDIC's deposit insurance premiums are assessed through a risk-based
system, under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period. As
of June 30, 2001, the Association met the requirements of a well-capitalized
institution.

         The premium schedule for BIF and SAIF insured institutions ranged from
0 to 27 basis points. However, SAIF insured institutions and BIF insured
institutions are required to pay a Financing Corporation assessment in order to
fund the interest on bonds issued to resolve thrift failures in the 1980s. This
amount is currently equal to about 1.88 points for each $100 in domestic
deposits for BIF and SAIF insured institutions. These assessments, which may be
revised based upon the level of BIF and SAIF deposits, will continue until the
bonds mature in 2017 through 2019.

REGULATORY CAPITAL REQUIREMENTS

         Federally insured savings associations, such as the Association, are
required to maintain a minimum level of regulatory capital. The OTS has
established capital standards, including a tangible capital requirement, a

                                       18
<PAGE>

leverage ratio (or core capital) requirement and a risk-based capital
requirement applicable to such savings associations. These capital requirements
must be generally as stringent as the comparable capital requirements for
national banks. The OTS is also authorized to impose capital requirements in
excess of these standards on individual associations on a case-by-case basis.

         The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement.

         The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries, the debt and equity investments in such subsidiaries are deducted
from assets and capital.

         At June 30, 2001 the Association had tangible capital of $6.0 million,
or 5.87% of adjusted total assets, which is approximately $4.4 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.

         The capital standards also require core capital equal to at least 3% to
4% of adjusted total assets depending on an institution's rating. Core capital
generally consists of tangible capital plus certain intangible assets, including
a limited amount of purchased credit card relationships. As a result of the
prompt corrective action provisions discussed below, however, a savings
association must maintain a core capital ratio of at least 4% to be considered
adequately capitalized unless its supervisory condition is such to allow it to
maintain a 3% ratio.

         At June 30, 2001, the Association had core capital equal to $6.0
million, or 5.87% of adjusted total assets, which is $1.9 million above the
minimum leverage ratio requirement of 4% as in effect on that date.

         The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At June 30, 2001, State Federal had
no capital instruments that qualify as supplementary capital but had $382,000 of
general loss reserves, which was less than .59% of risk-weighted assets.

         Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. State Federal had no such
exclusions from capital and assets at June 30, 2001.

         In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.

         OTS regulations also require that every savings association with more
than normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount

                                       19
<PAGE>

equal to 50% of its interest-rate risk exposure multiplied by the present value
of its assets. This exposure is a measure of the potential decline in the net
portfolio value of a savings association, greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain when this evaluation may be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise.

         On June 30, 2001, the Association had total risk-based capital of $6.3
million (including $6.0 million in core capital and $382,000 in qualifying
supplementary capital) and risk-weighted assets of $64.0 million or total
risk-based capital of 9.91% of risk-weighted assets. This amount was $1.2
million above the 8% requirement in effect on that date.

         The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1 risk-based
capital ratio or an 8% risk-based capital ratio). Any such association must
submit a capital restoration plan and until such plan is approved by the OTS may
not increase its assets, acquire another institution, establish a branch or
engage in any new activities, and generally may not make capital distributions.
The OTS is authorized to impose the additional restrictions that are applicable
to significantly undercapitalized associations.

         Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authorities of the OTS or FDIC, including the
appointment of a conservator or a receiver.

         The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.

         The imposition by the OTS or the FDIC of any of these measures on the
Association may have a substantial adverse effect on the Association's
operations and profitability. Holding Company shareholders do not have
preemptive rights, and therefore, if the Holding Company is directed by the OTS
or the FDIC to issue additional shares of Common Stock, such issuance may result
in the dilution in the percentage of ownership of the Holding Company.

LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS

         OTS regulations impose various restrictions or requirements on savings
associations with respect to their ability to make distributions of capital,
which include dividends, stock redemptions or repurchases, cash-out mergers and
other transactions charged to the capital account. OTS regulations permit a
federal savings association to pay dividends in any calendar year equal to net
income for that year plus retained earnings for the preceding two years.

