UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             450 Fifth Street, N.W.
                             Washington, D.C. 20549

                                    FORM 10-K/A

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the Fiscal Year Ended March 31, 2005

                                       OR

|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

        For the transition period from _______________ to _______________

                           Commission File No. 0-23433

                         WAYNE SAVINGS BANCSHARES, INC.
                         ------------------------------
             (Exact name of registrant as specified in its charter)

                     Delaware                              31-1557791
                     --------                              ----------
          (State or other jurisdiction of               (I.R.S. Employer
           incorporation or organization)             Identification Number)

      151 North Market Street, Wooster, Ohio                  44691
      --------------------------------------                  -----
     (Address of Principal Executive Offices)               Zip Code

                                 (330) 264-5767
                                 --------------
                         (Registrant's telephone number)

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 $.10 per share
                                                              --------------------------------------
                                                                          (Title of Class)


      Indicate by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was required to file such  reports) and (2) has been subject to such
requirements for the past 90 days.

YES |X| NO |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. |X|

      Indicate by check mark whether the registrant is an accelerated  filer (as
defined in Exchange Act Rule 12b-2). YES |_| NO |X|

      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 the Registrant's stock, as reported on the Nasdaq National Market on June 20,
2005, was  approximately  $53.5 million.  As of June 20, 2005, there were issued
and outstanding 3,429,244 shares of the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

      List hereunder the following  documents  incorporated by reference and the
Part of the Form 10-K into which the document is incorporated.

(1)   Portions of the Annual Report to Stockholders for the year ended March 31,
      2005 are incorporated into Part II, Items 5 through 8 of this Form 10-K.

(2)   Portions of the definitive  proxy statement for the 2005 Annual Meeting of
      Stockholders are  incorporated  into Part III, Items 10 through 14 of this
      Form 10-K.



                                EXPLANATORY NOTE

      This Form  10-K/A is being  filed  solely  for the  purpose  of filing the
consent of Grant Thornton LLP as Exhibit 23.0 and the Section 302 Certifications
pursuant to Item 601 of Regulation S-B as Exhibits 31.1 and 31.2, hereto,  which
were inadvertently  omitted from the Registrant's filing with the Securities and
Exchange Commission on June 29, 2005.




                                     PART I
                                     ------

ITEM 1. Business
- ----------------

General

      Wayne Savings Bancshares, Inc.

      Wayne Savings  Bancshares,  Inc. (the "Company"),  initially was a federal
corporation   which  was   organized   on  August  5,  1997.   The  Company  was
majority-owned by Wayne Savings Bankshares, M.H.C., a federally-chartered mutual
holding  company (the "Mutual  Holding  Company" or  "M.H.C.").  On November 25,
1997,  the Company  acquired all of the issued and  outstanding  common stock of
Wayne  Savings  Community  Bank  (the  "Bank")  in  connection  with the  Bank's
reorganization into the "two-tier" form of mutual holding company ownership.  In
fiscal 2002,  the Board of Directors of the M.H.C.  adopted a plan of conversion
and reorganization  (the "plan") to convert the M.H.C. from mutual to stock form
and to  complete  a related  stock  offering  in which  shares  of common  stock
representing  the M.H.C.'s  ownership  interest in the Company  would be sold to
investors.  The only  significant  asset of the Company is its investment in the
Bank.

      The plan was approved by the  stockholders of the Company,  the depositors
of Wayne Savings Community Bank and the Office of Thrift Supervision  ("OTS") in
fiscal 2003, and the related stock offering was completed on January 8, 2003. As
of that date 1,350,699 shares of common stock of the Company owned by the M.H.C.
were  retired and the Company sold  2,040,816  shares of common stock for $10.00
per share.  After  consideration  of funding the employee  stock  ownership plan
("ESOP") with $1.6 million and related  expenses of $1.9  million,  net proceeds
from the stock  offering  amounted to $17.1  million.  An  additional  1,847,820
shares were issued to existing  shareholders based on an exchange rate of 1.5109
new shares of common stock for each existing share, resulting in 3,888,795 total
new shares outstanding.

      Upon  completion  of the  conversion  and stock  offering,  Wayne  Savings
Bancshares, Inc. changed its charter to a Delaware holding company and is wholly
owned by public stockholders. At March 31, 2005, the Company had total assets of
$403.4 million,  total deposits of $320.6 million,  and stockholders'  equity of
$40.2 million.

      On June 1, 2004, the Company acquired Stebbins  Bancshares,  Inc., and its
national  bank  subsidiary,   Stebbins  National  Bank  of  Creston,  Ohio.  The
acquisition of Stebbins  National Bank  increased the Bank's  branches to eleven
full service locations.

      The  Company's  principal  office is located at 151 North  Market  Street,
Wooster, Ohio, and its telephone number at that address is (330) 264-5767.

      Wayne Savings Community Bank

      The  Bank  is  an  Ohio-chartered   stock  savings  and  loan  association
headquartered  in Wooster,  Ohio. The Bank's deposits are insured by the Federal
Deposit Insurance  Corporation ("FDIC") under the Savings Association  Insurance
Fund ("SAIF"). The Bank has been a member of the Federal Home Loan Bank ("FHLB")
System since 1937.

      On September 30, 2003,  Wayne Savings  Bancshares,  Inc. merged its wholly
owned  subsidiary,  Village Savings Bank,  F.S.B.,  into Wayne Savings Community
Bank.  The  Company  concluded  that  significant  cost  savings  and  operating
efficiencies could be achieved by discontinuing the separate corporate existence
of Village Savings.

      The Bank is a community-oriented  savings institution offering traditional
financial  services  to its local  community.  The Bank's  primary  lending  and
deposit  gathering  area  includes  Wayne,  Holmes,  Ashland,  Medina  and Stark
counties,  where  it  operates  eleven  full-service  offices.  This  contiguous
five-county  area is located in northeast  Ohio, and is an active  manufacturing
and agricultural  market.  The Bank's principal  business  activity  consists of
originating  one- to  four-family  residential  real estate  loans in its market
area. The Bank also originates multi-family residential and non-residential real
estate  loans,  although  such loans  constitute  a small  portion of the Bank's
lending  activities and a small portion of the Bank's loan  portfolio.  The Bank
also originates consumer loans, and to a lesser


                                       2


extent,  construction loans. Recently, the Bank has hired experienced commercial
lenders to help develop a commercial  lending program.  The Bank also invests in
mortgage-backed  securities and currently maintains a significant portion of its
assets  in liquid  investments,  such as United  States  Government  securities,
federal funds, and deposits in other financial institutions.

      The Bank's  principal  executive  office is  located  at 151 North  Market
Street,  Wooster,  Ohio,  and its  telephone  number  at that  address  is (330)
264-5767.

Market Area/Local Economy

      The Bank,  headquartered  in Wooster,  Ohio,  operates in Wayne,  Ashland,
Medina, Holmes and Stark Counties in northeast Ohio. Wooster, Ohio is located in
Wayne County and is approximately midway between Cleveland and Columbus, Ohio.

      Wayne County is  characterized  by a diverse  economic base,  which is not
dependent on any particular  industry.  The manufacturing  sector employs 26% of
the county's  workforce  with services and trade sectors  employing 20% and 19%,
respectively. It is one of the leading agricultural counties in the state. Since
1892,  Wooster has been the headquarters of the Ohio  Agricultural  Research and
Development Center, the agricultural  research arm of The Ohio State University.
In  addition,  Wayne  County  is also the  home  base of such  nationally  known
companies like J.M. Smucker Company,  Worthington  Industries/The  Gertsenslager
Company,  and the Wooster Brush Company.  It is also the home of many industrial
plants, including Packaging Corporation of America, International Paper Company,
Morton  Salt,  and  FritoLay,  Inc. The City of Wooster has  benefited  from the
commitment of the world renowned  Cleveland  Clinic as they have established new
state  of the  art  medical  facilities.  Wayne  County  is also  known  for its
excellence in  education.  The College of Wooster was founded in 1866 and serves
1,800 students during the school season. Other quality educational opportunities
are offered by the Agricultural  Technical  Institute of Ohio State  University,
and Wayne College,  a branch of The University of Akron.  Wayne Savings operates
four full-service  offices in Wooster,  one stand-alone  drive-thru facility and
one full-service office in Rittman and Creston.

      Ashland  County,  which is located  due west of Wayne  County,  also has a
diverse economic base. In addition to its agricultural  segment,  Ashland County
has   manufacturing   plants   producing   rubber   and   plastics,   machinery,
transportation equipment,  chemicals,  apparel, and other items. Ashland is also
the home of Ashland  University.  The City of Ashland is the county seat and the
location of two of the Bank's branch offices.

      Medina  County,  located  just north of Wayne  County,  is the center of a
fertile agricultural region.  Farming remains the largest industry in the county
in  terms  of  dollar  value  of  goods  produced.   However,   over  100  small
manufacturing firms also operate in the county. The City of Medina is located in
the  center  of the  Cleveland-Akron-Lorain  Standard  Consolidated  Statistical
Marketing Area. Medina is located  approximately 30 miles south of Cleveland and
15 miles west of Akron. Due to its proximity to Akron and Cleveland,  a majority
of  Medina  County's  labor  force is  employed  in these two  cities.  The Bank
operates  one  full-service  office in Medina  County,  which is  located in the
Village of Lodi.

      Holmes County,  located directly south of Wayne County, has a mostly rural
economy. The local economy depends mostly upon agriculture, light manufacturing,
fabrics,  and wood  products.  Because  of the scenic  beauty and a large  Amish
settlement,  revenues from tourism are becoming  increasingly  significant.  The
county is also noted for its many fine cheese-making  operations. A large number
of Holmes County residents are employed in Wayne County. The City of Millersburg
is the county seat and the location of one of the Bank's branch offices.

      Stark County, located directly east of Wayne County, is characterized by a
diverse  economy  and over 1,500  different  products  are  manufactured  in the
county.  Stark County also has a strong  agricultural  base, and ranks fourth in
Ohio in the production of dairy  products.  The major  employers in North Canton
are the Hoover  Company,  Diebold  Incorporated  (a major  manufacturer  of bank
security  products and  automated  teller  machines)  and the Timken  Company (a
world-wide  manufacturer of tapered roller bearings and specialty  steels).  The
Hoover Company is currently relocating to Maytag's  headquarters in Iowa. Timken
has also had plants close  resulting  in job loss in the North Canton  Region of
approximately 30%. Jackson Township is the home to the Belden Village


                                       3


Shopping  Center,  while Plain Township is a residential and  agricultural  area
with a few widely scattered light industries.

Lending Activities

      General.  Historically,  the principal lending activity of the Company has
been the  origination  of fixed  and  adjustable  rate  mortgage  ("ARM")  loans
collateralized  by one- to  four-family  residential  properties  located in its
market area.  The Company  originates  ARM loans for retention in its portfolio,
and fixed rate  loans that are  eligible  for resale in the  secondary  mortgage
market. The Company also originates loans  collateralized by non-residential and
multi-family  residential real estate as well as commercial  business loans. The
Company also originates consumer loans to broaden services offered to customers.

      The Company has sought to make its  interest-earning  assets more interest
rate sensitive by originating  adjustable  rate loans,  such as ARM loans,  home
equity  loans,  and  medium-term  consumer  loans.  The Company  also  purchases
mortgage-backed securities generally with estimated remaining average lives of 5
years or less. At March 31, 2005, approximately $107.3 million, or 38.7%, of the
Company's  total  loans and  mortgage-backed  securities  consisted  of loans or
securities with adjustable interest rates.

      The Company  continues to actively  originate  fixed rate mortgage  loans,
generally  with 15 to 30  year  terms  to  maturity,  collateralized  by one- to
four-family residential  properties.  One- to four-family fixed rate residential
mortgage loans generally are originated and underwritten  according to standards
that allow the Company to resell such loans in the secondary mortgage market for
purposes of managing interest rate risk and liquidity. The majority of such one-
to four-family fixed rate 30 year residential mortgage loans,  however, are sold
by the Company,  while the 15 year  originations  are  generally  retained.  The
Company  retains  servicing  on its sold  mortgage  loans and  realizes  monthly
service fee income.  The Company also originates  interim  construction loans on
one- to four-family residential properties.

      The Company has begun developing a commercial  business loan program.  The
purpose of this program is to increase the  Company's  interest  rate  sensitive
assets,  increase  interest income and diversify both the loan portfolio and the
Company's customer base. The Company has three experienced commercial lenders to
help in this  program.  The Company  targets  small local  businesses  with loan
amounts  in the  $50,000 -  $1,000,000  range  with a  majority  of loans  under
$500,000.  Commercial  loans  increased  to $14.1  million at March 31,  2005 as
compared to $6.5 million at March 31, 2004.  Nonresidential real estate and land
loans  increased  from $18.4  million,  or 8.8%, of the total loan  portfolio at
March 31, 2004 to $29.2 million,  or 13.4%, of the total loan portfolio at March
31, 2005.


                                       4


      Analysis of Loan Portfolio.  Set forth below are selected data relating to
the  composition of the Company's loan portfolio by type of loan as of the dates
indicated.



