<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-KSB/A

                               (Amendment No. 3)

     (Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934.

     For the fiscal year ended December 31, 2000

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

     For the transition period from___________ to ___________

     Commission file number 000-27244

                             USABANCSHARES.COM, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)


                Pennsylvania                            23-2806495
---------------------------------------     ---------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

    1535 Locust Street, Philadelphia, PA                  19102
----------------------------------------    ---------------------------
(Address of Principal Executive Offices)               (Zip Code)

                                 (215) 569-4200
--------------------------------------------------------------------------------
                  (Issuer's Telephone Number, Including Area Code)


    Securities registered pursuant to Section 12(b) of the Act: None.


      Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $1.00 par value
--------------------------------------------------------------------------------
                                    (Title of Class)


                                                                               1


<PAGE>


         Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

YES  __X__  NO ____

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

Reports to Security Holders.

         Any materials we file with the SEC may be read and copied at the SEC's
Public Reference Room at 450 Fifth Street, NW., Washington, D.C. 20549.
Materials may also be obtained by calling the Public Reference Room at
1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information at http://www.sec.gov.

The Issuer's revenues for its most recent fiscal year were $31.1 million.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of March 30, 2001 was $5.7 million, based on the
average of the closing bid and asked prices of the Registrant's Class A common
stock as reported by the NASDAQ National Market System.

         As of March 31, 2001 the Issuer had outstanding 5,054,545 shares of
Class A common stock, net of 669,889 shares held in Treasury.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Proxy Statement to be utilized in connection with the
2001 Annual Meeting of Shareholders are incorporated by reference into Part III
hereof.





                                                                               2

<PAGE>




                             USABANCSHARES.COM, INC.

                                   Form 10-KSB

                                      INDEX


                                                                            Page
                                                                            ----
PART I

Item 1.    Description of Business.............................................5

Item 2.    Description of Properties..........................................29

Item 3.    Legal Proceedings..................................................29

Item 4.    Submission of Matters to a Vote of Security Holders................29

PART II

Item 5.    Market for Common Equity and Related Stockholder Matters...........30

           Selected Financial and Other Data..................................31

Item 6.    Management's Discussion and Analysis...............................32

           Risk Factors.......................................................39

Item 7.    Financial Statements...............................................46

Item 8.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure...............................................47

PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance With Section 16(a) of the Exchange Act..................47

Item 10.   Executive Compensation.............................................47

Item 11.   Security Ownership of Certain Beneficial Owners and Management.....47

Item 12.   Certain Relationships and Related Transactions.....................47

Item 13.   Exhibits, List and Reports on Form 8-K.............................47

Financial Statements and Report of Independent Certified Public Accountants..F-1




                                                                               3


<PAGE>




FORWARD LOOKING STATEMENTS

         Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.

         Important factors that may cause actual results to differ from
projections include, for example,

         o    general economic conditions, including their impact on capital
              expenditures;

         o    business conditions in the financial services industry;

         o    the regulatory environment;

         o    rapidly changing technology and evolving banking industry
              standards;

         o    competitive factors, including increased competition with
              community, regional and national financial institutions;

         o    new services and products offered by competitors.

         Please see "Risk Factors" beginning on page 39 of this report.

                                                                               4


<PAGE>
                                     Part I

Item 1.  Description of Business

Introduction and Recent Developments.


         USABancShares.com, Inc. (the "Corporation"), is a Pennsylvania
corporation headquartered in Philadelphia, Pennsylvania and is the bank holding
company of vBank, a Savings Bank (the "Bank"), which does business under the
name BankPhiladelphia. The Bank, which is the primary business of the
Corporation, has operated as a community banking institution for over 114 years.
As of December 31, 2000, the Corporation had total assets of $333.0 million,
total liabilities of $327.8 million and stockholders' equity of $5.2 million.


         In November 1995, the Corporation was organized to facilitate the
acquisition of the Bank. Following such acquisition, senior management of the
Bank undertook a dual strategy of (i) growing the Bank's loan portfolio through
the purchase of pools of primarily performing loans at a discount, and (ii)
expanding the Bank's retail banking franchise with an increasing emphasis on
loan originations. See "Lending Activities" and "Sources of Funds"

         Beginning in August 1999 and continuing through the second quarter of
2000, the Corporation embarked on an Internet initiative in which it sought to
expand its business operations from offering financial products and services
primarily through retail distribution channels in the Philadelphia metropolitan
area to one which was national in scope, offering a full range of depository and
non-depository services on a nationwide basis through the Internet. Toward this
end, the Corporation expended significant resources on technology, website
development, marketing, the hiring of personnel and other startup costs
associated with the development and operation of an Internet banking platform.
In addition, the Corporation entered into a number of agreements with strategic
partners to provide on-line related services. While the Corporation's Internet
strategy generated significant online deposits as well as a secure and fully
functioning web site, the significant costs involved in the Internet initiative
resulted in the Corporation incurring significant losses in 1999 and 2000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 6 hereof.

         As a consequence of the expenses involved in implementing the
Corporation's Internet initiative and changed market conditions regarding the
Internet as a delivery platform for national banking services, during the third
quarter of 2000, the Corporation decided to de-emphasize its Internet initiative
and to re-focus its orientation toward the operation of a traditional community
banking franchise in the metropolitan Philadelphia marketplace. Toward this end,
the Corporation's senior management began instituting measures to reduce
expenses, including employee payroll, marketing, advertising and other operating
expenses associated with the Corporation's Internet operations. The Corporation
and the Bank have terminated or are allowing to expire all strategic partnership
relationships associated with the Corporation's Internet initiative.
Substantially all of the expenses associated with the Corporation's Internet
initiative were incurred in 2000, including specific write downs of $2.5 million
which were recognized in the fourth quarter of 2000. Reference is made to a more
detailed discussion in Item 6, "Management's Discussion and Analysis -- Results
of Operations -- Non-Interest Expense."