                                       20
<PAGE>

ACCOUNTING

         An OTS policy statement applicable to all savings associations
clarifies and re-emphasizes that the investment activities of a savings
association must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with GAAP.
Under the policy statement, management must support its classification of and
accounting for loans and securities (i.e., whether held for investment, sale or
trading) with appropriate documentation. The Association is in compliance with
these amended rules.

         The OTS has adopted an amendment to its accounting regulations, which
may be made more stringent than GAAP by the OTS, to require that transactions be
reported in a manner that best reflects their underlying economic substance and
inherent risk and that financial reports must incorporate any other accounting
regulations or orders prescribed by the OTS.

QUALIFIED THRIFT LENDER TEST

         All savings associations, including the Association, are required to
meet a qualified thrift lender ("QTL") test to avoid certain restrictions on
their operations. This test requires a savings association to have at least 65%
of its portfolio assets (as defined by regulation) in qualified thrift
investments on a monthly average for nine out of every 12 months on a rolling
basis. As an alternative, the Savings Association may maintain 60% of its assets
specified in Section 770(a)(19) of the Internal Revenue Code. Under either test,
such assets primarily consist of residential housing related loans and
investments. At June 30, 2001, the Association met the test and has always met
the test since its effectiveness.

         Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. See "- Holding Company Regulation."

COMMUNITY REINVESTMENT ACT

         Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking practices to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with the examination of State
Federal to assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications, such as a merger or the establishment of a branch, by State
Federal. An unsatisfactory rating may be used as the basis for the denial of an
application by the OTS.

         The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, the Association may be required to devote additional
funds for investment and lending in its local community. The Association
examined for CRA compliance in December 1999 and received a rating of
satisfactory.

                                       21
<PAGE>

TRANSACTIONS WITH AFFILIATES

         Generally, transactions between a savings association or its
subsidiaries and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates. In addition, certain of these
transactions such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of State Federal include the Holding
Company and any company which is under common control with the Association. In
addition, a savings association may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of most affiliates. The Association's subsidiaries are not deemed affiliates,
however; the OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.

         Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.

HOLDING COMPANY REGULATION

         The Holding Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Holding Company is
required to register and file reports with the OTS and is subject to regulation
and examination by the OTS. In addition, the OTS has enforcement authority over
the Holding Company and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.

         As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings and loan holding company, and the activities of
the Holding Company and any of its subsidiaries (other than the Association or
any other SAIF-insured savings association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.

         If the Association fails the QTL test, the Holding Company must obtain
the approval of the OTS prior to continuing after such failure, directly or
through its other subsidiaries, any business activity other than those approved
for multiple savings and loan holding companies or their subsidiaries. In
addition, within one year of such failure the Holding Company must register as,
and will become subject to, the restrictions applicable to bank holding
companies. The activities authorized for a bank holding company are more limited
than are the activities authorized for a unitary or multiple savings and loan
holding company. See "--Qualified Thrift Lender Test."

         The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.

FEDERAL SECURITIES LAW

         The stock of the Holding Company is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Holding
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.

         Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.

                                       22
<PAGE>

FEDERAL RESERVE SYSTEM

         The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At June 30, 2001, the Association was in compliance with these reserve
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity requirements that
may be imposed by the OTS. See "-- Liquidity."

         Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

FEDERAL HOME LOAN BANK SYSTEM

         The Association is a member of the FHLB of Des Moines, which is one of
12 regional FHLBs, that administers the home financing credit function of
savings associations. Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from proceeds derived
from the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing.

         As a member, State Federal is required to purchase and maintain stock
in the FHLB of Des Moines. At June 30, 2001, State Federal had $1.8 million in
FHLB stock, which was in compliance with this requirement. In past years, the
Association has received substantial dividends on its FHLB stock. Over the past
five fiscal years such dividends have averaged 6.59 % and were 6.07% for fiscal
year 2001.

         Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Association's FHLB stock may result in a corresponding
reduction in State Federal's capital.