                                                                         At March 31,
                                              -----------------------------------------------------------------
                                                      2005                   2004                   2003
                                              -------------------    -------------------    -------------------
                                                  $          %           $          %           $          %
                                              --------   --------    --------   --------    --------   --------
                                                                    (Dollars in thousands)
                                                                                       
Mortgage loans:
   One-to four-family residential(1) ......   $157,658      72.60%   $171,736      81.97%   $200,764      86.41%
   Residential construction loans .........      4,053       1.87       2,914       1.39       3,548       1.53
   Multi-family residential ...............      7,872       3.63       6,800       3.25       8,512       3.66
   Non-residential real estate/land(2) ....     29,187      13.44      18,439       8.80      12,067       5.19
                                              --------   --------    --------   --------    --------   --------
     Total mortgage loans .................    198,770      91.54     199,889      95.41     224,891      96.79
Other loans:
   Consumer loans(3) ......................      4,306       1.98       3,156       1.51       3,892       1.67
   Commercial business loans ..............     14,075       6.48       6,471       3.08       3,571       1.54
                                              --------   --------    --------   --------    --------   --------
     Total other loans ....................     18,381       8.46       9,627       4.59       7,463       3.21
                                              --------   --------    --------   --------    --------   --------
   Total loans before net items ...........    217,151     100.00%    209,516     100.00%    232,354     100.00%
                                                         ========               ========               ========
Less:
   Loans in process .......................      1,638                  2,579                  2,244
   Deferred loan origination fees .........        512                    679                  1,059
   Allowance for loan losses ..............      1,374                    815                    678
                                              --------               --------               --------
     Total loans receivable, net ..........   $213,627               $205,443               $228,373
                                              ========               ========               ========
   Mortgage-backed securities, net(4) .....   $ 60,352               $ 88,428               $ 76,002
                                              ========               ========               ========


                                                             At March 31,
                                              ------------------------------------------
                                                      2002                   2001
                                              -------------------    -------------------
                                                  $          %           $          %
                                              --------   --------    --------   --------
                                                        (Dollars in thousands)
                                                                      
Mortgage loans:
   One-to four-family residential(1) ......   $220,145      85.36%   $217,236      85.69%
   Residential construction loans .........      8,728       3.38       7,078       2.79
   Multi-family residential ...............      7,368       2.86       9,039       3.57
   Non-residential real estate/land(2) ....     12,423       4.82       7,525       2.97
                                              --------   --------    --------   --------
     Total mortgage loans .................    248,664      96.42     240,878      95.02
Other loans:
   Consumer loans(3) ......................      6,096       2.36       7,858       3.10
   Commercial business loans ..............      3,134       1.22       4,765       1.88
                                              --------   --------    --------   --------
     Total other loans ....................      9,230       3.58      12,623       4.98
                                              --------   --------    --------   --------
   Total loans before net items ...........    257,894     100.00%    253,501     100.00%
                                                         ========               ========
Less:
   Loans in process .......................      4,616                  4,764
   Deferred loan origination fees .........      1,376                  1,463
   Allowance for loan losses ..............        730                    655
                                              --------               --------
     Total loans receivable, net ..........   $251,172               $246,619
                                              ========               ========
   Mortgage-backed securities, net(4) .....   $ 17,326               $  8,574
                                              ========               ========


________________
(1)   Includes equity loans  collateralized by second mortgages in the aggregate
      amount of $20.3 million,  $20.3 million,  $21.2 million, $18.9 million and
      $15.7  million  as  of  March  31,  2005,   2004,  2003,  2002  and  2001,
      respectively.  Such loans have been underwritten on substantially the same
      basis as the Company's first mortgage loans.

(2)   Includes  land loans of $1.4  million,  $575,000,  $813,000,  $736,000 and
      $923,000 as of March 31, 2005, 2004, 2003, 2002, and 2001, respectively.

(3)   Includes second mortgage loans of $1.4 million,  $535,000,  $859,000, $1.2
      million and $1.8 million as of March 31, 2005,  2004, 2003, 2002 and 2001,
      respectively.

(4)   Includes mortgage-backed securities designated as available for sale.


                                       5


      Loan and Mortgage-Backed  Securities Maturity and Repricing Schedule.  The
following table sets forth certain  information as of March 31, 2005,  regarding
the  dollar  amount  of loans and  mortgage-backed  securities  maturing  in the
Company's portfolio based on their contractual terms to maturity.  Demand loans,
loans  having no stated  schedule  of  repayments  and no stated  maturity,  and
overdrafts are reported as due in one year or less. Adjustable and floating rate
loans  and  mortgage-backed  securities  are  included  in the  period  in which
interest  rates are next  scheduled to adjust  rather than in which they mature,
and fixed rate loans and  mortgage-backed  securities are included in the period
in which the final  contractual  repayment  is due.  Fixed rate  mortgage-backed
securities  are  assumed to mature in the period in which the final  contractual
payment is due on the underlying mortgage.



                                                                             One         Three        Five          Ten
                                                               Within      Through      Through      Through      Through
                                                              One Year   Three Years   Five Years   Ten Years   Twenty Years
                                                              --------   -----------   ----------   ---------   ------------
                                                                                     (In Thousands)
                                                                                                   
Mortgage loans:
  One- to four-family residential:
    Adjustable ..........................................     $ 31,199     $ 10,870     $  3,959     $     65     $     --
    Fixed ...............................................        1,516        1,543        1,897       18,797       40,475
  Construction:(1)
    Adjustable ..........................................           --           81           --           --           --
    Fixed ...............................................          176           --           --           30           72
  Multi-family residential, nonresidential and land:(1)
    Adjustable ..........................................        6,507        6,824       10,554            1           --
    Fixed ...............................................        1,356        3,258        5,317        1,542        1,523
Other Loans:
  Commercial business loans .............................       11,671          655        1,324           53          221
  Consumer ..............................................          924        1,463        1,676          243           --
                                                              --------     --------     --------     --------     --------
Total loans .............................................     $ 53,349     $ 24,694     $ 24,727     $ 20,731     $ 42,291
                                                              ========     ========     ========     ========     ========

Mortgage-backed securities(2) ...........................     $ 15,792     $  4,443     $    770     $  3,809     $ 18,611
                                                              ========     ========     ========     ========     ========


                                                               Beyond
                                                               Twenty
                                                                Years        Total
                                                              --------     --------
                                                                  (In Thousands)
                                                                     
Mortgage loans:
  One- to four-family residential:
    Adjustable ..........................................     $     --     $ 46,093
    Fixed ...............................................       47,337      111,565
  Construction:(1)
    Adjustable ..........................................           --           81
    Fixed ...............................................        2,233        2,511
  Multi-family residential, nonresidential and land:(1)
    Adjustable ..........................................           --       23,886
    Fixed ...............................................           --       12,996
Other Loans:
  Commercial business loans .............................          151       14,075
  Consumer ..............................................           --        4,306
                                                              --------     --------
Total loans .............................................     $ 49,721     $215,513
                                                              ========     ========

Mortgage-backed securities(2) ...........................     $ 16,484     $ 59,909
                                                              ========     ========


- ----------
(1)   Amounts shown are net of loans in process of $1.5 million in  construction
      loans and $177,000 in multi-family residential and nonresidential loans.

(2)   Includes  mortgage-backed  securities available for sale. Does not include
      premiums  of  $972,000,  discounts  of $49,000  and  unrealized  losses of
      $480,000.


                                       6


      The following table sets forth at March 31, 2005, the dollar amount of all
fixed rate and adjustable rate loans and mortgage-backed  securities maturing or
repricing after March 31, 2006.



                                                                    Fixed       Adjustable
                                                                  ----------    ----------
                                                                      (In Thousands)
                                                                           
Mortgage loans:
  One- to four-family residential ...........................      $110,049      $ 14,894
  Construction (2) ..........................................         2,335            81
  Multi-family residential, non-residential and land (2) ....        11,640        17,379
  Consumer ..................................................         3,382            --
  Commercial business .......................................         1,714           690
                                                                   --------      --------
    Total loans .............................................      $129,120      $ 33,044
                                                                   ========      ========

Mortgage-backed securities(1) ...............................      $ 39,674      $  4,443
                                                                   ========      ========


- ----------
(1)   Includes  mortgage-backed  securities  available  for sale,  which totaled
      $57.7 million as of March 31, 2005. Does not include premiums of $972,000,
      discounts of $49,000 and unrealized losses of $480,000.

(2)   Net of loans in process of $1.5 million in construction loans and $177,000
      in multi-family residential and non-residential loans.

      One- to Four-Family  Residential Real Estate Loans. The Company's  primary
lending   activity   consists  of  the   origination  of  one-  to  four-family,
owner-occupied,   residential  mortgage  loans  on  properties  located  in  the
Company's  market  area.  The  Company  generally  does  not  originate  one- to
four-family residential loans on properties outside of its market area. At March
31, 2005, the Company had $157.7 million,  or 72.6%, of its total loan portfolio
invested in one- to four-family residential mortgage loans.

      The Company's fixed rate loans  generally are originated and  underwritten
according to standards  that permit  resale in the  secondary  mortgage  market.
Whether the Company can or will sell fixed rate loans into the secondary market,
however,  depends on a number of factors including the Company's  portfolio mix,
gap and liquidity  positions,  and market conditions.  Moreover,  the Company is
more likely to retain  fixed rate loans if its  one-year  gap is  positive.  The
Company's  fixed  rate  mortgage  loans are  amortized  on a monthly  basis with
principal  and interest due each month.  One- to  four-family  residential  real
estate loans often remain  outstanding  for  significantly  shorter periods than
their contractual terms because borrowers may refinance or prepay loans at their
option.  The Company's  one- to four-family  residential  portfolio has declined
$14.1 million,  or 8.2%, from fiscal 2004 to 2005. This reduction was due mainly
to the low interest rate environment  which prompted many mortgage  customers to
refinance their loans. The Company chose not to aggressively  price its mortgage
loans  during this period and, as a result,  experienced  significant  principal
repayments.  The  Company  used the  proceeds  of the  principal  reductions  to
originate  non-residential  real  estate  and  commercial  business  loans.  The
Company's  secondary  market  activities  have  been  limited  to  sales of $6.7
million,  $6.2 million,  $4.0 million,  $27.4 million and $9.2 million,  for the
fiscal years ended March 31, 2005, 2004, 2003, 2002 and 2001, respectively. Such
sales generally  constituted  current period  originations.  There were no loans
identified  as available  for sale as of March 31, 2005,  2004,  2003,  or 2002.
Mortgage loans held for sale at March 31, 2001 totaled $861,000 .

      The Company  currently  offers one- to  four-family  residential  mortgage
loans with terms typically  ranging from 15 to 30 years,  and with adjustable or
fixed interest rates. Originations of fixed rate mortgage loans versus ARM loans
are monitored on an ongoing basis and are affected significantly by the level of
market  interest rates,  customer  preference,  the Company's  interest rate gap
position,  and loan products offered by the Company's  competitors.  Despite the
Company's emphasis on ARM loans, the low interest rate environment over the last
few years has resulted in customer  preference for fixed rate mortgage loans. As
a result,  during the year ended March 31, 2005,  the  Company's  ARM  portfolio
decreased by $2.9 million, or 6.0%.

      The Company  offers two ARM loan  products.  The Treasury ARM loan adjusts
annually with interest rate adjustment limitations of 2% per year and with a cap
of 5% on total rate  increases or decreases over the life of the loan. The index
on  the  Treasury  ARM  loan  is the  weekly  average  yield  on  U.S.  Treasury
securities,  adjusted to a constant maturity of one year plus a margin. However,
these loans are underwritten at the fully-indexed  interest rate. The second ARM
product is the Cost of Funds ARM loan which  adjusts  annually  and has periodic
and lifetime  interest  rate caps of 1% and 3%,  respectively.  The index is the
Ohio Cost of Funds from SAIF Insured Savings


                                       7


Associations,  which  index  is  published  quarterly  by the OTS.  The  initial
interest  rate  on the  Cost of  Funds  ARM  loans  is not  discounted.  One- to
four-family  residential  ARM loans  totaled  $46.1  million,  or 21.4%,  of the
Company's total loan portfolio at March 31, 2005.

      The primary  purpose of offering ARM loans is to make the  Company's  loan
portfolio more interest rate sensitive.  However,  as the interest income earned
on ARM loans varies with prevailing  interest rates, such loans do not offer the
Company  predictable cash flows as would long-term,  fixed rate loans. ARM loans
carry increased credit risk associated with potentially  higher monthly payments
by  borrowers  as  general  market  interest  rates  increase.  It is  possible,
therefore,  that during periods of rising interest rates, the risk of default on
ARM loans may increase  due to the upward  adjustment  of interest  costs to the
borrower. Management believes that the Company's credit risk associated with its
ARM loans is reduced  because  the Company has either a 3% or 5% cap on interest
rate increases during the life of its ARM loans.

      The  Company  also offers  home  equity  loans and equity  lines of credit
collateralized by a second mortgage on the borrower's  principal  residence.  In
underwriting  these home equity  loans,  the Company  requires  that the maximum
loan-to-value  ratios,  including the  principal  balances of both the first and
second mortgage loans,  not exceed 85%. The home equity loan portfolio  consists
of  adjustable  rate  loans  which use the prime rate as  published  in The Wall
Street  Journal as interest rate  indices.  Home equity loans include fixed term
adjustable  rate loans,  as well as lines of credit.  As of March 31, 2005,  the
Company's equity loan portfolio totaled $20.3 million,  or 12.6%, of its one- to
four-family mortgage loan portfolio.

      The  Company's  one-  to  four-family  residential  first  mortgage  loans
customarily include due-on-sale clauses, which are provisions giving the Company
the right to declare a loan  immediately  due and  payable  in the event,  among
other things,  that the borrower  sells or otherwise  disposes of the underlying
real  property  serving as  security  for the loan.  Due-on-sale  clauses are an
important means of adjusting the rates on the Company's fixed rate mortgage loan
portfolio.

      Regulations limit the amount that a savings  association may lend relative
to the appraised value of the real estate securing the loan, as determined by an
appraisal at the time of loan origination.  The Company's lending policies limit
the maximum loan-to-value ratio on both fixed rate and ARM loans without private
mortgage  insurance to 80% of the lesser of the appraised  value or the purchase
price of the property to serve as collateral for the loan. However,  the Company
makes one- to four-family real estate loans with loan-to-value  ratios in excess
of 80%. For 15 year fixed rate ARM loans with loan-to-value  ratios of 80.01% to
85%, 85.01% to 90%,  90.01% to 95%, and 95.01% to 97%, the Company  requires the
first 6%, 12%, 25% and 30%,  respectively,  of the loan to be covered by private
mortgage  insurance.  For 30 year fixed rate loans with loan-to-value  ratios of
80.01% to 85%, 85.01% to 90%, and 90.01% to 97%, the Company  requires the first
12%, 25%, and 30%,  respectively,  of the loan to be covered by private mortgage
insurance.  The Company requires fire and casualty  insurance,  as well as title
insurance  regarding good title,  on all  properties  securing real estate loans
made by the Company and flood insurance, where applicable.