         As previously reported, in March 2001, the Corporation has entered into
a Written Agreement with the Board of Governors of the Federal Reserve System.
The Bank had previously entered into a Memorandum of Understanding with the
Regional Director of the Federal Deposit Insurance Corporation. In both
instances, regulatory action was initiated due to, among other things, the
above-referenced operating results as well as criticisms raised upon examination
of the Corporation and the Bank by its federal and state examiners. See "Risk
Factors-We have recently incurred losses as a result of implementing our
internet strategy," and Note W of the Notes to Consolidated Financial
Statements, included in Item 7 hereof. The Corporation and the Bank are working
vigorously to comply with the terms of the Memorandum and the Written Agreement
and to correct all of the deficiencies in its operations reported by such
regulatory agencies in its recent examinations.

         On February 23, 2001, the Corporation and the Bank entered into an
agreement with Kenneth Tepper, the Corporation's Chief Executive Officer,
pursuant to which Mr. Tepper resigned from his positions as Chief Executive
Officer and member of the boards of directors of the Corporation and the Bank.
The agreement has been filed as an exhibit to this Form 10-KSB. Mr. Tepper
received a lump-sum payment in connection with his resignation. Craig J. Scher,
the President of the Bank, was appointed by the boards of directors of the
Corporation and the Bank to the additional position of Chief Executive Officer,
effective as of such date, subject to the receipt of requisite regulatory
approvals.

         During the year 2000, the Bank began to purchase shares of the
Corporation's common stock in open market transactions for the benefit of some
of the Corporation's employee benefit plans. As of March 30, 2001, the Bank had
purchased an aggregate of approximately 670,000 shares of the Corporation's
common stock. In view of the losses incurred by the Corporation as discussed
elsewhere in this report, the Corporation may sell such shares or newly-issued
shares in the future to raise additional capital.


                                                                               5
<PAGE>


         As of December 31, 2000, the Corporation was not in compliance with the
minimum regulatory capital requirements established by the Board of Governors of
the Federal Reserve System.


Lending Activities

         Following our acquisition of the Bank in November 1995, we
aggressively grew our loan portfolio through the acquisition of loan pools at a
discount and through loan originations. We intend to continue to expand our
small business community banking presence through the Bank loan officers
originating loans for small to mid-size business located in the Philadelphia
marketplace and through our online operations. We intend to emphasize the
origination of commercial real estate and commercial business loans, which
generally carry higher yields than traditional single-family residential loans.
Although we intend to continue to originate single-family residential and
consumer loans, retail loans will not be emphasized and they will be offered
primarily as an accommodation to our customers.

         Loan Portfolio. The principal components of our loan portfolio are real
estate loans, commercial real estate, and residential one-to-four family
mortgage loans, and to a much lesser extent, commercial business loans and home
equity loans, passbook and other consumer loans. At December 31, 2000 our total
loans receivable, net, amounted to $179.2 million, which represented 53.3% of
our total assets at that date.

         The following table sets forth the composition of our loan portfolio in
dollar amounts and as a percentage of the portfolio as of the dates indicated.
<TABLE>
<CAPTION>
                                                            December 31, 2000                December 31, 1999
                                                    -------------------------------   -------------------------------
(in Thousands)
<S>                                                       <C>                 <C>          <C>                 <C>
Real Estate
  1 - 4 family residential properties                     $ 12,900            7.1%         $ 31,729            15.9%
  Commercial real estate                                   135,152            74.5          143,428             71.7
  Multifamily residential properties                         9,952             5.5            7,726              3.9
Construction                                                 8,821             4.8            9,467              4.7
Commercial and industrial                                   12,645             7.0            4,688              2.3
Consumer                                                     2,025             1.1            2,967              1.5
                                                         ---------          ------        ---------           ------

    Total loans, net of discount                         $ 181,495          100.0%        $ 200,005           100.0%
                                                         =========          ======        =========           ======

    Deferred loan fees                                        (240)                            (267)
    Allowance for loan losses                               (2,090)                          (2,115)
                                                         ---------                        ---------

    Net loans                                            $ 179,165                        $ 197,623
                                                         =========                        =========
</TABLE>
         Origination, Purchase and Sale of Loans. Our lending activities are
subject to the underwriting policies and loan origination and purchase
procedures established by the board of directors and management. Loan
originations are derived from a number of sources, such as existing customers,
our loan officers, professional referrals, walk-in customers and correspondent
lenders. Upon receiving a loan application, we obtain a credit report and
financial information. In the case of a real estate loan, an appraiser approved
by us appraises the real estate intended to collateralize the proposed loan. An
underwriter checks the loan application file for accuracy and completeness, and
verifies the information provided. If the appraisal and credit information
generally comply with our underwriting guidelines, the loan is approved. We have
not delegated to any of our loan officers approval authority. Our President is
authorized to approve auto, home equity and residential mortgage loans up to
$50,000. All other loan originations up to $500,000 are required to be approved
by the loan committee and all loans in excess of $500,000 are required to be
approved by the full board of directors. For multi-family residential and
commercial real estate loans, we require that the borrower provide operating
statements, pro forma cash flow statements and, if applicable, rent rolls. In
addition, we review the borrower's credit standing and expertise in owning and
managing the type of property that will collateralize the loan. Fire and
casualty insurance, and in certain cases, flood insurance, are required on the
property serving as collateral at the time the loan is made and throughout the
term of the loan.