         For the fiscal year ended June 30, 2001, dividends paid by the FHLB of
Des Moines to State Federal totaled $98,900 which constitutes a $20,700 increase
from the amount of dividends received in the fiscal year ended June 30, 2000.
The $20,300 dividend received for the period ended May 31, 2001 and paid June
15, 2001 reflects an annualized rate of 4.56%, which decreased 2.30% from the
same quarter ended June 30, 2000, which was a rate of 6.86%.

FEDERAL AND STATE TAXATION

         In addition to the regular income tax, corporations, including savings
associations such as the Association, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income.

         A portion of the Association's reserves for losses on loans may not,
without adverse tax consequences, be utilized for the payment of cash dividends
or other distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of June 30,

                                       23
<PAGE>

2001, the portion of the Association's reserves subject to this treatment for
tax purposes totaled approximately $1.35 million.

         State Federal and its subsidiaries file consolidated federal income tax
returns on a fiscal year basis using the accrual method of accounting. State
Federal and its subsidiaries have not been audited by the IRS within the last
ten years.

         IOWA TAXATION. The Holding Company and the Association's subsidiaries
file Iowa corporation tax returns while the Association files an Iowa franchise
tax return.

         Iowa imposes a franchise tax on the taxable income for both mutual and
stock savings and loan associations. The tax rate is 5%, which may effectively
be increased, in individual cases, by application of a minimum tax provision.
Taxable income under the franchise tax is generally similar to taxable income
under the federal corporate income tax, except that, under the Iowa franchise
tax, no deduction is allowed for Iowa franchise tax and taxable income includes
interest on state and municipal obligations. Interest on U.S. obligations is
taxable under the Iowa franchise tax and under the federal corporate income tax.

         Taxable income under the Iowa corporate income tax is generally similar
to taxable income under the federal corporate income tax, except that, under the
Iowa tax, no deduction is allowed for Iowa income tax payments; interest from
state and municipal obligations is included in income; interest from U.S.
obligations is excluded from income; and 50% of federal corporate income tax is
excluded from income. The Iowa corporate income tax rates range from 6% to 12%
and may be effectively increased, in individual cases, by application of a
minimum tax provision.

         DELAWARE TAXATION. As a Delaware holding company, the Holding Company
is exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.

COMPETITION

         State Federal faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from other commercial banks, savings associations,
credit unions and mortgage bankers making loans secured by real estate located
in the Association's market area. The Association competes for real estate and
other loans principally on the basis of the quality of services it provides to
borrowers, and loan fees it charges, and the types of loans it originates.

         The Association attracts all of its deposits through its retail banking
offices, primarily from the communities in which those retail banking offices
are located; therefore, competition for those deposits is principally from other
commercial banks, savings associations and credit unions located in the same
communities. The Association competes for these deposits by offering a variety
of deposit accounts at competitive rates, convenient business hours, and
convenient branch locations with interbranch deposit and withdrawal privileges
at each.

         The Association's primary concentration is Des Moines, Iowa. There are
over 30 commercial banks and approximately 30 credit unions in the Association's
market area. The Association estimates its share of the savings market in its
primary market area to be approximately 1.0%.

EMPLOYEES

         At June 30, 2001, the Company and its subsidiary had a total of 25
full- time employees. The Association's employees are not represented by any
collective bargaining group. Management considers its employee relations to be
good.

ITEM 2.  PROPERTIES
         ----------

                                       24
<PAGE>

         The Association conducts its business at its main office and one other
location in its primary market area. The following table sets forth information
relating to each of the Association's offices as of June 30, 2001.

         The Association owns two branch offices and its main office. The total
net book value of the Association's premises and equipment (including land,
building, furniture, fixtures and equipment) at June 30, 2001 was $3.9 million.
See Note H of Notes to Consolidated Financial Statements in the Annual Report to
Stockholders attached hereto as Exhibit 13.