      Multi-Family  Residential Real Estate Loans. Loans secured by multi-family
real estate constituted  approximately  $7.9 million,  or 3.6%, of the Company's
total loan portfolio at March 31, 2005. The Company's  multi-family  real estate
loans are secured by multi-family  residences,  such as apartment buildings.  At
March 31,  2005,  most of the  Company's  multi-family  loans  were  secured  by
properties  located  within the Company's  market area.  At March 31, 2005,  the
Company's multi-family real estate loans had an average balance of $463,000, and
the  largest  multi-family  real  estate  loan had a  principal  balance of $3.3
million.  Multi-family  real estate loans  currently are offered with adjustable
interest  rates or  short  term  balloon  maturities,  although  in the past the
Company  originated  fixed rate long term  multi-family  real estate loans.  The
terms of each multi-family loan are negotiated on a case by case basis, although
such loans typically have adjustable  interest rates tied to a market index, and
amortize  over  15 to  25  years.  The  Company  currently  does  not  emphasize
multi-family real estate construction loans.

      Loans  secured by  multi-family  real estate  generally  involve a greater
degree of credit risk than one- to  four-family  residential  mortgage loans and
carry larger loan balances.  This  increased  credit risk is a result of several
factors,  including the  concentration of principal in a limited number of loans
and borrowers,  the effects of general  economic  conditions on income producing
properties,  and the increased  difficulty of evaluating  and  monitoring  these
types of loans. Furthermore, the repayment of loans secured by multi-family real
estate is typically dependent


                                       8


upon the successful  operation of the related real estate property.  If the cash
flow from the project is reduced,  the borrower's  ability to repay the loan may
be impaired.

      Non-Residential   Real   Estate   and  Land   Loans.   Loans   secured  by
non-residential  real estate constituted  approximately $27.8 million, or 12.8%,
of the  Company's  total  loan  portfolio  at  March  31,  2005.  The  Company's
non-residential  real  estate  loans are secured by  improved  property  such as
offices,  small business facilities,  and other  non-residential  buildings.  At
March 31, 2005,  most of the  Company's  non-residential  real estate loans were
secured by properties  located  within the  Company's  market area. At March 31,
2005, the Company's non-residential loans had an average balance of $147,000 and
the largest  non-residential  real  estate loan had a principal  balance of $2.4
million.  The terms of each non-residential real estate loan are negotiated on a
case by case basis. Non-residential real estate loans are currently offered with
adjustable interest rates or short term balloon maturities, although in the past
the  Company has  originated  fixed rate long term  non-residential  real estate
loans.  Non-residential  real estate loans  originated by the Company  generally
amortize  over  15 to  25  years.  The  Company  currently  does  not  emphasize
non-residential real estate construction loans.

      Loans secured by  non-residential  real estate generally involve a greater
degree of risk than one- to  four-family  residential  mortgage  loans and carry
larger loan balances. This increased credit risk is a result of several factors,
including  the  concentration  of  principal  in a  limited  number of loans and
borrowers,  the  effects  of general  economic  conditions  on income  producing
properties,  and the increased  difficulty of evaluating  and  monitoring  these
types of loans.  Furthermore,  the repayment of loans secured by non-residential
real estate is typically dependent upon the successful  operation of the related
real  estate  project.  If the  cash  flow  from the  project  is  reduced,  the
borrower's ability to repay the loan may be impaired.

      The Company  also  originates  a limited  number of land loans  secured by
individual  improved and unimproved  lots for future  residential  construction.
Land  loans are  generally  offered  with a fixed rate and with terms of up to 5
years. Land loans totaled $1.4 million at March 31, 2005.

      Residential Construction Loans. To a lesser extent, the Company originates
loans to finance the construction of one- to four-family  residential  property.
At March 31,  2005,  the Company had $4.1  million,  or 1.9%,  of its total loan
portfolio invested in interim construction loans. The Company makes construction
loans to private  individuals  and to builders.  Loan  proceeds are disbursed in
increments as construction  progresses and as inspections warrant.  Construction
loans are typically structured as permanent one- to four-family loans originated
by the Company with a 12-month construction phase. Accordingly,  upon completion
of the  construction  phase,  there is no  change  in  interest  rate or term to
maturity  of  the  original  construction  loan,  nor  is a new  permanent  loan
originated.

      Commercial  Business  Loans.   Commercial  business  loans  totaled  $14.1
million,  or 6.5% of the Company's  total loan portfolio at March 31, 2005. This
represents  net  growth of $7.6  million  which  equates to a 3.6%  increase  as
percentage  of total  loans  compared  to $6.5  million at March 31,  2004.  The
Company has three experienced commercial lenders and is developing an additional
commercial  lender  internally.  The Company  has plans to  continue  commercial
lending growth as market conditions permit.

      Commercial  loans  carry a  higher  degree  of  risk  than  one- to  four-
residential   loans.  Such  lending  typically   involves  large  loan  balances
concentrated in a single  borrower or groups of related  borrowers for rental or
business  properties.  In addition,  the payment  experience on loans secured by
income-producing  properties  is  typically  dependent  on  the  success  of the
operation  of the  related  project  and thus is  typically  affected by adverse
conditions in the real estate market and in the economy. The Company makes loans
generally  in the $100,000 to  $1,000,000  range with the majority of them being
under  $500,000.  Commercial  loans  are  generally  underwritten  based  on the
borrower's  ability to pay and assets such as buildings,  land and equipment are
taken as additional loan collateral.  Each loan is evaluated for a level of risk
and assigned a rating from "1" (the highest  rating) to "7" (the lowest rating).
All loans originated to date have been rated 4 or higher.

      Consumer  Loans.  Ohio savings  associations  are  authorized to invest in
secured and unsecured consumer loans in an aggregate amount which, when combined
with  investments in commercial  paper and corporate debt  securities,  does not
exceed 20% of an  association's  assets.  In addition,  an Ohio  association  is
permitted to invest up to 5% of its assets in loans for educational purposes.


                                       9


      As of March 31, 2005, consumer loans totaled $4.3 million, or 2.0%, of the
Company's total loan portfolio. The principal types of consumer loans offered by
the  Company  are  second  mortgage  loans,  fixed  rate auto and  truck  loans,
education loans, credit card loans,  unsecured personal loans, and loans secured
by deposit accounts.  Consumer loans are offered primarily on a fixed rate basis
with maturities generally of less than ten years.

      The Company's second mortgage consumer loans are secured by the borrower's
principal residence with a maximum loan-to-value ratio,  including the principal
balances of both the first and second mortgage loans, of 80% or less. Such loans
are  offered on a fixed  rate basis with terms of up to ten years.  At March 31,
2005, second mortgage loans totaled $1.4 million, or .9%, of one- to four-family
mortgage.

      The  underwriting  standards  employed by the Company for  consumer  loans
include a determination  of the applicant's  credit history and an assessment of
the  applicant's  ability  to meet  existing  obligations  and  payments  on the
proposed loan. The quality and stability of the  applicant's  monthly income are
determined by analyzing the gross monthly  income from primary  employment,  and
additionally  from any  verifiable  secondary  income.  Creditworthiness  of the
applicant  is  of  primary  consideration.   However,   where  applicable,   the
underwriting  process also includes a comparison of the value of the  collateral
in relation to the proposed loan amount.

      Consumer loans entail greater credit risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate  rapidly,  such as automobiles,  mobile homes, boats, and
recreational  vehicles.  In such cases,  repossessed  collateral for a defaulted
consumer  loan  may  not  provide  an  adequate  source  of  repayment  for  the
outstanding  loan and the remaining  deficiency  often does not warrant  further
substantial  collection  efforts  against the borrower.  In particular,  amounts
realizable on the sale of repossessed  automobiles may be significantly  reduced
based  upon the  condition  of the  automobiles  and the lack of demand for used
automobiles.  The Company  adds a general  provision  on a regular  basis to its
consumer loan loss allowance,  based on, among other factors,  general  economic
conditions  and prior  loss  experience.  See  "--Delinquencies  and  Classified
Assets--Non-Performing  and Impaired Assets," and  "--Classification  of Assets"
for information regarding the Company's loan loss experience and reserve policy.

      Mortgage-Backed  Securities.  The Company also invests in  mortgage-backed
securities  generally  issued or guaranteed  by the United States  Government or
agencies  thereof.  Investments  in  mortgage-backed  securities are made either
directly or by exchanging  mortgage  loans in the  Company's  portfolio for such
securities.    These   securities   consist   primarily   of   adjustable   rate
mortgage-backed securities issued or guaranteed by the Federal National Mortgage
Association ("FNMA"),  Federal Home Loan Mortgage Corporation ("FHLMC"), and the
Government  National  Mortgage  Association   ("GNMA").   Total  mortgage-backed
securities,  including  those  designated as available for sale,  decreased from
$88.4 million at March 31, 2004 to $60.4 million at March 31, 2005 primarily due
to repayments.

      The Company's  objectives in investing in mortgage-backed  securities vary
from time to time  depending  upon market  interest  rates,  local mortgage loan
demand,  and the Company's  level of liquidity.  Mortgage-backed  securities are
more  liquid  than whole  loans and can be readily  sold in  response  to market
conditions and changes in interest rates.  Mortgage-backed  securities purchased
by the Company also have lower credit risk  because  principal  and interest are
either  insured  or  guaranteed  by the United  States  Government  or  agencies
thereof.

      Loan  Originations,   Solicitation,   Processing,  and  Commitments.  Loan
originations  are derived  from a number of sources  such as real estate  broker
referrals,   existing  customers,   borrowers,   builders,   attorneys,  walk-in
customers.  The Company has also  entered into a number of  participation  loans
with high quality lead  lenders.  The  participations  are outside the Company's
normal  lending area and diversify  the loan  portfolio.  Upon  receiving a loan
application,  the Company obtains a credit report and employment verification to
verify specific information relating to the applicant's employment,  income, and
credit standing. In the case of a real estate loan, an appraiser approved by the
Company  appraises  the real estate  intended to secure the  proposed  loan.  An
underwriter in the Company's loan department  checks the loan  application  file
for accuracy and completeness,  and verifies the information  provided.  One- to
four-family and multi-family residential,  and commercial real estate loans, for
up to $150,000,  may be approved by the manager of the mortgage loan department,
loans  between  $150,000  and $300,000  must be approved by the Chief  Executive
Officer  and  loans in  excess  of  $300,000  must be  approved  by the Board of
Directors.  The Loan Committee  meets once a week to review and verify that loan
officer approvals of loans are made within the scope of management's  authority.
All approvals subsequently are ratified monthly by the full


                                       10


Board of Directors. Fire and casualty insurance is required at the time the loan
is made and throughout the term of the loan. After the loan is approved,  a loan
commitment  letter is promptly  issued to the borrower.  At March 31, 2005,  the
Company had commitments to originate $2.1 million of loans.

      If the loan is approved,  the  commitment  letter  specifies the terms and
conditions of the proposed loan including the amount of the loan, interest rate,
amortization term, a brief description of the required collateral,  and required
insurance  coverage.  The  borrower  must  provide  proof of fire  and  casualty
insurance  on the  property  serving  as  collateral,  which  insurance  must be
maintained  during the full term of the loan.  A title search of the property is
required on all loans secured by real property.

      Origination,  Purchase and Sale of Loans and  Mortgage-Backed  Securities.
The table  below  shows  the  Company's  loan  origination,  purchase  and sales
activity for the periods indicated.



                                                                    At March 31,
                                                         ----------------------------------
                                                           2005         2004         2003
                                                         --------     --------     --------
                                                                   (In Thousands)
                                                                          
Total loans receivable, net at beginning of year ....    $205,443     $228,373     $251,172
Loans originated:
   One- to four-family residential(1) ...............      20,312       53,116       52,523
   Multi-family residential(2) ......................          18          421        2,761
Non-residential real estate/land ....................      11,237        1,147        1,074
   Consumer loans ...................................       1,932        1,318        1,900
   Commercial loans .................................      22,696       15,859        2,973
                                                         --------     --------     --------
      Total loans originated ........................      56,195       71,861       61,231
Loans sold:
   Whole loans ......................................      (6,726)      (6,198)      (3,998)
                                                         --------     --------     --------
      Total loans sold ..............................      (6,726)      (6,198)      (3,998)

Mortgage loans transferred to REO ...................        (268)        (279)          --
Loan repayments .....................................     (52,517)     (89,107)     (80,362)
Other loan activity, net(3) .........................      11,500          793          330
                                                         --------     --------     --------
      Total loans receivable, net at end of year ....    $213,627     $205,443     $228,373
                                                         ========     ========     ========

Mortgage-backed securities at beginning of year .....    $ 88,428     $ 76,002     $ 17,326
Mortgage-backed securities purchased ................       8,018       55,526       77,442
Principal repayments and other activity .............     (36,094)     (43,100)     (18,766)
                                                         --------     --------     --------
      Mortgage-backed securities at end of year .....    $ 60,352     $ 88,428     $ 76,002
                                                         ========     ========     ========


- ----------
(1)   Includes  loans  to  finance  the  construction  of  one-  to  four-family
      residential  properties,  and loans  originated  for sale in the secondary
      market.

(2)   Includes  loans  to  finance  the  sale of real  estate  acquired  through
      foreclosure.

(3)   For  fiscal  2005,   includes  other  activity  related  to  the  Stebbins
      acquisition.