         Our internal originations consist primarily of multi-family residential
and commercial real estate loans, which we intend to continue to emphasize. In
addition, although commercial business loans have historically not been a major
line of business for us, we intend to increase our emphasis on small business
commercial loan originations. Although we will and do originate single-family
residential and consumer loans, such originations have historically been made as
an accommodation to our customers and we generally do not emphasize such loans.


                                                                               6


<PAGE>



         From December 1995 through August 1999, we supplemented our
originations with purchases of loan pools at a discount. Such purchases were the
primary factor in our substantial growth during that period. Prior to 1997, we
acquired loans at a discount, generally from the FDIC and the Resolution Trust
Corporation, primarily in auctions of pools of loans acquired by such agencies
from the large number of financial institutions which had failed during the late
1980s and early 1990s. Although governmental agencies, such as the FDIC,
continue to be a potential source of loans, in recent periods we have obtained
discounted loans primarily from various private sector sellers, such as banks,
savings institutions, mortgage companies and insurance companies which generally
were seeking to eliminate a loan or a category of loans from their portfolio.
While we may purchase loan pools in the future, management does not anticipate
that such purchases will be a large part of our business.

         At December 31, 2000 our net discounted loan portfolio amounted to
$95.5 million or 28.4% of our total assets. These loans had a face value of
$98.6 million, reflecting a discount of $3.1 million or 3.1%.

         Substantially all of the loans we purchased at a discount were
performing in accordance with their terms at the time of purchase. The discount
is determined based on objective and subjective criteria. The objective criteria
includes geographic location, loan-to-value ratio, collateral type, past payment
performance, and the term and structure of the loan. The subjective criteria
relies on senior management's substantial experience with respect to the
acquisition and management of discounted real estate loans.

         We generally acquired real estate loans in pools, although multi-family
residential and commercial real estate loans may be acquired individually. These
pools generally were acquired in auctions or competitive bid circumstances in
which we faced substantial competition. Although many of our competitors have
access to greater capital and have other advantages, we believe we have a
competitive advantage relative to many of our competitors as a result of our
experience in acquiring and managing loans purchased at a discount.

         Prior to making an offer to purchase a portfolio of loans, we conduct
an extensive investigation and evaluation of the loans in the portfolio.
Evaluations of potential loans are conducted primarily by our senior management
who specialize in the analysis of such loans. Our employees may use third
parties to assist them in conducting an evaluation of the value of the
collateral property as well as to assist them in the evaluation and verification
of information and the gathering of other information not previously made
available by the potential seller.

         Although we have focused on acquiring loans in the Mid-Atlantic region,
we have acquired loans secured by real estate located in a number of other
states including Minnesota, Florida and California. We believe that the
relatively broad geographic distribution of our discounted loan portfolio
reduces the risks associated with concentrating such loans in limited geographic
areas and that due to our expertise and our policies and procedures, the
geographic diversity of our discounted loan portfolio does not place greater
burdens on our ability to administer and, if applicable, service such loans. The
table below provides a geographic analysis of the loan portfolio by state.

                                                                               7
<PAGE>

 As of December 31, 2000



                     Principal Balance           Number of
State                 (in Thousands)               Loans
                   ----------------------    ------------------

AL                     $     76                     3
AK                          381                     2
AZ                        3,389                     7
CA                        7,353                    34
CT                        6,205                    38
DC                        4,138                     6
DE                           11                     1
FL                        9,137                    57
GA                           88                     2
IL                            3                     2
KS                            3                     1
KY                        4,201                     1
LA                           32                     1
MA                        2,348                    10
MD                           41                     4
MN                        9,691                    10
KS                            3                     1
NC                        1,720                     1
NH                          542                     7
NJ                       36,007                   183
NY                        9,138                    27
OH                        1,919                     2
OR                          890                     5
PA                       76,106                   327
RI                          249                     2
SC                           27                     2
TX                          533                    10
UT                          208                    21
VA                        4,643                     8
VT                           34                     1
WA                        1,406                     4
WV                          973                     1
                       --------                  ----
                       $181,495                   781
                       ========                  ====

One-to-Four Family Residential Mortgage Lending. At December 31, 2000 the Bank
had $12.9 million loans outstanding secured by one-to-four family residental
mortgages. We are not an active originator of single-family residential loans
and such loans have generally been originated as an accommodation to our
customers. These loans are generally made to borrowers who, because of the size
of the loan, prior credit problems, the absence of a credit history or other
factors, are unable to qualify as borrowers for a single-family residential loan
under Federal Home Loan Mortgage Corporation or Federal National Mortgage
Association guidelines ("conforming loans"). As a result, these loans are not
eligible for resale in the secondary mortgage market. Loans to non-conforming
borrowers are perceived by management as being advantageous because they
generally have higher interest rates and origination and servicing fees, and
generally have lower loan-to-value ratios.


