The accompanying consolidated financial statements for the period ended June 30, 2000 include the accounts of Homestead Bancorp, Inc. (the "Company") and its wholly owned subsidiary, Homestead Bank (the "Bank"). Ponchatoula Homestead Savings, F.A. changed it's name to Homestead Bank on July 1, 1999. Currently, the business and management of Homestead Bancorp, Inc. is primarily the business and management of the Bank. All significant intercompany transactions and balances have been eliminated in the consolidation.

      The accompanying unaudited financial statements were prepared in accordance with instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the financial statements have been included.

     The Company sponsors a leveraged employee stock ownership plan (ESOP) that covers all employees who have at least six months of service with the Company, and obtained age 20. The ESOP shares initially were pledged as collateral for its debt. The debt is being repaid based on a ten-year amortization and the shares are being released for allocation to active employees annually over the ten-year period. The shares pledged as collateral are deducted from stockholder's equity as unearned ESOP shares in the accompanying balance sheets. ESOP compensation expense was $31,347 for the six months ended June 30, 2000 based on the annual release of shares.

     The Company declared a quarterly dividend of $.06 for the first and second quarters of 2000. Total dividends paid to stockholders in the first six months of 2000 was $135,000.

     Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, which is 1,086,484 for the six month period ended June 30, 2000. Earnings per common share - assuming dilution, are computed by dividing net income by the weighted average number of shares of common stock outstanding plus the effect of diluted securities, which was 1,219,438 for the six month period ended June 30, 2000.

     The following discussion compares the consolidated financial condition of Homestead Bancorp, Inc. (the "Company") and Subsidiary, Homestead Bank (the "Bank") (formerly Ponchatoula Homestead Savings, F.A.), at June 30, 2000 to December 31, 1999 and the results of operations for the three and six month periods ended June 30, 2000 with the same period in 1999. Currently, the business and management of Homestead Bancorp, Inc. is primarily the business and management of the Bank. This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included herein.

     The Company and Bank's results of operations depends primarily on its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest bearing liabilities. The Company's principle interest-earning assets are loans and leases, mortgage-backed securities and investment securities. The Company's results of operations also are affected by the provision for losses on loans and leases; the level of its other income, including loan fees and service charges, federal insurance premiums, net real estate owned expense and miscellaneous other expenses; as well as its income tax expense.

     At June 30, 2000, the Company's total assets, deposits and equity amounted to $110.9 million, $40.9 million, and $13.2 million respectively compared to $102.5 million, $38 million, and $13 million respectively at December 31, 1999. The increase in total assets of $8.4 million or 8.2% was due primarily to an increase of $6.1 million in the net loan and lease portfolio. The increase of 8.5% in net loan and lease portfolio was due to new loan originations exceeding new loan sales and repayment, combined with the Company retaining a greater number of fixed rate loans in its loan portfolio. Interest-bearing deposits in other institutions increased $2.4 million during the first six months to $2.6 million. The increase in interest-bearing deposit was due primarily to an increase in deposits combined with an increase in Federal Home Loan Bank Advances. Investments in Mortgage-Backed securities decreased in the first six months of 2000 by $1.4 million or 6.0%, due to repayment of Mortgage-Backed securities exceeding new purchases. Investment in Federal Home Loan Bank stock increased in the first six months of 2000 by $213,000 or 8.0%, due to the purchase of additional Federal Home Loan Bank stock to facilitate the long term borrowing from Federal Home Loan Bank.

     The Company's short term borrowing from the Federal Home Loan Bank increased during the first six months of 2000 by $5.8 million or 26.0%. The Bank uses the proceeds from short term borrowing to finance the purchase of mortgage-backed securities and fund long term fixed rate mortgages. The Company's long term borrowing from the Federal Home Loan Bank decreased during the first six months of 2000 by $892,000. Homestead uses the proceeds from long term borrowing to fund long term fixed rate mortgages. Deposits with the Bank have increased by $2.8 million or 7.4% in the first six months of 2000. The equity of the Company increased $149,000 or 1.1% in the first six months of 2000, due primarily to net income of $337,000 offset by the repurchase of the Company's common stock in the stock repurchase plan of $46,000 and dividends paid out of $135,000. At June 30, 2000 the Company had repurchased $2.8 million of it's common stock. This amount appears in the equity section of the Statement of Financial Condition as Treasury Stock.

     The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory---and possible additional discretionary---actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighing, and other factors.

      Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of June 30, 2000, that the Bank meets all capital adequacy requirements to which it is subject.

      As of June 30, 2000, the most recent notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.

 The Bank's actual capital amounts and ratios are also presented in the table.

     The Bank is required under applicable federal regulations to maintain specific levels of "liquid" investments in qualifying types of United States Government, federal agency and other investments having maturities of five years or less. Current regulations require that a Savings institution maintain liquid assets of not less than 5% of its average daily balance of net withdrawable shares.