      Loan Origination Fees and Other Income.  In addition to interest earned on
loans,  the  Company  generally  receives  loan  origination  fees.  The Company
accounts for loan  origination  fees in accordance  with  Statement of Financial
Accounting  Standards  ("SFAS") No. 91 "Accounting for  Non-refundable  Fees and
Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases." To the extent that loans are  originated  or acquired for the Company's
portfolio, SFAS No. 91 requires that the Company defer loan origination fees and
costs and amortize  such amounts as an  adjustment of yield over the life of the
loan by use of the level yield method. SFAS No. 91 reduces the amount of revenue
recognized by many financial  institutions at the time such loans are originated
or  acquired.  Fees  deferred  under  SFAS No.  91 are  recognized  into  income
immediately  upon prepayment or the sale of the related loan. At March 31, 2005,
the Company had $512,000 of deferred loan  origination  fees.  Loan  origination
fees are volatile sources of income.  Such fees vary with the volume and type of
loans and commitments made and purchased,  principal repayments, and competitive
conditions in the mortgage markets,  which in turn respond to the demand for and
availability of money.

      The Company receives other fees,  service  charges,  and other income that
consist primarily of deposit transaction account service charges,  late charges,
credit card fees, and income from REO operations. The Company


                                       11


recognized  fees and  service  charges of $1.3  million,  $1.5  million and $1.4
million, for the fiscal years ended March 31, 2005, 2004 and 2003, respectively.

      Loans to One Borrower. Savings associations are subject to the same limits
as those applicable to national banks, which under current regulations  restrict
loans to one  borrower  to an  amount  equal to 15% of  unimpaired  capital  and
unimpaired  surplus on an unsecured basis, and an additional amount equal to 10%
of unimpaired  capital and unimpaired  surplus if the loan is secured by readily
marketable  collateral  (generally,  financial  instruments and bullion, but not
real estate). At March 31, 2005, the Company's largest concentration of loans to
one borrower  totaled $3.9 million.  All of such loans were current at March 31,
2005.  The Company had no loans at March 31, 2005 that exceeded the loans to one
borrower regulations.

Delinquencies and Classified Assets

      Delinquencies.  The Company's  collection  procedures  provide that when a
loan is 15 days past due, a computer-generated late charge notice is sent to the
borrower requesting payment,  plus a late charge. This notice is followed with a
letter again  requesting  payment when the payment  becomes 20 days past due. If
delinquency continues, at 30 days another collection letter is sent and personal
contact efforts are attempted,  either in person or by telephone,  to strengthen
the collection  process and obtain reasons for the  delinquency.  Also, plans to
arrange a repayment  plan are made. If a loan becomes 60 days past due, the loan
becomes subject to possible legal action if suitable  arrangements to repay have
not been made. In addition,  the borrower is given  information  which  provides
access  to  consumer  counseling  services,   to  the  extent  required  by  HUD
regulations.  When a loan continues in a delinquent  status for 90 days or more,
and a repayment schedule has not been made or kept by the borrower,  a notice of
intent  to  foreclose  is  sent to the  borrower,  giving  30  days to cure  the
delinquency. If not cured, foreclosure proceedings are initiated.

      Non-Performing and Impaired Assets.  Loans are reviewed on a regular basis
and are placed on a non-accrual  status when, in the opinion of management,  the
collection  of  additional  interest is doubtful.  Mortgage  loans are placed on
non-accrual  status  generally  when either  principal or interest is 90 days or
more past due and  management  considers  the interest  uncollectible.  Interest
accrued and unpaid at the time a loan is placed on non-accrual status is charged
against interest income.

      Under  the  provisions  of SFAS No.  114,  "Accounting  by  Creditors  for
Impairment  of a Loan," a loan is defined  as  impaired  when,  based on current
information and events, it is probable that a creditor will be unable to collect
all amounts due under the contractual  terms of the loan agreement.  In applying
the  provisions  of SFAS No.  114,  the  Bank  considers  investment  in one- to
four-family  residential loans and consumer  installment loans to be homogeneous
and therefore excluded from separate identification for impairment. With respect
to the Bank's investment in multi-family  commercial and  nonresidential  loans,
and the evaluation of impairment  thereof,  such loans are collateral  dependent
and, as a result,  are carried as a practical  expedient at the lower of cost or
fair value.

      At March 31, 2005, the Company had non-performing  loans of $906,000 and a
ratio of  non-performing  and impaired  loans to loans  receivable of 0.42%.  At
March 31, 2004,  the Company had  non-performing  and impaired loans of $747,000
and a ratio of non-performing loans to loans receivable of .36%. For both fiscal
2005  and  2004,  the  nonperforming  loans  consisted  mainly  of one  to  four
residential  mortgage loans. The Company  generally does not recognize losses on
one to four residential mortgage loans primarily because the loan will generally
be a maximum 85% LTV ratio on these mortgages without further insurance.  In the
opinion of management, all non-performing loans are adequately collateralized as
of March 31, 2005 and no significant loss is presently anticipated.

      Real estate  acquired by the Company as a result of foreclosure or by deed
in lieu of foreclosure ("REO") is deemed REO until such time as it is sold. When
REO is acquired,  it is recorded at the lower of the unpaid principal balance of
the related loan or its fair value, less estimated selling expenses.  Valuations
are  periodically  performed by management,  and any subsequent  decline in fair
value is charged to operations.


                                       12


      The following table sets forth  information  regarding our non-accrual and
impaired loans and real estate  acquired by foreclosure at the dates  indicated.
For all the dates  indicated,  we did not have any material loans which had been
restructured pursuant to SFAS No. 15.



                                                                                    At March 31,
                                                                 --------------------------------------------------
                                                                  2005       2004       2003       2002       2001
                                                                 ------     ------     ------     ------     ------
                                                                               (Dollars In Thousands)
                                                                                              
Non-accrual loans:
 Mortgage loans:
    One- to four-family residential .........................    $  895     $  714     $  664     $  616     $  443
    All other mortgage loans ................................        --         24        430      1,070         --
 Non-mortgage loans:
    Commercial business loans ...............................        --         --      1,380      1,416         --
    Consumer ................................................        11          9          6         25         72
                                                                 ------     ------     ------     ------     ------
Total non-accrual loans .....................................       906        747      2,480      3,127        515
Accruing loans 90 days or more delinquent ...................        --         --         15         38         --
                                                                 ------     ------     ------     ------     ------
Total non-performing loans ..................................       906        747      2,495      3,165        515
Loans deemed impaired (1) ...................................        --         --         --        645        645
                                                                 ------     ------     ------     ------     ------
Total non-performing and impaired loans .....................       906        747      2,495      3,810      1,160
Total real estate owned (2) .................................        35        100         --         19        124
                                                                 ------     ------     ------     ------     ------
Total non-performing and impaired assets ....................    $  941     $  847     $2,495     $3,829     $1,284
                                                                 ======     ======     ======     ======     ======

Total non-performing and impaired loans to net loans
  receivable ................................................      0.42%      0.36%      1.09%      1.52%      0.47%
                                                                 ======     ======     ======     ======     ======
Total non-performing and impaired loans to total assets .....      0.22%      0.23%       .65%      1.14%      0.37%
                                                                 ======     ======     ======     ======     ======
Total non-performing and impaired assets to total assets ....      0.22%      0.23%       .65%      1.14%      0.41%
                                                                 ======     ======     ======     ======     ======


- ----------
(1)   Includes loans deemed impaired that are currently performing.

(2)   Represents  the  net  book  value  of  property  acquired  by  us  through
      foreclosure or deed in lieu of foreclosure.  These properties are recorded
      at the lower of the  loan's  unpaid  principal  balance or fair value less
      estimated selling expenses.

      During the year ended March 31, 2005, 2004 and 2003, gross interest income
of $40,000,  $37,000 and $208,000  would have been  recorded on loans  currently
accounted  for on a non-accrual  basis if the loans had been current  throughout
the period.  Interest  income  recognized on nonaccrual  loans totaled  $45,000,
$23,000  and  $362,000  for the  years  ended  March  31,  2005,  2004 and 2003,
respectively.  The Company had no interest income from impaired loans for fiscal
2005. The Company  recognized  interest  income on impaired loans using the cash
method of accounting of  approximately  $249,000 and $24,000 for the years ended
March 31, 2004 and 2003.

      The following table sets forth  information with respect to loans past due
60-89 days and 90 days or more in our portfolio at the dates indicated.



                                                           At March 31,
                                          ----------------------------------------------
                                           2005      2004      2003      2002      2001
                                          ------    ------    ------    ------    ------
                                                          (In Thousands)
                                                                   
Loans past due 60-89 days ............    $1,084    $  669    $  723    $  431    $2,536
Loans past due 90 days or more .......       906       747     2,495     3,165       515
                                          ------    ------    ------    ------    ------
   Total past due 60 days or more ....    $1,990    $1,416    $3,218    $3,596    $3,051
                                          ======    ======    ======    ======    ======


      Classification   of   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"  assets.  An  asset 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 institution 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.  Assets
that do not  expose  the  savings  institution  to risk  sufficient  to  warrant
classification


                                       13


in one of the aforementioned  categories, but which possess some weaknesses, are
required to be designated "special mention" by management.

      When a savings institution classifies problem assets as either substandard
or doubtful,  it is required to establish general  allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances that 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  institution  classifies
problem  assets as  "loss,"  it is  required  either  to  establish  a  specific
allowance for losses equal to 100% of the amount of the assets so classified, or
to charge  off such  amount.  A savings  institution's  determination  as to the
classification  of its  assets  and the amount of its  valuation  allowances  is
subject to review by the OTS,  which can order the  establishment  of additional
general or specific loss allowances.  The Company  regularly reviews the problem
loans in its portfolio to determine whether any loans require  classification in
accordance with applicable regulations.

      The  following  table sets  forth the  aggregate  amount of the  Company's
classified assets at the dates indicated.

                                                   At March 31,
                                  ----------------------------------------------
                                   2005      2004      2003      2002      2001
                                  ------    ------    ------    ------    ------
                                              (Dollars in Thousands)

Substandard assets(1) .........   $2,767    $  839    $2,481    $3,303    $  569
Doubtful assets ...............       --        --        --        --        --
Loss assets ...................       --        --        --       105        --
                                  ------    ------    ------    ------    ------
   Total classified assets ....   $2,767    $  839    $2,481    $3,408    $  569
                                  ======    ======    ======    ======    ======

- ----------
(1)   Includes REO.

      Allowance for Loan Losses.  In determining the amount of the allowance for
loan losses at any point in time,  management and the Board of Directors apply a
systematic  process  focusing on the risk of loss in the loan portfolio.  First,
delinquent  non-residential,  multi-family  and  commercial  loans are evaluated
individually  for  potential   impairment  in  their  carrying  value.   Second,
management  applies historic loss experience to the individual loan types in the
portfolio.  In addition to the historic loss percentage,  management  employs an
additional  risk  percentage  tailored to the  perception of overall risk in the
economy.  However,  the analysis of the  allowance  for loan losses  requires an
element of judgment and is subject to the  possibility  that the  allowance  may
need to be increased, with the corresponding reduction in earnings.

      During the fiscal years ended March 31, 2005,  2004 and 2003,  the Company
added $430,000,  $173,000 and $91,000,  respectively,  to the provision for loan
losses. The Company's  allowance for loan losses totaled $1.4 million,  $815,000
and $678,000 at March 31, 2005, 2004 and 2003, respectively.  As a result of the
increased  commercial  loan volume,  the acquisition of Stebbins' loan portfolio
and an enhancement of the Company's loan rating standards,  management increased
the  provision  for loan  losses by $257,000 in fiscal  2005.  While  management
believes that the Company's current allowance for loan losses is adequate, there
can be no assurance that the allowance for loan losses will be adequate to cover
losses that may in fact be realized in the future or that additional  provisions
for loan losses will not be required. To the best of management's knowledge, all
known losses as of March 31, 2005 have been recorded.


                                       14


      Analysis of the Allowance For Loan Losses.  The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.



                                                                        At or for the Year Ended March 31,
                                                         ----------------------------------------------------------------
                                                           2005          2004          2003          2002          2001
                                                         --------      --------      --------      --------      --------
                                                                                  (In Thousands)
                                                                                                  
Loans receivable, net ...............................    $213,627      $205,443      $228,373      $251,172      $247,480
                                                         ========      ========      ========      ========      ========
Average loans receivable, net .......................     212,785       214,174       242,120       253,058       245,624
                                                         ========      ========      ========      ========      ========
Allowance balance (at beginning of period) ..........         815           678           730           655           793
Provision for losses ................................         430           173            91           134            96
Stebbins acquisition ................................         230            --            --            --            --
Charge-offs:
   Mortgage loans:
     One- to four-family ............................         (28)           --           (20)           --            (7)
     Residential construction .......................          --            --            --            --            --
     Multi-family residential .......................          --            --            --            --            --
     Non-residential real estate and land(1) ........          --            --           (84)           --          (172)
   Other loans:
     Consumer .......................................         (44)          (65)          (54)          (63)          (61)
     Commercial .....................................         (54)           --            --            --            --
                                                         --------      --------      --------      --------      --------
         Gross charge-offs ..........................        (126)          (65)         (158)          (63)         (240)
                                                         --------      --------      --------      --------      --------
Recoveries:
   Mortgage loans:
     One- to four-family ............................          --            --            --            --            --
     Residential construction .......................          --            --            --            --            --
     Multi-family residential .......................          --            --            --            --            --
     Non-residential real estate and land ...........          --            --            --            --            --
   Other loans:
     Consumer .......................................          25            29            15             4             6
     Commercial .....................................          --            --            --            --            --
                                                         --------      --------      --------      --------      --------
         Gross recoveries ...........................          25            29            15             4             6
                                                         --------      --------      --------      --------      --------
         Net charge-offs ............................        (101)          (36)         (143)          (59)         (234)
                                                         --------      --------      --------      --------      --------

Allowance for loan losses balance (at end of
   period) (2) ......................................    $  1,374      $    815      $    678      $    730      $    655
                                                         ========      ========      ========      ========      ========
Allowance for loan losses as a percent of loans
   receivable, net at end of period .................        0.64%         0.40%         0.30%         0.29%         0.27%
                                                         ========      ========      ========      ========      ========
Net loans charged off as a percent of
   average loans receivable, net ....................        0.05%         0.02%         0.06%         0.02%         0.10%
                                                         ========      ========      ========      ========      ========
Ratio of allowance for loan losses to total non-
   performing assets at end of period ...............      146.01%        96.22%        27.17%        19.07%        51.01%
                                                         ========      ========      ========      ========      ========
Ratio of allowance for loan losses to non-
   performing loans at end of period ................      151.66%       109.10%        27.35%        19.16%        56.47%
                                                         ========      ========      ========      ========      ========


- ----------
(1)   The fiscal 2001 charge-offs  include a $172,000  charge-off  related to an
      impaired loan. This loan was current at March 31, 2002 and March 31, 2001.
      This loan was paid off in fiscal 2003.