                                                                               8


<PAGE>



         A majority of our one-to-four family residential loans have been
acquired through loan purchases. A majority of these loans are located outside
of the greater Delaware Valley. Although our purchased single-family residential
loans carry a variety of terms, the majority of such loans have loan-to-value
ratios of 80% or below and carry fixed rates of interest. We generally attempt
to acquire the servicing rights with respect to purchased single-family
residential loans, which includes collecting and remitting loan payments,
inspecting the properties and making required insurance and tax payments on
behalf of the borrowers. In the past we purchased loans where the seller
retained the servicing rights. At December 31, 2000, we held in our portfolio
approximately $5.9 million of loans which were being serviced by others.

         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 average
length of time that our one-to-four family residential mortgage loans remain
outstanding varies significantly depending upon trends in market interest rates
and other factors.

         We are permitted under applicable law to lend up to 100% of the
appraised value of the real property securing a residential loan. However, if
the amount of a residential loan originated or refinanced exceeds 80% of the
appraised value, we are required by federal regulations to obtain private
mortgage insurance on the portion of the principal amount that exceeds 80% of
the appraised value of the secured property. Pursuant to underwriting guidelines
adopted by the board of directors, we will generally only lend up to 80% of the
appraised value of the property securing a single-family residential loan.

         Construction and Land Development Lending. We will originate loans for
the construction of single-family residential properties. Such loans may be made
to individuals or builders. Although we do not expect to emphasize construction
lending in the near term, at December 31, 2000 we had $13.4 million of gross
construction loans with $8.8 million of construction loans outstanding as of
such date.

         Commercial Real Estate and Multi-Family Residential Real Estate
Lending. Our lending activities currently emphasize the origination and
acquisition of loans secured by existing commercial and multi-family residential
properties. As of December 31, 2000, a majority of our real estate loan
portfolio consisted of loans secured by commercial and multi-family residential
properties. We have generally targeted higher quality, smaller multi-family
residential and commercial real estate loans with principal balances up to $3.3
million. The Bank's legal lending limit is $3.6 million at December 31, 2000. At
December 31, 2000 we had $135.1 million of commercial real estate loans and
$10.0 million of multi-family residential loans outstanding.

                                                                               9


<PAGE>


         Our multi-family residential loans are secured by multi-family
properties of five units or more, while our commercial real estate loans are
secured primarily by industrial, warehouse, office buildings, office and
industrial condominiums, retail space, strip shopping centers and mixed-used
commercial properties. At December 31, 2000, 41.9% of our commercial real estate
loans were secured by property located in Pennsylvania and 19.8% were secured by
property located in New Jersey.

         We will originate multi-family residential and commercial real estate
loans for terms of up to 25 years. Some of these loans contain call or repayment
option features within three to seven years after origination. We will originate
such loans on both a fixed-rate or adjustable-rate basis, with the latter based
on an applicable prime rate. Adjustable-rate loans may have an established
ceiling and floor, and the maximum loan-to-value for these loan products is
generally 80%. Though historically the Bank has originated and acquired loans
with lower debt coverage ratios, as part of the criteria for underwriting
multi-family residential and commercial real estate loans, the Bank generally
requires a debt coverage ratio (the ratio of net cash from operations before
payment of debt service to debt service) of at least 1.10 to 1.0 on originated
and acquired loans. We generally seek additional protection, such as secondary
collateral and personal guarantees from the principals of the borrowers to
mitigate any weaknesses identified in the underwriting process.

         Loans collateralized by multi-family residential and commercial 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 commercial real estate and multi-family real estate is
typically dependent upon the successful operation of the related property. If
the cash flow from the project is reduced, the borrower's ability to repay the
loan can become impaired. At December 31, 2000, none of our commercial real
estate loans were classified as non-performing.

         Commercial Business Loans. We originate commercial business loans
consisting primarily of lines of credit and term loans secured by equipment and
accounts receivable. At December 31, 2000, commercial business loans totaled
$12.6 million, or 7.0%, of our total loan portfolio. Currently, we are placing
greater emphasis on the origination of commercial business loans. Commercial
business loans generally have shorter terms and higher interest rates than
mortgage loans because of the type and nature of the collateral. At December 31,
2000, none of our commercial business loans were classified as non-performing.

         Consumer Loans. We originate consumer loans consisting primarily of
loans secured by deposit accounts and marketable securities, home improvement
and personal and automobile loans. At December 31, 2000, consumer loans totaled
$2.0 million or 1.1%, of our total loan portfolio. We are not an active
originator of consumer loans. The Bank has offered consumer loans as
accommodations to our existing customers.

         Consumer loans are offered primarily on a fixed-rate basis with
maturities generally less than ten years. Consumer loans entail greater credit
risk than do residential mortgage loans but have smaller balances and tend to
have higher interest rates.




                                                                              10


<PAGE>



         Loan Origination Fees and Other Income. In addition to interest earned
on loans, we generally receive fees in connection with loan originations. Such
loan origination fees, net of costs to originate, are deferred and amortized
using the interest method over the contractual life of the loan. Fees deferred
are recognized as income immediately upon repayment of the related loan. At
December 31, 2000, we had $240,000 of net deferred loan origination fees. Such
fees vary with the volume and type of loans the principal repayments on such
loans and competitive conditions in the real estate market that reflect the
demand and availability of money. In addition to loan origination fees, we also
receive service charges that consist primarily of deposit transaction account
service charges and late charges.