<TABLE>
<CAPTION>
                                                                         Total
                                                                      Approximate
                                                  Date                  Square             Net Book Value at
         Location                                Acquired               Footage             June 30, 2001
------------------                         --------------------    -----------------   ------------------------
<S>                                            <C>                     <C>                     <C>
Main Office:
   13523 University Avenue                          2001                  12,000                  $ 2,630,000
   Clive, Iowa

Branch Offices:
   4018 University Avenue                           1985                   4,000                  $   280,000
   Des Moines, Iowa

   519 Sixth Avenue                            January 3, 1995             3,300                  $   710,000
   Des Moines, Iowa
</TABLE>

         The Association conducts its data processing through a service bureau,
NCR Corporation. The net book value of the data processing and computer
equipment utilized by the Association at June 30, 2001 was $74,000. The net book
value of other furniture and equipment at June 30, 2001 was $234,000

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

         State Federal is involved from time to time as plaintiff or defendant
in various legal actions arising in the normal course of its business. Neither
the Company nor State Service Corporation, the Association's wholly-owned
subsidiary, is a party to any legal action. While the ultimate outcome of these
proceedings cannot be predicted with certainty, it is the opinion of management,
after consultation with counsel representing State Federal in the proceedings,
that the resolution of these proceedings should not have a material effect on
State Federal's consolidated financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2001.

                                       25
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS
         -------------------------------------------------

         Page 37 of the attached 2001 Annual Report to Stockholders is herein
incorporated by reference. The dividend payout ratio for June 30, 2001 was
87.5%.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATION AND SELECTED FINANCIAL DATA
         -----------------------------------------------------------

         Pages 7 through 16 of the attached 2001 Annual Report to Stockholders
are herein incorporated by reference.

ITEM 7.  FINANCIAL STATEMENTS
         --------------------

         The following information appearing in the Company's Annual Report to
Stockholders for the year ended June 30, 2001 is incorporated by reference in
this Annual Report on Form 10-KSB as Exhibit 13.

<TABLE>
<CAPTION>

                                                                                                     PAGES IN
ANNUAL REPORT SECTION                                                                             ANNUAL REPORT
---------------------------------------------------------------------------------------------    ----------------

<S>                                                                                             <C>
Independent Auditors' Report ................................................................            17

Consolidated Balance Sheets as of June 30, 2001 and 2000 ....................................            18

Consolidated Statements of Income for the Years Ended
     June 30, 2001, 2000 and 1999 ...........................................................            19

Consolidated Statements of Stockholders' Equity for Years Ended
     June 30, 2001, 2000 and 1999 ...........................................................            21

Consolidated Statements of Cash Flows for Years Ended June 30, 2001, 2000 and 1999 ..........            22

Notes to Consolidated Financial Statements ..................................................       23 through 36
</TABLE>


         With the exception of the aforementioned information, the Company's
Annual Report to Stockholders for the year ended June 30, 2001 is not deemed
filed as part of this Annual Report on Form 10-KSB.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE
         ------------------------------------------------

         There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.


                                       26
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
         -------------------------------------------------------------

DIRECTORS
---------

         Information concerning directors and executive officers of the Company
is incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in 2001, except for information
contained under the heading "Report of the Audit Committee," a copy of which
will be filed not later than 120 days after the close of the fiscal year.

ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

         Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 2001, except for information contained under the
heading "Report of the Audit Committee," a copy of which will be filed not later
than 120 days after the close of the fiscal year.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT
          ----------------------------------------

         Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in 2001, except for
information contained under the heading "Report of the Audit Committee," a copy
of which will be filed not later than 120 days after the close of the fiscal
year.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

         Information concerning certain relationships and related transactions
is incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in 2001, except for information
contained under the heading "Report of the Audit Committee," a copy of which
will be filed not later than 120 days after the close of the fiscal year.


                                       27
<PAGE>

                                   SIGNATURES
                                   ----------

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        STATEFED FINANCIAL CORPORATION

Date:     September 28, 2001            By: /s/ Randall C. Bray
     -----------------------                -------------------------------
                                                Randall C. Bray
                                                (DULY AUTHORIZED REPRESENTATIVE)

          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

  /s/Randall C. Bray                        /s/ Craig Wood
---------------------------                 -------------------------------
RANDALL C. BRAY                             CRAIG WOOD
Chairman of the Board                       Director and Co- President
 Officer

Date:    September 28, 2001                Date:   September 28, 2001
     ----------------------                     --------------------------------