(2)   At March 31,  2002,  a specific  allowance  of $105,000 was reserved for a
      nonresidential  loan that met the definition of impaired  pursuant to SFAS
      No. 114.


                                       15


      Allocation  of Allowance for Loan Losses.  The following  table sets forth
the  allocation  of allowance  for loan losses by loan  category for the periods
indicated.  Management  believes that the allowance can be allocated by category
only on an approximate basis. The allocation of the allowance by category is not
necessarily  indicative  of future  losses and does not  restrict the use of the
allowance to absorb losses in any category.



                                                                                  At March 31,
                                           -----------------------------------------------------------------------------------------
                                                 2005               2004              2003              2002              2001
                                           ----------------   ----------------  ----------------  ----------------  ----------------
                                                     % of               % of              % of              % of              % of
                                                     Loans              Loans             Loans             Loans             Loans
                                                    in Each            in Each           in Each           in Each           in Each
                                                   Category           Category          Category          Category          Category
                                                      to                 to                to                to                to
                                                     Total              Total             Total             Total             Total
                                           Amount    Loans    Amount    Loans   Amount    Loans   Amount    Loans   Amount    Loans
                                           ------  --------   ------  --------  ------  --------  ------  --------  ------  --------
                                                                            (Dollars in Thousands)
                                                                                                
Mortgage loans:
  One- to four-family ...................  $   99     72.6%    $100     82.0%    $162     86.4%    $126     85.4%    $551     85.7%
  Residential construction ..............      --      1.9       --      1.4       --      1.5       --      3.4       23      2.8
  Multi-family residential ..............      --      3.6       --      3.2        7      3.7       47      2.8       24      3.6
  Non-residential real estate and land ..     545     13.4      196      8.8       55      5.2      207      4.8       20      3.4
Other loans:
  Consumer ..............................      37      2.0       20      1.5      119      1.7       28      2.4        6      3.1
  Commercial ............................     693      6.5      499      3.1      335      1.5      322      1.2       31      1.4
                                           ------    -----     ----    -----     ----    -----     ----    -----     ----    -----
Total allowance for loan losses .........  $1,374    100.0%    $815    100.0%    $678    100.0%    $730    100.0%    $655    100.0%
                                           ======    =====     ====    =====     ====    =====     ====    =====     ====    =====



                                       16


Investment Activities

      The Company's investment portfolio is comprised of investment  securities,
corporate bonds and notes and state and local obligations. The carrying value of
the  Company's  investment  securities  totaled $72.9 million at March 31, 2005,
compared to $31.6  million at March 31, 2004, an increase of $41.3  million,  or
130.7%.  Such  increase  was  primarily  due to the use of  repayments  from our
mortgage-backed  securities  portfolio to provide a short-term  structured  cash
flow maturity  ladder to fund  projected  loan growth over the next three years.
The Company's cash and cash equivalents,  consisting of cash and due from banks,
federal  funds sold and  interest  bearing  deposits  due from  other  financial
institutions  with original  maturities  of three months or less,  totaled $29.9
million  at March 31,  2005  compared  to $19.9  million at March 31,  2004,  an
increase of $10.1 million, or 50.6%.

      Liquidity  levels may be increased or decreased  depending upon the yields
on  investment   alternatives   and  upon   management's   judgment  as  to  the
attractiveness  of the yields then available in relation to other  opportunities
and its  expectation of the level of yield that will be available in the future,
as well as management's  projections as to the short term demand for funds to be
used in the Company's loan origination and other activities.

      Investment Portfolio. The following table sets forth the carrying value of
the Company's investment securities portfolio,  short-term  investments and FHLB
stock, at the dates indicated.



                                                                                    At March 31,
                                                        --------------------------------------------------------------------
                                                                2005                    2004                    2003
                                                        --------------------    --------------------    --------------------
                                                        Carrying     Market     Carrying     Market     Carrying     Market
                                                          Value      Value       Value       Value       Value       Value
                                                        --------    --------    --------    --------    --------    --------
                                                                       (In Thousands)
                                                                                                  
Investment securities:
Mutual funds .......................................    $     --    $     --    $     --    $     --    $ 10,009    $ 10,009
Corporate bonds and notes ..........................      11,086      11,156      11,714      12,418      12,118      12,314
U.S. Government and agency securities ..............      51,239      51,246      15,189      15,262      10,115      10,309
Obligations of state and political subdivisions ....      10,531      10,543       4,679       4,696       3,599       3,615
                                                        --------    --------    --------    --------    --------    --------
       Total investment securities .................      72,856      72,945      31,582      32,376      35,841      36,247
Other Investments:
Interest-bearing deposits in other financial
  institutions .....................................       6,366       6,366       6,721       6,721       6,529       6,529
Federal funds sold .................................      19,400      19,400       9,875       9,875       8,000       8,000
Federal Home Loan Bank stock .......................       4,386       4,386       4,205       4,205       4,041       4,041
                                                        --------    --------    --------    --------    --------    --------
       Total investments ...........................    $103,008    $103,097    $ 52,383    $ 53,177    $ 54,411    $ 54,817
                                                        ========    ========    ========    ========    ========    ========



                                       17


      Investment  Portfolio  Maturities.  The  following  table  sets  forth the
scheduled maturities,  carrying values, market values and average yields for the
Company's investment securities at March 31, 2005. The Company does not hold any
investment securities with maturities in excess of 30 years.



                                                                                   At March 31, 2005
                                                      ------------------------------------------------------------------------------
                                                      One Year or Less    One to Five Years   Five to Ten Years  More than Ten Years
                                                      -----------------   -----------------   -----------------  -------------------
                                                      Carrying  Average   Carrying  Average   Carrying  Average   Carrying  Average
                                                       Value     Yield     Value     Yield     Value     Yield     Value     Yield
                                                      --------  -------   --------  -------   --------  -------   --------  -------
                                                                                  (Dollars in Thousands)
                                                                                                      
Investment Securities:
  Corporate bonds and notes ........................  $ 5,032     5.64%   $ 6,054     6.59%   $    --      --%    $    --      --%
  U.S. Government and agency .......................    4,974     2.98     43,724     3.64        980     3.12      1,561     3.10
  Obligations of state and political subdivisions ..       --       --        100     3.08        194     6.66     10,237     5.78
                                                      -------   ------    -------   ------    -------   ------    -------   ------
    Total investment securities ....................  $10,006     4.31%   $49,878     3.99%   $ 1,174     3.73%   $11,798     5.43%
                                                      =======   ======    =======   ======    =======   ======    =======   ======




                                                                   At March 31, 2005
                                                       ----------------------------------------
                                                                   Total Investment
                                                                      Securities
                                                       ----------------------------------------
                                                        Average                        Weighted
                                                         Life     Carrying    Market    Average
                                                       In Years    Value      Value      Yield
                                                       --------   --------   -------   --------
                                                                (Dollars in Thousands)
                                                                              
Investment Securities:
  Corporate bonds and notes .........................     1.31    $11,086    $11,156      6.17%
  U.S. Government and agency ........................     2.37     51,239     51,246      3.43
  Obligations of state and political subdivisions ...    10.09     10,531     10,543      5.66
                                                        ------    -------    -------    ------
  Total investment securities .......................     4.98    $72,856    $72,945      4.94%
                                                        ======    =======    =======    ======



                                       18


Sources of Funds

      General.  Deposits are the major source of the Company's funds for lending
and other  investment  purposes.  In addition to deposits,  the Company  derives
funds from the  amortization,  prepayment  or sale of loans and  mortgage-backed
securities,  the sale or maturity of investment  securities,  operations and, if
needed,  advances  from the  Federal  Home Loan Bank  ("FHLB").  Scheduled  loan
principal  repayments  are a relatively  stable  source of funds,  while deposit
inflows and  outflows  and loan  prepayments  are  influenced  significantly  by
general  interest  rates  and  market  conditions.  Borrowings  may be used on a
short-term  basis to compensate for reductions in the availability of funds from
other  sources or on a longer  term basis for  general  business  purposes.  The
Company had $40.0 million of advances from the FHLB at March 31, 2005.

      Deposits.  Consumer and commercial deposits are attracted principally from
within the  Company's  market area through the offering of a broad  selection of
deposit  instruments  including NOW  accounts,  passbook  savings,  money market
deposit,  term  certificate  accounts and individual  retirement  accounts.  The
Company  accepts  deposits of $100,000  or more and offers  negotiated  interest
rates on such  deposits.  Deposit  account  terms vary  according to the minimum
balance  required,  the period of time  during  which the funds  must  remain on
deposit,  and the interest  rate,  among other  factors.  The Company  regularly
evaluates  its  internal  cost of funds,  surveys  rates  offered  by  competing
institutions,  reviews  the  Company's  cash flow  requirements  for lending and
liquidity,  and executes rate changes when deemed appropriate.  The Company does
not obtain funds through  brokers,  nor does it solicit funds outside its market
area.

      Deposit  Portfolio.  Savings and other deposits in the Company as of March
31, 2005, were comprised of the following:



  Weighted                                                                                          Percentage
   Average                                                                Minimum                    of Total
Interest Rate      Minimum Term        Checking and Savings Deposits      Amount       Balances      Deposits
- -------------      ------------        -----------------------------      ------       --------      --------
                                                                                    (In Thousands)
                                                                                          
     0.27%             None              NOW Accounts                   $    100       $ 53,060          16.55%
     0.79              None              Passbook                             25         82,184          25.64
     1.34              None              Money Market Investor             2,500         18,097           5.65

                                          Certificates of Deposit
                                          -----------------------

     1.99          12 months or less     Fixed term, fixed rate              500         42,483          13.25
     1.97          12 to 24 months       Fixed term, fixed rate              500         24,438           7.62
     3.02          25 to 36 months       Fixed term, fixed rate              500         16,039           5.00
     4.39          36 months or more     Fixed term, fixed rate              500         53,183          16.59
     3.24          Negotiable            Jumbo Certificates              100,000         31,102           9.70
                                                                                       --------         ------
                                                                                       $320,586         100.00%
                                                                                       ========         ======



                                       19


      The  following  table sets  forth the  change in dollar  amount of savings
deposits in the various types of savings accounts offered by the Company between
the dates indicated.



                                  Balance at                            Balance at                            Balance at
                                   March 31,      %         Increase     March 31,      %         Increase     March 31,      %
                                     2005      Deposits    (Decrease)      2004      Deposits    (Decrease)      2003      Deposits
                                  ----------  ----------   ----------   ----------  ----------   ----------   ----------  ----------
                                                                        (Dollars in Thousands)
                                                                                                      
NOW accounts ...................   $ 53,060       16.55%    $ 10,381     $ 42,679       14.63%    $  2,697     $ 39,982       13.29%
Passbook statement accounts ....     82,184       25.64           91       82,093       28.13       (2,385)      84,478       28.07
Money market passbook ..........     18,097        5.65        6,204       11,893        4.08       (1,754)      13,647        4.54
Certificates of deposit(1)
Original maturities of:
  12 months or less ............     42,483       13.25       26,642       15,841        5.42       (3,559)      19,400        6.45
  12 to 24 months ..............     24,438        7.62      (19,107)      43,545       14.92      (10,210)      53,755       17.86
  25 to 36 months ..............     16,039        5.00       (1,821)      17,860        6.12        1,990       15,870        5.27
  36 months or more ............     53,183       16.59       10,402       42,781       14.66        7,597       35,184       11.69
Negotiated jumbo ...............     31,102        9.70       (4,036)      35,138       12.04       (3,477)      38,615       12.83
                                   --------    --------     --------     --------    --------     --------     --------    --------
     Total .....................   $320,586      100.00%    $ 28,756     $291,830      100.00%    $ (9,101)    $300,931      100.00%
                                   ========    ========     ========     ========    ========     ========     ========    ========


- ----------
(1)   Certain  Individual  Retirement  Accounts  ("IRAs")  are  included  in the
      respective certificate balances. IRAs totaled $34.1 million, $32.8 million
      and $33.7 million, as of March 31, 2005, 2004 and 2003, respectively.

      The  following  table sets forth the average  dollar  amount and  weighted
average  rate of savings  deposits  in the  various  types of  savings  accounts
offered by the Company.



                                                                              Years Ended March 31,
                                          ------------------------------------------------------------------------------------------
                                                      2005                           2004                           2003
                                          ----------------------------   ----------------------------   ----------------------------
                                                    Percent   Weighted             Percent   Weighted             Percent   Weighted
                                           Average     of      Average    Average     of      Average    Average     of      Average
                                           Balance  Deposits    Rate      Balance  Deposits    Rate      Balance  Deposits    Rate
                                          --------  --------  --------   --------  --------  --------   --------  --------  --------
                                                                            (Dollars in Thousands)
                                                                                                    
Noninterest-bearing demand deposits ...   $  9,849     3.14%     0.00%   $  9,321     3.15%     0.00%   $  8,830     2.94%     0.00%
NOW accounts ..........................     35,913    11.45       .53      34,190    11.54       .43      39,344    13.10       .77
Passbook statement accounts ...........     82,817    26.41       .79      81,034    27.35       .85      73,486    24.47      1.05
Money market passbook .................     14,238     4.54      1.36      13,217     4.46       .92      13,682     4.56      1.20
Certificates of deposit ...............    170,794    54.46      2.96     158,482    53.50      3.12     164,984    54.93      3.89
                                          --------   ------    ------    --------   ------    ------    --------   ------    ------
     Total deposits ...................   $313,611   100.00%     1.81%   $296,244   100.00%     1.99%   $300,326   100.00%     2.81%
                                          ========   ======    ======    ========   ======    ======    ========   ======    ======



                                       20


      The following table sets forth the  certificates of deposit in the Company
classified by rates as of the dates indicated:

                                                          At March 31,
                                                --------------------------------
                                                  2005        2004        2003
                                                --------    --------    --------
                                                     (Dollars in Thousands)

1.05- 2.00%.................................    $ 39,272    $ 59,687    $ 29,681
2.01- 4.00%.................................      82,548      48,536      70,834
4.01- 6.00%.................................      45,294      46,565      61,425
6.01- 6.75%.................................         131         377         884
                                                --------    --------    --------
     Total..................................    $167,245    $155,165    $162,824
                                                ========    ========    ========

      The following  table sets forth the amount and maturities of  certificates
of deposit at March 31, 2004.