         Loans to One Borrower. 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). At December 31, 2000, our
regulatory limit on loans to one borrower was $3.6 million. Our five largest
loans or groups of loans to one borrower, including related entities, averaged
approximately $3.3 million each. All five of these loans or loan concentrations
were secured by multi-family residential, commercial real estate or marketable
securities and were performing in accordance with their terms at December 31,
2000.

Asset Quality

         Collection Procedures. Our collection procedures provide that when a
loan is 16 days past due, a computer generated late charge notice is sent to the
borrower requesting payment of the amount due under the loan, plus a late
charge. If such delinquency continues, on the first day of the next month, a
delinquent notice is mailed advising the borrower of the violation of the terms
of the loan. We attempt to contact borrowers whose loans are more than 30 days
past due. If such attempts are unsuccessful, we will engage counsel to
facilitate the collection process. A delinquent loan report is presented to the
board of directors on a monthly basis for their review. Historically, we have
instituted legal action on loans 90 days past due. It is sometimes necessary and
desirable to arrange special repayment schedules with borrowers to prevent
foreclosure or filing for bankruptcy. Any change in the terms of a loan is
approved by the loan committee of the board of directors or the full board of
directors.

         Delinquent Loans and Non-performing Assets. Loans are reviewed on a
monthly basis. A loan is placed in a non-accrual status at the time when
ultimate collectibility of principal or interest, wholly or partially, is in
doubt. Past due loans are those loans which were contractually past due 90 days
or more as to interest or principal payments but are well secured and in the
process of collection. Delinquent loans are charged off when it appears no
longer reasonable or probable that the loan will be collected. Interest accrued
and unpaid at the time a loan is placed on non-accrual status is charged against
interest income.

         Real estate acquired by us as a result of foreclosure or by deed in
lieu of foreclosure is deemed Other Real Estate ("ORE") until such time as it is
sold. When ORE is acquired, it is recorded at the lower of the unpaid principal
balance of the related loan or its estimated fair value, less estimated selling
expenses. Valuations are periodically performed or obtained by management and
any subsequent decline in fair market value is charged to operations. We had ORE
of $40,000 as of December 31, 2000 and none as of December 31, 1999.

                                                                              11


<PAGE>



         The following table sets forth information with respect to our
delinquent loans at December 31, 2000.

                                                Balance       Number
                                              -----------    -------
(in Thousands)
Residential real estate:
  Loans 30 to 89 days delinquent                 $   242         11
  Loans 90 or more days delinquent                   260          9
                                                 -------    -------
     Total                                           502         20

Commercial real estate:
  Loans 30 to 89 days delinquent                      15          1
  Loans 90 or more days delinquent                     -          -
                                                 -------    -------
     Total                                            15          1

Commercial business loans:
  Loans 30 to 89 days delinquent                       -          -
  Loans 90 or more days delinquent                     -          -
                                                 -------    -------
     Total                                             -          -
                                                 -------    -------
Total delinquent loans                           $   517         21
                                                 =======    =======

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

         The following table presents information on our non-performing assets
at the dates indicated:


                                                           December 31,
                                                      2000             1999
                                                     --------         -------
(in Thousands)
Non-accruing loans:
One to four family                                   $   260          $   634
Commercial real estate                                     -              632
Commercial business                                        -                -
                                                     -------          -------
     Total non-performing loans                      $   260          $ 1,266

Accruing loans greater than 90 days delinquent             -                -
                                                     -------          -------
     Total non-performing loans                          260            1,266

Other real estate owned                                   40                -
                                                     -------          -------
     Total non-performing assets                     $   300          $ 1,266
                                                     =======          =======
Total non-performing loans, net of discount,
  as a percentage of total loans, net of
  discount                                              0.15%            0.63%
                                                     =======          =======

Total non-performing assets, net of discount,
  as a percentage of total assets, net of
  discount                                              0.09%            0.39%
                                                     =======          =======



                                                                              12

<PAGE>

         Classification of Assets. Federal regulations provide for the
classification of delinquent or non-homogeneous loans and other assets such as
debt and equity securities as "substandard," "doubtful," or "loss" assets. In
analyzing potential loans for purchase as well as for purposes of our loan
classification, we have placed increased emphasis on the payment history of the
obligor and, to a lesser extent, the purchase discount associated with a
specific loan. Assets that do not expose us to risk sufficient to warrant
classification in one of the aforementioned categories, but which possess some
weaknesses, are required to be designated "special mention" by management. Loans
designated as special mention are generally loans that, while current in
required payment, have exhibited some potential weaknesses that, if not
corrected, could increase the level of risk in the future. An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor. "Substandard" assets include those
characterized by the "distinct possibility" that we 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 is not
warranted and are charged against the loan loss reserve. Pursuant to internal
procedures, loans with a history of 60-89 day delinquencies will generally be
classified either special mention or substandard. However, all loans 90 days or
more delinquent are classified either substandard, doubtful or loss.

         The following table sets forth the aggregate amount of our special
mention and classified assets at December 31, 2000:

    (in Thousands)

     Special mention ............................................       $  785
     Substandard ................................................          272
     Doubtful ...................................................           --
     Loss .......................................................           --
                                                                        ------
     Total special mention and classified assets ................       $1,057
     Other real estate owned ....................................           40
                                                                        ------
     Total special mention and classified assets, including other
       real estate ..............................................       $1,097
                                                                        ======

         Allowance for Loan Losses. The Corporation maintains an allowance for
loan losses at a level deemed sufficient to absorb losses, which are inherent in
the loan portfolio. Senior management determines the adequacy of the allowance
on at least a quarterly basis to ensure that the provision for loan losses has
been charged against earnings in an amount necessary to maintain the allowance
at a level that is appropriate based on management's assessment of probable
estimated losses. The Corporation's methodology for assessing the
appropriateness of the allowance for loan losses consists of several key
elements. These elements include a specific allowance for loan watch list
classified loans, an allowance based on historical trends, an additional
allowance for special circumstances, and an unallocated portion. The Corporation
consistently applies the following methodology.