---------------------------                -------------------------------------
HARRY A. WINEGAR                           EUGENE M. MCCORMICK
Director                                   Director

Date:    September 28, 2001                Date:   September 28, 2001
     ----------------------                     --------------------------------


  /s/ Sidney M. Ramey                      /s/ Kevin J. Kruse
---------------------------                -------------------------------------
SIDNEY M. RAMEY                            KEVIN J. KRUSE
Director                                   Director

Date:    September 28, 2001                Date:   September 28, 2001
     ----------------------                     --------------------------------


                                           /s/ Andra K. Black
---------------------------                -------------------------------------
WILLIAM T. NASSIF                          ANDRA K. BLACK
Director                                   Director, Co-President, Secretary and
                                                     Chief Financial and
                                                     Accounting Officer

Date:    September 28, 2001                Date:   September 28, 2001
     ----------------------                     --------------------------------


                                       28
<PAGE>

                                     PART IV

<TABLE>
<CAPTION>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

          (A)  EXHIBITS

                                                                                                   REFERENCE TO
                                                                                                  PRIOR FILING OR
                                                                                                  EXHIBIT NUMBER
 EXHIBIT NUMBER         DOCUMENT                                                                  ATTACHED HERETO
----------------        ----------------------------------------------------------------------   -----------------

<S>                     <C>                                                                        <C>
         3(I)           Articles of Incorporation, including amendments thereto                         *

        3(II)           By-Laws                                                                         **

          4             Instruments Defining the Rights of Security Holders,
                             including indentures                                                       *

          9             Voting Trust Agreement                                                         None

          10            Executive Compensation plans and Arrangements
                        (a)      Employment Contract Between:
                           (i)   Randall C. Bray and the Association                                   10.1
                           (ii)  Andra K. Black and the Association                                     *
                           (iii) Craig Wood and the Association                                         *
                        (B)      1993 Stock Option and Incentive Plan                                   *
                        (C)      1993 Management Recognition and Retention Plan                         *
                        (D)      Deferred Compensation Agreement (John Golden)                          *
                        (E)      Severance Agreement (John Golden)                                     10.2

          11            Statement Regarding Computation of Per Share Earnings                          None

          13            Annual Report to Security Holders                                               13

          16            Letter Regarding Change in Certifying Accountant                               None

          18            Letter Regarding Change in Accounting Principles                               None

          21            Subsidiaries of Registrant                                                      21

          22            Published Report Regarding Matters Submitted to                                None
                             Vote of Security Holders

          23            Consents of Experts and Counsel                                                 23

          24            Power of Attorney                                                          Not Required

          99            Additional Exhibits                                                            None
</TABLE>

----------------
*         Filed as exhibits to the Company's Form S-1 registration statement
          filed on September 23, 1993 (File No. 33-69314) pursuant to Section 5
          of the Securities Act of 1933. All of such previously filed documents
          are hereby incorporated herein by reference in accordance with Item
          601 of Regulation S-K.

**        Filed as exhibits to the Company's Annual Report on Form 10-KSB for
          the fiscal year ended June 30, 2000.


                                       29
<PAGE>

         (B)  REPORTS ON FORM 8-K

THE FOLLOWING REPORTS ON FORM 8-K WERE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION DURING THE QUARTER ENDING JUNE 30, 2001:

<TABLE>
<CAPTION>

                          Regarding Event
         Date Filed:      Occurring On:       Nature of Event
         -----------    -------------------   ------------------------------------------------------------------

<S>                         <C>               <C>
         04/30/2001         04/24/2001        Chairman John F. Golden announces retirement from Board of
                                              Directors of Registrant

         05/08/2001         05/03/2001        Announcement of Registrant's third quarter earnings

         05/10/2001         05/08/2001        Registrant announces new Chairman; announces Annual Meeting date

         05/11/2001         05/11/2001        Announcement of offer to buy up to 230,770 Shares "Dutch Auction."

         06/15/2001         06/14/2001        Announcement of preliminary results of modified dutch auction
                                              tender offer

         06/21/2001         06/19/2001        Announcement of final results of modified dutch auction tender
                                                 offer
</TABLE>






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