                                                      Amount Due
                            ----------------------------------------------------
                            Less Than     1-2        2-3       After
                            One Year     Years      Years     3 Years     Total
                            ---------  --------   --------   --------   --------
Rate                                           (In Thousands)
- ----
                                                         
1.05- 2.00%..............   $ 36,283   $  2,989   $     --   $     --   $ 39,272
2.01- 4.00%..............     48,821     16,582     10,351      6,794     82,548
4.01- 6.00%..............      6,261     18,522      7,926     12,585     45,294
6.01- 6.75%..............        131         --         --         --        131
                            --------   --------   --------   --------   --------
     Total...............   $ 91,496   $ 38,093   $ 18,277   $ 19,379   $167,245
                            ========   ========   ========   ========   ========


      The following table indicates the amount of the Company's  certificates of
deposit of $100,000  or more by time  remaining  until  maturity as of March 31,
2005.

                          Maturity Period                Certificates of Deposit
                          ---------------                -----------------------
                                                             (In Thousands)

      Three months or less ..........................            $ 9,050
      Over three months through six months ..........              6,702
      Over six months through twelve months .........             13,222
      Over twelve months ............................             17,391
                                                                 -------
           Total ....................................            $46,365
                                                                 =======

Borrowings

      Savings deposits are the primary source of funds for the Company's lending
and investment  activities and for its general business  purposes.  The Bank may
rely upon advances from the FHLB and the Federal Reserve Bank discount window to
supplement  their  supply  of  lendable  funds  and to meet  deposit  withdrawal
requirements.  Advances from the FHLB typically are  collateralized  by stock in
the FHLB and a portion of first  mortgage  loans held by the Bank.  At March 31,
2005 the Company had $40.0 million in advances outstanding.

      The FHLB functions as a central  reserve bank providing  credit for member
savings  associations  and  financial  institutions.  As members,  the Banks are
required  to own  capital  stock  in the FHLB and are  authorized  to apply  for
advances  on the  security of such stock and certain  home  mortgages  and other
assets  (principally,  securities that are obligations of, or guaranteed by, the
United States) provided certain standards related to creditworthiness  have been
met.  Advances  are made  pursuant to several  different  programs.  Each credit
program has its own  interest  rate and range of  maturities.  Depending  on the
program,  limitations  on the  amount of  advances  are based  either on a fixed
percentage of a member  institution's  net worth or on the FHLB's  assessment of
the  institution's  creditworthiness.   Although  advances  may  be  used  on  a
short-term basis for cash management needs, FHLB advances have not been, nor are
they expected to be, a significant long-term funding source for the Company.


                                       21



                                                       Year Ended March 31,
                                                  -----------------------------
                                                    2005       2004       2003
                                                  -------    -------    -------
                                                      (Dollars in thousands)

Federal Home Loan Bank advances:
   Maximum month-end balance ..................   $40,000    $30,000    $30,000
   Balance at end of period ...................    40,000     30,000     30,000
   Average balance ............................    26,076     30,000     17,204

Weighted average interest rate on:
   Balance at end of period ...................      3.59%      4.15%      4.15%
   Average balance for period .................      3.96       4.16       4.28

Competition

      The Company encounters strong competition both in attracting  deposits and
in  originating  real estate and other loans.  Its most direct  competition  for
deposits has come historically from commercial  banks,  brokerage houses,  other
savings  associations,  and credit  unions in its market  area,  and the Company
expects  continued strong  competition  from such financial  institutions in the
foreseeable  future.  The  Company's  market area  includes  branches of several
commercial  banks that are  substantially  larger  than the  Company in terms of
state-wide  deposits.  The Company competes for savings by offering depositors a
high level of  personal  service  and  expertise  together  with a wide range of
financial services.

      The  competition  for real estate and other loans comes  principally  from
commercial banks,  mortgage banking companies,  and other savings  associations.
This  competition  for loans has  increased  substantially  in recent years as a
result of the large number of  institutions  competing in the  Company's  market
area as well as the  increased  efforts by commercial  banks to expand  mortgage
loan originations.

      The Company  competes for loans  primarily  through the interest rates and
loan fees it charges  and the  efficiency  and  quality of  services it provides
borrowers,  real estate brokers,  and builders.  Factors that affect competition
include general and local economic conditions, current interest rate levels, and
volatility of the mortgage markets.

Subsidiaries

      At March 31,  2005,  the  Company  did not have any direct  unconsolidated
subsidiaries.

Total Employees

      The Company had 115  full-time  employees  and 32  part-time  employees at
March  31,  2005.  None of  these  employees  are  represented  by a  collective
bargaining  agent,  and the Company  believes that it enjoys good relations with
its personnel.

Regulation

      As a  state-chartered,  SAIF-insured  savings  association,  the  Bank  is
subject to  examination,  supervision  and extensive  regulation by the OTS, the
Ohio Division of Financial Institutions (the "Ohio Division"), and the FDIC. The
Bank is a member of, and owns stock in, the FHLB of Cincinnati,  which is one of
the twelve regional banks in the Federal Home Loan Bank System.  This regulation
and supervision  establishes a comprehensive framework of activities in which an
institution  can engage and is  intended  primarily  for the  protection  of the
insurance fund and depositors.  The OTS and Ohio Division  regularly examine the
Bank  and  prepare  reports  for the  consideration  of the  Company's  Board of
Directors on any  deficiencies  that they may find in the Company's  operations.
The FDIC also  examines the Bank in its role as the  administrator  of the SAIF.
The Bank's relationship with its depositors and borrowers also is regulated to a
great extent by both federal and state laws especially in such matters as the


                                       22


ownership of savings  accounts  and the form and content of the Bank's  mortgage
documents.  Any  change  in such  regulation,  whether  by the FDIC,  OTS,  Ohio
Division, or Congress,  could have a material adverse impact on the Company, the
Bank and their operations.

Federal Regulation of Savings Institutions

      Business  Activities.  The activities of savings associations are governed
by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain  respects,
the Federal Deposit Insurance Act (the "FDI Act"). These federal statutes, among
other things,  (1) limit the types of loans a savings  association may make, (2)
prohibit the acquisition of any corporate debt security that is not rated in one
of the four highest rating categories,  and (3) restrict the aggregate amount of
loans secured by  non-residential  real estate property to 400% of capital.  The
description  of  statutory  provisions  and  regulations  applicable  to savings
associations  set forth herein does not purport to be a complete  description of
such statutes and regulations and their effect on the Company or the Bank.

      Loans to One Borrower.  Under the HOLA, savings institutions are generally
subject to the national bank limits on loans to one borrower. Generally, savings
institutions  may not make a loan or extend  credit to a single or related group
of  borrowers  in  excess of 15% of the  institution's  unimpaired  capital  and
surplus.  An additional  amount may be lent, equal to 10% of unimpaired  capital
and surplus, if such loan is secured by readily-marketable  collateral, which is
defined to include  certain  securities  and  bullion,  but  generally  does not
include real estate. See "--Lending Activities--Loans to One Borrower."

      Qualified  Thrift Lender Test. The HOLA requires  savings  associations to
meet a qualified  thrift  lender  ("QTL")  test.  Under the QTL test,  a savings
association  is  required to  maintain  at least 65% of its  "portfolio  assets"
(total assets less (i) specified  liquid assets up to 20% of total assets,  (ii)
intangibles, including goodwill, and (iii) the value of property used to conduct
business)  in certain  "qualified  thrift  investments,"  primarily  residential
mortgages and related investments, including certain mortgage-backed and related
securities on a monthly basis in 9 out of every 12 months.

      A savings  association  that fails the QTL test must  either  convert to a
bank charter or operate under certain  restrictions.  As of March 31, 2005,  the
Company maintained 87.2% of its portfolio assets in qualified thrift investments
and, therefore, met the QTL test.

      Limitation on Capital  Distributions.  OTS regulations  impose limitations
upon all capital distributions by savings institutions,  such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another  institution  in a cash-out  merger and other  distributions  charged
against capital.  A "well  capitalized"  institution can, after prior notice but
without the approval of the OTS,  make capital  distributions  during a calendar
year in an amount up to 100% of its net income  during the calendar  year,  plus
its retained net income for the  preceding  two years.  As of March 31, 2005 the
Bank was a "well-capitalized" institution.

      Community Reinvestment.  Under the Community Reinvestment Act (the "CRA"),
as implemented by OTS  regulations,  a savings  institution has a continuing and
affirmative  obligation,  consistent with its safe and sound operation,  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 its  examination of a savings  institution,
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
by such  institution.  The CRA also  requires  all  institutions  to make public
disclosure  of their CRA  ratings.  The Company  received a  "satisfactory"  CRA
rating under the current CRA regulations in its most recent federal  examination
by the OTS.

      Transactions  with Related Parties.  The Company's  authority to engage in
transactions  with  related  parties or  "affiliates"  (i.e.,  any company  that
controls or is under common control with an institution,  including the Bank and
any non-savings institution  subsidiaries) or to make loans to certain insiders,
is limited by Sections 23A and 23B of the Federal  Reserve Act ("FRA").  Section
23A limits the aggregate amount


                                       23



of transactions with any individual  affiliate to 10% of the capital and surplus
of the savings  institution and also limits the aggregate amount of transactions
with all  affiliates  to 20% of the savings  institution's  capital and surplus.
Certain transactions with affiliates are required to be secured by collateral in
an amount and of a type described in Section 23A and the purchase of low quality
assets from  affiliates  is  generally  prohibited.  Section 23B  provides  that
certain transactions with affiliates,  including loans and asset purchases, must
be on terms  and  under  circumstances,  including  credit  standards,  that are
substantially  the same or at least as  favorable  to the  institution  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies. In addition,  savings institutions are prohibited from lending to any
affiliate  that is  engaged  in  activities  that are not  permissible  for bank
holding companies and no savings  institution may purchase the securities of any
affiliate other than a subsidiary.

      Enforcement.   Under  the  FDI  Act,  the  OTS  has  primary   enforcement
responsibility  over  savings  institutions  and  has  the  authority  to  bring
enforcement  action  against  all   "institution-related   parties,"   including
stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital  directive  or cease and  desist  order to removal  of  officers  and/or
directors of the institutions, receivership,  conservatorship or the termination
of deposit  insurance.  Civil  penalties  cover a wide range of  violations  and
actions, and range up to $25,000 per day, unless a finding of reckless disregard
is made, in which case penalties may be as high as $1 million per day.  Criminal
penalties  for  most  financial  institution  crimes  include  fines of up to $1
million and imprisonment for up to 30 years. Under the FDI Act, the FDIC has the
authority to recommend to the Director of OTS that  enforcement  action be taken
with respect to a particular savings institution.  If action is not taken by the
Director,   the  FDIC  has   authority  to  take  such  action   under   certain
circumstances.

      Standards  for Safety and  Soundness.  The federal  banking  agencies have
adopted a final regulation and Interagency  Guidelines Prescribing Standards for
Safety and  Soundness  ("Guidelines")  to  implement  the  safety and  soundness
standards  required  under the FDI Act. The  Guidelines set forth the safety and
soundness  standards  that the federal  banking  agencies  use to  identify  and
address  problems at insured  depository  institutions  before  capital  becomes
impaired.  The standards set forth in the Guidelines  address internal  controls
and  information  systems;  internal  audit system;  credit  underwriting;  loan
documentation; interest rate risk exposure; asset growth; and compensation, fees
and benefits.  The agencies also adopted a proposed  rule which  proposes  asset
quality  and  earnings  standards  which,  if  adopted,  would  be  added to the
Guidelines.  If the  appropriate  federal  banking  agency  determines  that  an
institution fails to meet any standard prescribed by the Guidelines,  the agency
may  require  the  institution  to submit to the  agency an  acceptable  plan to
achieve  compliance  with the  standard,  as required by the FDI Act.  The final
regulations establish deadlines for the submission and review of such safety and
soundness compliance plans.

      Capital   Requirements.   The  OTS  capital  regulations  require  savings
institutions to meet three capital standards:  a 1.5% tangible capital standard,
a 4.0% leverage  ratio (or core capital  ratio) and an 8.0%  risk-based  capital
standard.  Core  capital is defined as common  stockholders'  equity  (including
retained earnings), certain non-cumulative perpetual preferred stock and related
surplus, minority interests in equity accounts of consolidated subsidiaries less
intangibles  other than  certain  qualifying  supervisory  goodwill  and certain
mortgage servicing rights. The OTS regulations also require that, in meeting the
tangible ratio,  leverage and risk-based  capital  standards,  institutions must
deduct  investments  in and loans to  subsidiaries  engaged  in  activities  not
permissible for a national bank.

      The  risk-based  capital  standard for savings  institutions  requires the
maintenance of Tier 2 (core) and total capital (which is defined as core capital
and   supplementary   capital)  to  risk  weighted  assets  of  4.0%  and  8.0%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including certain  off-balance sheet assets,  are multiplied by a risk-weight of
0% to 100%, as assigned by the OTS capital regulation based on the risks the OTS
believes  are  inherent in the type of asset.  The  components  of Tier 1 (core)
capital are equivalent to those discussed  earlier under the 4.0% leverage ratio
standard.  The components of supplementary  capital currently include cumulative
preferred stock,  long-term  perpetual  preferred stock,  mandatory  convertible
securities, subordinated debt and intermediate preferred stock and allowance for
loan and  lease  losses.  Allowance  for loan and  lease  losses  includable  in
supplementary  capital is limited to a maximum of 1.25%.  Overall, the amount of
supplementary  capital  included as part of total capital  cannot exceed 100% of
core capital.