         The allowance for loan watch list classified loans addresses those
loans maintained on the Corporation's loan watch list, and include substandard,
doubtful, or loss. Substandard loans are those with a well-defined weakness or a
weakness which jeopardizes the repayment of the debt. A loan may be classified
as substandard as a result of impairment of the borrower's financial condition
and repayment capacity. Doubtful loans have the characteristics of substandard
loans with the added characteristic that collection or liquidation in full, on
the basis of presently existing facts and conditions, is highly improbable.
Loans rated as doubtful in whole or in part are placed in non-accrual status.
Loans which are classified as loss are considered uncollectible and are charged
to the allowance for loan losses. The Corporation did not have any loans
classified as doubtful or loss at December 31, 2000.

         Each of the classified loans on the loan watch list is individually
analyzed to determine the level of the potential loss in the loan under the
current circumstances. The specific reserve established for these loans is based
on analysis of the loan's performance, the related collateral value, cash flow
considerations and the financial capability of any guarantor. Loan watch list
loans are managed and monitored by senior management.

         The allowance based on historical trends uses charge-off experience of
the Corporation to estimate potential unconfirmed losses in the balances of the
loan and lease portfolios. The historical loss experience percentage is based on
the charge-off history. Historical loss experience percentages are applied to
all non-classified loans to obtain the portion of the allowance for loan losses.
Before applying the historical loss experience percentages, loan balances are
reduced by the portion of the loan balances which are subject to guarantee by a
government agency. Loan balances are also adjusted for unearned discount on
installment loans.


                                                                              13
<PAGE>




         Since all identified losses are immediately charged off, no portion of
the allowance for loan losses is restricted to any individual loan or group of
loans, and the entire allowance is available to absorb any and all loan losses.


         Based on the recommendation of management, the board of directors makes
determinations as to any reserves and changes to the provision for loan losses
and allowance for loan losses. Both general and specific loan loss allowances
are charged against earnings; however, general loan loss allowances are added
back to capital in computing total risk-based capital under Pennsylvania
Department of Banking and FDIC regulations, subject to certain limitations.

         We will continue to monitor the allowance for loan losses and make
future adjustments to the allowance through the provision for loan losses as
conditions indicate. Although we maintain our allowance for loan losses at a
level that we consider to be adequate to provide for the inherent risk of loss
in the loan portfolio, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods. In addition, our determination as to the amount
of our allowance for loan losses is subject to review by the Pennsylvania
Department of Banking and the FDIC as part of their examination process, which
may result in the establishment of an additional allowance based upon the
judgment of the applicable regulator.

         The following table sets forth activity in our allowance for loan
losses at or for the specified periods.



                                                       At or for the Year Ended
                                                               December 31,
                                                     ---------------------------
                                                         2000             1999
                                                     -----------      ----------

Total loans outstanding. ...........................  $179,165        $ 197,623
Average loans outstanding. .........................   190,242          150,182
Allowance balance (at beginning of period) .........     2,115            1,051
Provision for loan losses ..........................         -            1,175
Charge-offs, net of recoveries .....................        25              111
                                                      --------         --------
Allowance balance (at end of period) ...............  $  2,090        $   2,115
                                                      ========         ========
Allowance for loan losses as a percent of total
 loans, net of discount, at end of period ..........      1.15%            1.06%
                                                      ========         ========
Allowance for loan losses as a percent of total
 non-performing loans, net of discount, at
 end of period .....................................    803.85%          167.06%
                                                      ========         ========
Allowance for loan losses and purchase
 discount as a percentage of total loans ...........      2.86%            3.82%
                                                      ========          =======
Net loans charged off as a percent of average
 loans outstanding. ................................      0.01%            0.07%
                                                      ========          =======



                                                                              14


<PAGE>



         The following tables set forth our percentage of allowance for loan
losses to total allowance for loan losses and the percentage of loans to total
loans in each of the categories listed at the dates indicated.

<TABLE>
<CAPTION>
                                            At December 31, 2000                         At December 31, 1999
                               ------------------------------------------  ------------------------------------------
                                          Percentage of    Percentage of              Percentage of    Percentage of
                                            Allowance      Loans in Each                Allowance      Loans in Each
                                             to Total       Category to                  to Total       Category to
                                Amount      Allowance       Total Loans     Amount      Allowance       Total Loans
                               --------  ---------------  ---------------  --------  ---------------  ---------------
(Dollars in Thousands)

<S>                               <C>           <C>       <C>               <C>             <C>             <C>
Balance of allowance
for loan losses at end of
 period applicable to:
Real estate .................   $1,890         90.4%            91.9%       $1,990         94.1%            97.6%
Commercial business .........      175          8.4              7.0           100          4.7              1.9
Consumer ....................       25          1.2              1.1            25          1.2              0.5
                                ------        -----            -----        ------        -----            -----
 Total ......................   $2,090        100.0%           100.0%       $2,115        100.0%           100.0%
                                ======        =====            =====        ======        =====            =====
</TABLE>
Investment Activities

         Our securities portfolio is managed by our Chief Executive Officer and
the Chief Financial Officer (the "Investment Officers") in accordance with a
written investment policy approved by the board of directors which addresses
strategies, types and levels of allowable investments.