     Net income for the first six months of 2000 was $337,000 compared to $251,000 for the same period of 1999. The increase in net income of $86,000 or 34.3%, was primarily due to an increase in net interest income after provision for (recovery of) loan and lease losses of $130,000 or 10.1%, offset by a decrease in non-interest income of $29,000 or 16.4%, with an increase of $39,000 or 28.9%, in income tax expense. The decrease in non-interest income is due to a decrease in loan fees and service charges of $26,000 or 17.0%. Non-interest expense decreased by $24,000 or 2.2% in the first six months of 2000. Compensation expense increased by $25,000 or 4.7%, offset by a decease in federal insurance premiums of $8,000 or 66.7%, for the first six months of 2000.

     Net income for the three month period ended June 30, 2000 was $193,000 compared to $118,000 for the same period of 1999. The increase in net income of $75,000 or 63.6%, was primarily due to an increase in net interest income after provision for (recovery of) loan and lease losses of $85,000 or 13.2%, offset by a decrease in non-interest income of $9,000 or 10.2%, with an increase of $24,000 or 36.9%, in income tax expense. The decrease in non-interest income is due to a decrease in loan fees and service charges of $8,000 or 11.0%. Non-interest expense decreased by $23,000 or 4.2% for the three month period ended June 30, 2000.

     The primary source of earnings for the Company is net interest income; the difference between income generated from interest-earning assets less interest expense on interest-bearing liabilities. The primary factors that affect interest income are changes in the volume and type of interest-earning assets and interest-bearing liabilities, along with changes in market rates. Net interest income for the first six months of 2000 was $1.4 million an increase of $145,000 or 11.3% over the same period of 1999. This increase in net interest income was primarily attributable to an increase in interest income of $729,000 or 22.8%, offset by an increase in interest expense of $584,000 or 30.5% over the same period of 1999. One of the factors in the increase in net interest income, was a special dividend of $45,000 paid by Federal Home Loan Bank of Dallas to it's shareholders in April 2000. As this was a special dividend, the Bank does not anticipate receiving any other special dividends in future periods. Other factors contributing to the increase in interest income was an increase in the volume of the Company's loan and lease portfolio, combined with an increase in the volume of investment securities offset by a decrease in the volume of the Company's mortgage-backed securities. Interest rate spread is the yield of interest-earning assets minus the costs of interest-bearing liabilities. The interest rate spread for the six months ended June 30, 2000 was 2.24% as compared to 2.10% for the same period in 1999

     Net interest income for the three month period ended June 30, 2000 was $732,000 an increase of $95,000 or 14.9% over the same period of 1999. This increase in net interest income was primarily attributable to an increase in interest income of $404,000 or 25.0%, offset by an increase in interest expense of $309,000 or 31.6% over the same period of 1999. The increase in interest income was primarily due to an increase in the volume of the Company's loan and lease portfolio, combined with an increase in the volume of investment securities and the Federal Home Loan Bank of Dallas special dividend, offset by a decrease in the volume of the Company's mortgage-backed securities.

     The table of Consolidated Average Balance Sheets and Interest Rate Analysis for the six months ended June 30, 2000 and 1999 on page 13, and the corresponding table of Interest Differentials on page 14, detail the effect of a change in average balances and the change in interest yield and interest cost have on net interest income for the respective periods.

Nonperforming Assets

     Nonperforming assets include non-accrual loans and leases and real estate owned. Loans are considered non-accrual when the principal or interest becomes 90 days past due or when there is uncertainty about the repayment of the principal and interest in accordance with the terms of the loans. Non-accrual loans at June 30, 2000 were $197,000 compared to $274,000 at June 30, 1999. The percentage of non-accrual loans and leases to total loans and leases at June 30, 2000 is .26% down from .43% at June 30, 1999.

     Real estate owned is properties held for sale acquired through foreclosure or negotiated settlements of debt. At June 30, 2000 the Bank had real estate owned of $0 compared to $97,000 at June 30, 1999. Nonperforming assets at June 30, 2000 were .18% of total assets compared to .37% at June 30, 1999.

Current Events

     On July 12, 2000, the Office of Thrift Supervision (OTS), amended it's regulations on stock repurchases. Under the old regulations, a company could not repurchase any of its common stock, for the first year after the public offer, and in years two and three only up to 25% of the total outstanding, with OTS approval. Under the new regulations adopted by the OTS on July 12, 2000 a company can not repurchase any common stock in the first year after the public offering, but after the first year a company can repurchase any amount of it's common stock without OTS approval. As a result of the new regulations the Board of Directors of Homestead Bancorp, Inc on July 12, 2000, approved a new stock repurchase program. Under the new program the company can purchase up to 250,000 shares of its common stock.

     In January of this year, Homestead Bank, purchased a tract of land in Walker, La. The land will used to open its third location. The target date for the opening is the second quarter of 2001. Walker is a residential community located about 20 miles east of Baton Rouge, La.