                                       24



Prompt Corrective Regulatory Action

      Under the OTS Prompt Corrective Action regulations, the OTS is required to
take certain  supervisory  actions against  undercapitalized  institutions,  the
severity  of which  depends  upon the  institution's  degree of  capitalization.
Generally,  a savings institution that has total risk-based capital of less than
8.0% or a leverage  ratio or a Tier 1 core capital  ratio that is less than 4.0%
is considered to be  undercapitalized.  A savings institution that has the total
risk-based  capital less than 6.0%, a Tier 1 core  risk-based  capital  ratio of
less than 3.0% or a leverage  ratio that is less than 3.0% is  considered  to be
"significantly  undercapitalized"  and a savings institution that has a tangible
capital to assets  ratio equal to or less than 2.0% is deemed to be  "critically
undercapitalized."  Subject to a narrow  exception,  the  banking  regulator  is
required  to  appoint a  receiver  or  conservator  for an  institution  that is
"critically  undercapitalized."  The  regulation  also  provides  that a capital
restoration  plan  must be  filed  with  the OTS  within  45 days of the date an
institution  receives  notice  that  it  is  "undercapitalized,"  "significantly
undercapitalized"  or  "critically   undercapitalized."  In  addition,  numerous
mandatory supervisory actions become immediately  applicable to the institution,
including,  but not limited to, restrictions on growth,  investment  activities,
capital distributions,  and affiliate transactions.  The OTS could also take any
one of a number of discretionary supervisory actions,  including the issuance of
a capital  directive  and the  replacement  of  senior  executive  officers  and
directors.

Insurance of Accounts and Regulation by the FDIC

      The Bank 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 U.S. 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 FDIC.  The FDIC also has the
authority to initiate enforcement actions against savings and loan 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 or is
engaging  in  unsafe  or  unsound  practices,  or  is in an  unsafe  or  unsound
condition.  Currently,  FDIC deposit  insurance  rates generally range from zero
basis points to 27 basis points, depending on the assessment risk classification
assigned to the depository institution.

      The FDIC may  terminate  the deposit  insurance of any insured  depository
institution,  including  the Bank,  if it  determines  after a hearing  that the
institution has engaged or is engaging in unsafe or unsound practices,  is in an
unsafe  or  unsound  condition  to  continue  operations,  or has  violated  any
applicable law, regulation,  order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance  temporarily  during the hearing
process for the permanent  termination of insurance,  if the  institution has no
tangible  capital.  If insurance of accounts is terminated,  the accounts at the
institution at the time of the termination,  less subsequent withdrawals,  shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances which would result in
termination of the deposit insurance of the Bank.

Federal Home Loan Bank System

      The Banks are members of the FHLB  System,  which  consists of 12 regional
FHLBs.  The FHLB  provides  a  central  credit  facility  primarily  for  member
institutions.  The Banks,  as members of the FHLB,  are  required to acquire and
hold  shares of capital  stock in that FHLB in an amount at least equal to 1% of
the aggregate  principal  amount of its unpaid  residential  mortgage  loans and
similar  obligations  at the  beginning  of each year,  or 1/20 of its  advances
(borrowings) from the FHLB,  whichever is greater.  The Banks were in compliance
with this requirement with an investment in FHLB-Cincinnati  stock, at March 31,
2005, of $4.4 million.

      The FHLBs are required to provide  funds for the  resolution  of insolvent
thrifts  and  to  contribute  funds  for  affordable  housing  programs.   These
requirements  could reduce the amount of  dividends  that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their  members.  FHLB dividends were 4.25% for the fiscal year ended
March 31, 2005. If dividends were reduced, or interest on future FHLB-Cincinnati
advances  increased,  the  Company's  net  interest  income would likely also be
reduced.


                                       25



Ohio Regulation

      As a savings and loan association organized under the laws of the State of
Ohio, the Bank is subject to regulation by the Ohio Division.  Regulation by the
Ohio Division  affects the Bank's internal  organization as well as its savings,
mortgage lending, and other investment activities.  Periodic examinations by the
Ohio  Division  are usually  conducted  on a joint basis with the OTS.  Ohio law
requires  that the Bank  maintain  federal  deposit  insurance as a condition of
doing business.

      Under Ohio law, an Ohio association may buy any obligation  representing a
loan that would be a legal loan if  originated  by the Bank,  subject to various
requirements  including:  loans secured by liens on income-producing real estate
may not exceed 20% of an association's assets; consumer loans, commercial paper,
and corporate  debt  securities may not exceed 20% of an  association's  assets;
loans for commercial,  corporate,  business,  or  agricultural  purposes may not
exceed 30% of an association's assets , provided that an association's  required
reserve must increase proportionately;  certain other types of loans may be made
for  lesser  percentages  of  the  association's   assets;   and,  with  certain
limitations  and  exceptions,  certain  additional  loans  may be made if not in
excess of 3% of the association's total assets. In addition,  no association may
make real estate acquisition and development loans for primarily residential use
to one borrower in excess of 2% of assets.  The total  investments in commercial
paper or  corporate  debt of any  issuer  cannot  exceed 1% of an  association's
assets, with certain exceptions.

      Ohio law authorizes  Ohio-chartered  associations  to, among other things:
(i)  invest up to 15% of assets in the  capital  stock,  obligations,  and other
securities  of service  corporations  organized  under the laws of Ohio,  and an
additional  20% of net worth may be invested in loans to majority  owned service
corporations;  (ii) invest up to 10% of assets in corporate  equity  securities,
bonds, debentures, notes, or other evidence of indebtedness; (iii) exceed limits
otherwise  applicable to certain types of investments (other than investments in
service  corporations)  by and between 3% and 10% of assets,  depending upon the
level of the  institution's  permanent stock,  general  reserves,  surplus,  and
undivided  profits;  and  (iv)  invest  up to 15% of  assets  in  any  loans  or
investments  not otherwise  specifically  authorized or  prohibited,  subject to
authorization by the institution's board of directors.

      An Ohio association may invest in such real property or interests  therein
as its board of directors  deems  necessary or convenient for the conduct of the
business of the  association,  but the amount so invested may not exceed the net
worth of the  association at the time the investment is made.  Additionally,  an
association  may  invest an amount  equal to 10% of its assets in any other real
estate.  This  limitation  does not apply,  however,  to real estate acquired by
foreclosure,  conveyance in lieu of foreclosure,  or other legal  proceedings in
relation to loan security interests.

      Notwithstanding the above powers authorized under Ohio law and regulation,
a state-chartered  savings association,  such as the Bank, is subject to certain
limitations on its permitted activities and investments under federal law, which
may  restrict  the  ability  of  an  Ohio-chartered  association  to  engage  in
activities and make investments otherwise authorized under Ohio law.

      Ohio has adopted statutory limitations on the acquisition of control of an
Ohio savings and loan  association by requiring the written approval of the Ohio
Division prior to the acquisition by any person or company, as defined under the
Ohio Revised  Code, of a controlling  interest in an Ohio  association.  Control
exists,  for purposes of Ohio law, when any person or company,  either directly,
indirectly, or acting in concert with one or more other persons or companies (a)
acquires  15%  of  any  class  of  voting  stock,  irrevocable  proxies,  or any
combination  thereof,  (b) directs the election of a majority of directors,  (c)
becomes  the  general  partner  of the  savings  and loan  association,  (d) has
influence over the management and policies of the savings and loan  association,
(e) has the ability to direct  shareholder votes, or (f) anything else deemed to
be control by the Ohio  Division.  The Ohio  Division's  written  permission  is
required  when the total amount of control held by the acquiror was less than or
equal to 25% control before the  acquisition and more than 25% control after the
acquisition,  or when the total  amount of control held by the acquiror was less
than 50% before the  acquisition and more than 50% after the  acquisition.  Ohio
law also prescribes other situations in which the Ohio Division must be notified
of the acquisition even though prior approval


                                       26



is not required. Any person or company, which would include a director, will not
be deemed to be in control by virtue of an annual  solicitation of proxies voted
as directed by a majority of the board of directors.

      Under certain circumstances, interstate mergers and acquisitions involving
associations  incorporated  under Ohio law are  permitted by Ohio law. A savings
and loan  association  or savings and loan holding  company  with its  principal
place of business in another state may acquire a savings and loan association or
savings and loan holding company incorporated under Ohio law if the laws of such
other state  permit an Ohio  savings  and loan  association  or an Ohio  holding
company reciprocal rights.  Additionally,  recently enacted  legislation permits
interstate  branching by savings and loan associations  incorporated  under Ohio
law.

      Ohio law requires  prior written  approval of the Ohio  Superintendent  of
Savings and Loans of a merger of an Ohio  association  with another  savings and
loan association or a holding company affiliate.

Holding Company Regulation

      Holding Company Acquisitions. The Company is a registered savings and loan
holding  company within the meaning of Section 10 of the HOLA, and is subject to
OTS  examination  and  supervision  as well as certain  reporting  requirements.
Federal law  generally  prohibits a savings and loan  holding  company,  without
prior OTS approval, from acquiring the ownership or control of any other savings
institution or savings and loan holding company,  or all, or substantially  all,
of the assets or more than 5% of the voting  shares  thereof.  These  provisions
also prohibit, among other things, any director or officer of a savings and loan
holding  company,  or any  individual  who owns or controls more than 25% of the
voting shares of such holding  company,  from  acquiring  control of any savings
institution  not a subsidiary of such savings and loan holding  company,  unless
the acquisition is approved by the OTS.

      Holding Company Activities.  The Company operates as a unitary savings and
loan  holding  company.  The  activities  of the  Company  and  its  non-savings
institution subsidiaries are restricted to activities traditionally permitted to
multiple savings and loan holding  companies and to financial  holding companies
under newly added  provisions of the Bank Holding Company Act.  Multiple savings
and loan holding companies may:

      o     furnish or perform  management  services  for a savings  association
            subsidiary of a savings and loan holding company;

      o     hold,  manage or liquidate  assets owned or acquired  from a savings
            association subsidiary of a savings and loan holding company;

      o     hold or manage properties used or occupied by a savings  association
            subsidiary of a savings and loan holding company;

      o     engage in activities determined by the Federal Reserve to be closely
            related to banking and a proper incident thereto; and

      o     engage in  services  and  activities  previously  determined  by the
            Federal Home Loan Bank Board by regulation to be  permissible  for a
            multiple savings and loan holding company as of March 5, 1987.

      The activities financial holding companies may engage in include:

      o     lending,  exchanging,  transferring  or  investing  for  others,  or
            safeguarding money or securities;

      o     insuring,  guaranteeing or indemnifying  others,  issuing annuities,
            and  acting  as  principal,  agent or  broker  for  purposes  of the
            foregoing;


                                       27


      o     providing  financial,  investment  or  economic  advisory  services,
            including advising an investment company;

      o     issuing or selling interests in pooled assets that a bank could hold
            directly;

      o     underwriting, dealing in or making a market in securities; and

      o     merchant banking activities.

      If the OTS determines  that there is reasonable  cause to believe that the
continuation by a savings and loan holding company of an activity  constitutes a
serious risk to the financial  safety,  soundness or stability of its subsidiary
savings institution, the OTS may impose such restrictions as deemed necessary to
address such risk. These restrictions include limiting the following:

      o     the payment of dividends by the savings institution;

      o     transactions between the savings institution and its affiliates; and

      o     any  activities  of the  savings  institution  that  might  create a
            serious  risk that the  liabilities  of the holding  company and its
            affiliates may be imposed on the savings institution.

      Federal  Securities Laws. The Company registered its common stock with the
Securities  and  Exchange  Commission  under  Section  12(g)  of the  Securities
Exchange  Act of 1934.  The  Company is  subject  to the proxy and tender  offer
rules,  insider trading  reporting  requirements and  restrictions,  and certain
other  requirements  under the Exchange Act.  Pursuant to OTS  regulations,  the
Company has agreed to maintain  such  registration  for a minimum of three years
following the conversion in January 2003.

Federal and State Taxation

      Federal  Taxation.  Income  taxes  are  accounted  for under the asset and
liability  method which  requires  recognition of deferred tax  liabilities  and
assets  for the  expected  future  tax  consequences  of  events  that have been
included in the financial statements or tax returns.  Under this method deferred
tax  liabilities and assets are determined  based on the difference  between the
financial  statement and tax bases of assets and  liabilities  using enacted tax
rates in effect for the year in which the differences are expected to reverse.

      The Federal tax bad debt reserve method  available to thrift  institutions
was  repealed  in 1996 for tax years  beginning  after  1995.  As a result,  the
Company  was  required  to  change  from  the  reserve  method  to the  specific
charge-off method to compute its bad debt deduction

      The recapture  amount  resulting  from the change in a thrift's  method of
accounting for its bad debt reserves generally will be taken into taxable income
ratably  (on a  straight-line  basis)  over a  six-year  period.  The Bank began
recapture of the bad debt reserve during fiscal 1999.

      Retained earnings as of March 31, 2005 include  approximately $2.7 million
for which no provision for Federal income tax has been made.  This reserve (base
year and supplemental) is frozen/not  forgiven as certain events could trigger a
recapture such as stock redemption or distributions to shareholders in excess of
current or accumulated earnings and profits.

      The Company's 1999 federal income tax return was under  examination by the
IRS.  Such  examination  was  concluded  without  material  effect on results of
operations or financial position.

      Ohio  Taxation.  The Bank  files  Ohio  franchise  tax  returns.  For Ohio
franchise tax purposes, savings institutions are currently taxed at a rate equal
to 1.3% of taxable net worth. The Bank is not currently under audit with respect
to its Ohio franchise tax returns.