         At December 31, 2000, our securities portfolio equaled $121.6 million,
or 36.5% of our total assets. Our investment portfolio is comprised of trust
preferred securities, mortgage-backed securities, U.S. government agency
securities, corporate and municipal obligations and equity securities. At
December 31, 2000, our trust preferred securities amounted to $33.1 million,
corporate and municipal obligations amounted to $27.8 million, mortgage-backed
securities amounted to $21.9 million, equity securities (consisting of common
stock of a local financial institution, a self-service photocopy business, stock
in our computer vendor and a financial institution managed fund) equaled $4.1
million, and U.S. government agency securities amounted to $37.9 million.

         As of December 31, 2000, all securities are classified as available for
sale. Securities available for sale include debt and equity securities that are
held for an indefinite period of time and are not intended to be held to
maturity. Securities available for sale include securities that we intend to use
as part of our overall asset/liability management strategy and that may be sold
in response to changes in interest rates and resultant prepayment risk and other
factors related thereto. Securities available for sale are carried at fair
value, and unrealized gains and losses (net of related tax effects) on such
securities are excluded from earnings but are included in stockholders' equity.
Upon realization, such gains and losses will be included in our earnings. On
December 31, 2000, we reclassified our entire held-to-maturity portfolio to
available-for-sale. The reclassification was a result of our consideration of
recent regulatory agreements and their impact on our ability to hold our
held-to-maturity portfolio to maturity.

         We are required under federal regulations to maintain a minimum amount
of liquid assets that may be invested in specified short-term securities and
certain other investments. We have maintained a portfolio of liquid assets that
exceeds regulatory requirements. Our Asset Liability Management Committee meets
periodically to decide, based on market levels and conditions, current economic
data, political and regulatory information, and internal needs, whether any
alterations need to be made to our investment portfolio. Based on the parameters
of our Investment Policy, we endeavor to diversify our holdings through the
purchase of medium-term and long-term, fixed-rate and variable-rate instruments,
which provide both an adequate return and moderate risk. The Investment Officers
of the Corporation and the Bank make all investment decisions in accordance with
the Investment Policy and Asset Liability Management Committee guidelines.


                                                                              15

<PAGE>


         Our securities portfolio composition is designed to provide a liquid
portfolio yet maximize yield on a risk-adjusted basis. The process by which we
decide to acquire debt instruments, trust preferred securities and corporate and
municipal obligations are similar to that of underwriting a loan. We evaluate
the potential credit risk associated with these types of investment instruments
by becoming familiar with the institution, its earnings history, its ability to
meet its debt obligation and, if possible, by meeting its management team. The
trust preferred securities are fixed-rate long-term obligations with a weighted
average yield of 9.05% as of December 31, 2000. The trust preferred securities
are obligations of primarily non-rated financial institutions located throughout
the United States, and thus there is a limited market in which to purchase and
sell these securities. As long-term instruments, this portfolio is also subject
to interest rate risk. If interest rates were to rise, these securities would
lose value and require us to reflect a charge to our stockholders' equity.

         Our investments include mortgage-backed securities, which represent an
interest in, or are collateralized by, pools of mortgage loans originated by
private lenders that have been grouped by various governmental,
government-related or private organizations. Mortgage-backed securities
generally enhance the quality of our assets by virtue of the insurance or
guarantees that back such securities, are more liquid than individual mortgage
loans and may be used to collateralize borrowings or other obligations.
Investments in mortgage-backed securities, however, may involve risks not
present with mortgage loans. Specifically, mortgage-backed securities are
subject to the risk that actual prepayments will be greater than estimated
prepayments over the life of the security, which may require adjustments to the
amortization of any premium or accretion of any discount relating to such
instruments, thereby reducing the net yield on such securities. Like mortgage
loans, there is also reinvestment risk associated with the cash flows from such
securities in the event such securities are redeemed by the issuer. In addition,
the market value of such securities may be adversely affected by changes in
interest rates. As interest rates increase, the value of such securities may
decrease as mortgages with higher rates are refinanced. Our mortgage-backed
securities are primarily pass-through securities, which provide us with payments
consisting of both principal and interest as mortgage loans in the underlying
mortgage pool are paid off by the borrowers. The average maturity of
pass-through mortgage-backed securities varies with the maturities of the
underlying mortgage instruments and with the occurrence of unscheduled
prepayments of those mortgage instruments.

         In accordance with regulatory agreements between the Bank and its
regulators, we intend to reduce our holdings of non-rated investments, trust
preferred securities and our portfolio's overall concentration in the banking
industry.



                                                                              16



<PAGE>

         The following tables present the book values and estimated market
values at December 31, 2000 and December 31, 1999, respectively, for each major
category of our investment securities.