                                       28



      Delaware  Taxation.  As a Delaware  holding  company not earning income in
Delaware,  the  Company  is exempt  from  Delaware  corporate  income tax but is
required to file an annual  report with and pay an annual  franchise  tax to the
State of Delaware. The tax is imposed as a percentage of the capital base of the
Company with an annual maximum of $165,000.  The Company paid Delaware franchise
taxes of $22,801 in fiscal 2005.

ITEM 2. Properties
- ------------------

      The Company  conducts its business through its main banking office located
in Wooster,  Ohio, and its ten additional full service branch offices located in
its market area. The following table sets forth information about its offices as
of March 31, 2005.

                                                Original Year
                                 Leased or        Leased or       Year of Lease
Location                           Owned          Acquired         Expiration
- ---------------------------    -------------   ----------------  ---------------

North Market Street Office
151 N. Market Street
Wooster, Ohio                      Owned             1902              N/A

Cleveland Point Financial
Center
1908 Cleveland Road
Wooster, Ohio                      Owned             1978              N/A

Madison South Office
2024 Millersburg Road
Wooster, Ohio                      Owned             1999              N/A

Northside Office
543 Riffel Road
Wooster, Ohio                      Leased            1999             2019

Millersburg Office
90 N. Clay Street
Millersburg, Ohio                  Owned             1964              N/A

Claremont Avenue Office
233 Claremont Avenue
Ashland, Ohio                      Owned             1968              N/A

Buehlers-Sugarbush Office
1055 Sugarbush Drive
Ashland, Ohio                      Leased            2001             2021

Rittman Office
237 North Main Street
Rittman, Ohio                      Owned             1972              N/A

Lodi Office
303 Highland Drive
Lodi, Ohio                         Owned             1980              N/A

Village Office
1265 S. Main Street
North Canton, Ohio                 Owned             1998              N/A


                                       29

>

Stebbins Office                    Owned             2005              N/A

121 North Main Street

Creston, Ohio 44217

      The Company's  accounting  and  recordkeeping  activities  are  maintained
through an in-house data processing system.

ITEM 3. Legal Proceedings
- -------------------------

      The Company is not involved in any pending  legal  proceedings  other than
routine legal proceedings occurring in the ordinary course of business which, in
the aggregate, involve amounts which are believed by management to be immaterial
to the financial condition and operations of the Company.

ITEM 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------

      During the fourth  quarter of the fiscal year covered by this report,  the
Registrant did not submit any matters to the vote of security holders.

                                     PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and
- ------------------------------------------------------------------------------
        Issuer Purchases of Equity Securities
        -------------------------------------

      The "Stockholder Information" and "Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations  - Common  Stock and  Related
Matters"  sections of the Company's Annual Report to Stockholders for the fiscal
year  ended  March 31,  2005 (the  "2005  Annual  Report to  Stockholders")  are
incorporated herein by reference. No other sections of the 2005 Annual Report to
Stockholders are incorporated herein by this reference.

      The following table sets forth  information with respect to purchases made
by or on behalf of the Company of shares of common  stock of the Company  during
the indicated periods.



                                                            Total Number of      Maximum Number of
                                                          Shares Purchased as     Shares that May
                          Total Number      Average        Part of Publicly      Yet Be Purchased
                           of Shares      Price Paid      Announced Plans or     Under the Plans or
      Period               Purchased       per Share           Programs             Programs(1)
- -------------------     ---------------  --------------  ---------------------  ---------------------
                                                                          
January 1-31, 2005               --         $    --              54,761               130,730

February 1-28, 2005          10,000           16.30              64,761               120,730

March 1-31, 2005             20,000           16.25              84,761               100,730
                            -------         -------             -------               -------

     Total                   30,000         $ 16.02              84,761               100,730
                            =======         =======             =======               =======


- ----------
(1)   A  repurchase  program for  185,491,  or 5% of the  Company's  outstanding
      shares,  was publicly announced on September 2, 2004 and expires on August
      26, 2005. As of March 31, 2005,  84,761 shares had been repurchased  under
      that program. On June 6, 2005, the Company announced the completion of the
      repurchase  program and the  authorization  by the Board of Directors of a
      new program for the repurchase of 352,433 shares,  or 10% of the Company's
      outstanding shares.


                                       30



Equity Compensation Plan Information

      The  following  table sets  forth  information  as of March 31,  2005 with
respect to compensation  plans under which equity  securities of the Company are
authorized for issuance.



                                                                  Number of
                                                               Shares Remaining            Available for
                           Number of shares to be issued       Weighted-Average           Future Issuance
                         Upon the exercise of outstanding     Exercise Price of     (Excluding Shares reflected
Plan Category              Options, Warrants and Rights      Outstanding Options        in the First Column)
- -------------            --------------------------------    -------------------    ---------------------------
                                                                                            
Equity Compensation
Plans Approved by
Security Holders                     279,510(1)                    $13.84                            --

Equity Compensation
Plans Not Approved by
Security Holders                          --                           --                            --
                                  ----------                                                 ----------
                                     279,510                                                         --
                                  ==========                                                 ==========


- ----------
(1) Included in such number are 65,306  shares  which are subject to  restricted
stock grants  which were  accelerated  as to vesting as of March 31,  2005.  The
weighted average price excluded restricted stock grants.

ITEM 6. Selected Financial Data
- -------------------------------

      The information  required herein is incorporated by reference from pages 8
to 9 of the 2005Annual Report to Stockholders.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
        of Operations
        -------------

      The  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results  of  Operations"   section  of  the  Company's  2005  Annual  Report  to
Stockholders is incorporated herein by reference.  No other sections of the 2005
Annual report to Stockholders are incorporated herein by this reference.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------

      The information required herein is incorporated by reference from pages 16
to 18 of the 2005 Annual Report to Stockholders.

ITEM 8. Financial Statements and Supplementary Data
- ---------------------------------------------------

      The material  identified in Item 15(a)(1) hereof is incorporated herein by
reference.

ITEM 9. Changes in and Disagreements With Accountants on Accounting and
- -----------------------------------------------------------------------
        Financial Disclosure
        --------------------

      Not Applicable

ITEM 9A. Controls and Procedures
- --------------------------------

      Our management  evaluated,  with the  participation of our Chief Executive
Officer  and  Chief  Financial  Officer,  the  effectiveness  of our  disclosure
controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under


                                       31



the Securities Exchange Act of 1934) as of the end of the period covered by this
report.  Based  on such  evaluation,  our  Chief  Executive  Officer  and  Chief
Financial Officer have concluded that our disclosure controls and procedures are
designed  to ensure  that  information  required  to be  disclosed  by us in the
reports  that we file or submit  under the  Securities  Exchange  Act of 1934 is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's rules and regulations and are operating in an effective manner.

ITEM 9B. Other Information
- --------------------------

      Not Applicable

                                    PART III
                                    --------

ITEM 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------

      The information  required herein is incorporated  herein by reference from
pages 3 to 6 and page 16 of the Proxy Statement.

      The Company  has adopted a Code of Conduct and Ethics that  applies to its
principal  executive officer and principal  financial officer,  as well as other
officers and  employees  of the Company and the Bank.  Upon receipt of a written
request we will furnish  without charge to any stockholder a copy of the Code of
Conduct and Ethics.  Such written  requests should be directed to Mr. Michael C.
Anderson,  Secretary,  Wayne Savings Bancshares,  Inc., 151 North Market Street,
Wooster, Ohio 44691.

ITEM 11. Executive Compensation
- -------------------------------

      The information  required herein is incorporated  herein by reference from
pages 7 to 12 and page 14 of the Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and
- ---------------------------------------------------------------------------
         Related Stockholder Matters
         ---------------------------

      The information  required herein is incorporated  herein by reference from
pages 15 to page 16 of the Proxy Statement and Item 5 hereof.

ITEM 13. Certain Relationships and Related Transactions
- -------------------------------------------------------

      The  information  required  by  Item 13 of Form  10-K is  incorporated  by
reference from "Management Compensation - Indebtedness of Management and Related
Party Transactions" on page 11 in the Proxy Statement.

ITEM 14. Principal Accountant Fees and Services
- -----------------------------------------------

      The  information   required  herein  in  incorporated  by  reference  from
"Proposal II - Ratification  of Appointment of Auditors" on page 17 in the Proxy
Statement.

                                     PART IV
                                     -------

ITEM 15. Exhibits, Financial Statement Schedules
- ------------------------------------------------

      (a)(1)      Financial Statements
                  --------------------

                  The  following  documents  appear in sections of the Company's
2005 Annual Report to Stockholders under the same captions, and are incorporated
herein by reference. No other sections of the 2005 Annual Report to Stockholders
are incorporated herein by this reference:

      (i)         Selected Consolidated Financial and Other Data;

      (ii)        Management's  Discussion  and Analysis of Financial  Condition
                  and Results of Operations;

      (iii)       Report of Independent Registered Certified Public Accountants;


                                       32



      (iv)        Consolidated Statements of Financial Condition;

      (v)         Consolidated Statements of Earnings;

      (vi)        Consolidated Statements of Stockholders' Equity;

      (vii)       Consolidated Statements of Cash Flows; and

      (viii)      Notes to Consolidated Financial Statements.

                  With  the  exception  of  the  aforementioned   sections,  the
      Company's 2005 Annual Report to  Stockholders  is not deemed filed as part
      of this  Annual  Report on Form 10-K,  and no other  sections  of the 2005
      Annual Report to Stockholders are incorporated herein by this reference.

      (a)(2)      Financial Statement Schedules
                  -----------------------------

                  All  financial  statement  schedules  have been omitted as the
      required  information is inapplicable or has been included in the Notes to
      Consolidated Financial Statements.

      (a)(3) Exhibits
           --------

      Exhibit Number             Description

      3.1(1)            Articles of Incorporation
      3.2(1)            Bylaws
      4.0(2)            Form of Common Stock Certificate of Wayne Savings
                          Bancshares, Inc.
      10.1(3)           Employment Agreement between Wayne Savings
                          Community Bank and Charles F. Finn dated April 1, 2004
      10.2(3)           Employment Agreement between Wayne Savings
                          Community Bank and Wanda Christopher-Finn dated
                          April 1, 2004
      10.3(3)           Employment Agreement between Wayne Savings Community
                          Bank and Michael C. Anderson dated April 1, 2004
      10.4(4)           Employment Agreement between Wayne Savings Community
                          Bank and Phillip E. Becker dated February 15, 2005
      10.5(5)           The Wayne Savings and Loan Company 1993 Incentive
                          Stock Option Plan
      10.6(6)           Wayne Savings Bancshares, Inc. Amended and Restated 2003
                          Stock Option Plan
      11.0(7)           Statement re: computation of per share earnings
      13.0              Annual Report to Security Holders
      21.0              Subsidiaries of Registrant-Reference is made to
                          Item 1 - "Business" for the Required Information
      23.0              Consent of Grant Thornton LLP
      31.1              Certification pursuant to Rule 13a-14(a) and 15d-14(a)
                          of the Securities Exchange Act of 1934 of the Chief
                          Executive Officer
      31.2              Certification pursuant to Rule 13a-14(a) and 15d-14(a)
                          of the Securities Exchange Act of 1934 of the Chief
                          Financial Officer
      32.0              Certification pursuant to 18 U.S.C. Section 1350

- ------------------------

(1)   Filed as exhibits to the Plan of Conversion  and  Reorganization  filed as
      Exhibit  2 to  the  Registrant's  registration  statement  on  Form  SB-2,
      initially  filed on  September  18,  2001,  as amended  (Registration  No.
      333-69600).

(2)   Filed as Exhibit 4, to the  Registrant's  registration  statement  on Form
      SB-2, initially filed on September 18, 2001, as amended  (Registration No.
      333-69600).

(3)   Incorporated  by reference to the Exhibits to the Company's  Form 10-K for
      year ended March 31, 2004, filed on June 29, 2004 (File No. 000-23433).

(4)   Incorporated  by reference to the Exhibits to the Company's  Form 10-Q for
      quarter  ended  December  31,  2004,  filed on February 11, 2005 (File No.
      000-23433).

(5)   Incorporated  by reference  from the Company's  Registration  Statement on
      Form S-8 filed on December 4, 1997 (File No. 333-41479).

(6)   Incorporated  by reference  from the Company's  Registration  Statement on
      Form S-8 filed on October 5, 2004 (File No. 333-119556).

(7)   Incorporated by reference to Note A.8. of "Notes to Consolidated Financial
      Statements" of the 2005 Annual Report to Stockholders.

                                       33



                                   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.

                                    WAYNE SAVINGS BANCSHARES, INC.


Date:  June 28, 2005                By:  /s/Charles F. Finn
                                         -------------------------------------
                                         Charles F. Finn
                                         President and Chief Executive Officer

      Pursuant to the  requirements  of the  Securities  Exchange 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.



                                                
By:    /s/Charles F. Finn                          By:    /s/Michael C. Anderson
       -----------------------------------                ----------------------------------------------
       Charles F. Finn, President, Chief                  Michael C. Anderson, Senior Vice President and
         Executive Officer and Director                     Corporate Secretary
       (Principal Executive Officer)                      (Principal Financial Officer)

Date:  June 28, 2005                               Date:    June 28, 2005


By:    /s/Myron Swartzentruber                     By:    /s/Kenneth R. Lehman
       -----------------------------------                ---------------------------
       Myron Swartzentruber, Vice President               Kenneth R. Lehman, Director
       (Principal Accounting Officer)

Date:  June 28, 2005                               Date:  June 28, 2005


By:    /s/Frederick J. Krum                        By:    /s/James C. Morgan
       -----------------------------------                -------------------------
       Frederick J. Krum, Director                        James C. Morgan, Director

Date:  June 28, 2005                               Date:  June 28, 2005


By:    /s/Terry A. Gardner                         By:    /s/Russell L. Harpster
       -----------------------------------                -----------------------------
       Terry A. Gardner, Director                         Russell L. Harpster, Director

Date:  June 28, 2005                               Date:  June 28, 2005


By:    /s/Joseph L. Retzler
       -----------------------------------
       Joseph L. Retzler, Director

Date:  June 28, 2005


                                       34