<TABLE>
<CAPTION>
  (in Thousands)
                                                            December 31, 2000
                                     ------------------------------------------------------------------
                                                           Gross           Gross
                                       Amortized        Unrealized      Unrealized           Fair
                                          Cost             Gains          Losses            Value
                                     ---------------   --------------  --------------   ---------------
<S>                                   <C>                <C>              <C>             <C>
Available-for-Sale
U.S. Government and agency
         securities                        $ 37,956            $  70         $  (113)         $ 37,913
Mortgage-backed securities                   22,056              164            (283)           21,937
Corporate securities                         27,576               79          (3,015)           24,640
Trust preferred securities                   38,064               25          (4,951)           33,138
Municipal securities                          3,175               20              (3)            3,192
Other securities                                815                3               -               818
                                           --------            -----         -------          --------

Total Available-for-Sale                   $129,642            $ 361         $(8,365)         $121,638
                                           ========            =====         =======          ========



(in Thousands)
                                                             December 31, 1999
                                     ------------------------------------------------------------------

                                                           Gross           Gross         Approximate
                                       Amortized        Unrealized      Unrealized           Fair
                                          Cost             Gains          Losses            Value
                                     ---------------   --------------  --------------   ---------------

Available-for-Sale
U.S. Government and agency
         securities                     $ 1,399              $ -           $ (51)          $ 1,348
Mortgage-backed securities                9,101                -            (457)            8,644
Corporate securities                     19,326                6            (311)           19,021
Trust preferred securities                7,588                -            (608)            6,980
Other securities                          2,058                2            (575)            1,485
                                       --------             ----         -------          --------

Total Available-for-Sale               $ 39,472              $ 8         $(2,002)         $ 37,478
                                       ========             ====         =======          ========

Held-to-Maturity
U.S. Government and agency
         securities                     $ 5,694              $ -          $ (262)          $ 5,432
Mortgage-backed securities                6,514                8            (152)            6,370
Municipal securities                     16,079                -          (1,355)           14,724
Trust preferred securities               29,676              139          (3,595)           26,220
Other securities                          3,170                -            (321)            2,849
                                       --------             ----         -------          --------

Total Held-to-Maturity                 $ 61,133            $ 147         $(5,685)         $ 55,595
                                       ========             ====         =======          ========
</TABLE>

         In April 1999 in conjunction with the adoption of SFAS No. 133, the
Bank reclassified $33.4 million of securities from available-for-sale to
held-to-maturity. Due to the reclassification, the Bank recorded $817,000 as an
unrealized loss. This unrealized loss was being accreted back over the remaining
maturities of the securities transferred. At December 31, 2000, the remaining
unrealized loss was zero, due to our reclassifying our entire held-to-maturity
portfolio to available-for-sale. At December 31, 1999, the remaining unrealized
loss was $796,000.

         On December 31, 2000, we reclassified our entire held-to-maturity
portfolio to available-for-sale. The reclassification was a result of our
consideration of recent regulatory agreements and their impact on our ability to
hold our held-to-maturity portfolio to maturity.

                                                                              17



<PAGE>

                  The following table shows the contractual maturity of our
investment securities portfolio at December 31, 2000.



<TABLE>
<CAPTION>
(in Thousands)                                         Available-for-Sale
                                          --------------------------------------------
                                                                           Weighted
                                          Amortized      Approximate       Average
                                             Cost         Fair Value        Yield
                                          ---------      -----------       ---------
<S>                                          <C>              <C>               <C>
Due within one year                        $ 23,791        $ 23,652           5.71%
Due after one year through five years        12,798          11,514           9.73
Due after five years through ten years       14,076          12,652           8.45
Due after ten years                          56,106          51,065           8.64
Mortgage-backed securities                   22,056          21,937           7.19
Equity Securities                               815             818              -
                                           --------        --------
                                           $129,642        $121,638
                                           ========        ========
</TABLE>


Sources of Funds

         General. Deposits are the major source of our funds for lending and
other investment purposes. We expect our banking operations to generate
moderate deposit growth. In addition to deposits, we derive funds from the
scheduled payments as well as prepayment of loans, the maturity of investment
securities and the sale of assets available for sale. 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 to compensate for reductions
in the availability of funds from other sources or on a longer-term basis for
general business purposes.

         Deposits. Consumer and commercial deposits have historically been
attracted principally from within our market area through the offering of a
broad selection of deposit instruments, including non interest-bearing demand
accounts, NOW accounts, passbook savings accounts, money market accounts, term
certificate accounts and individual retirement accounts. We expect to continue
to attract deposits on a national basis through our Internet banking operations.
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. Deposits have increased $261.1 million from $20.8 million
at December 31, 1995 to $281.9 million at December 31, 2000. At December 31,
2000 we had $213.6 million of certificates of deposit, $101.5 million of which
were in excess of $100,000, of which $38.1 million mature within twelve months.

         We regularly evaluate our internal cost of funds, survey rates offered
by competing institutions, review our cash flow requirements for lending and
liquidity, and execute rate changes when deemed appropriate. We anticipate that
the mix of deposits will shift toward transaction accounts as we continue to
reduce our institutional time deposits. We anticipate that the shift in deposits
would be accomplished through greater reliance on the branch network in our
community and less emphasis on funds obtained through Internet banking operation
from outside of our primary market area.




                                                                              18

<PAGE>




         The following table sets forth the balance of each deposit type and the
weighted average yield paid on each deposit type of the Bank for the periods
indicated.


<TABLE>
<CAPTION>
(in Thousands)
                                      December 31, 2000                         December 31, 1999
                            ----------------------------------------  ----------------------------------------
                              Amount        Percent        Yield        Amount        Percent     Yield
                            ------------  ------------  ------------  ------------  ------------  ------------
<S>                        <C>              <C>          <C>              <C>        <C>           <C>
Demand                     $   5,893           2.1%           -      $   5,168          2.0%           -
NOW                           39,202          13.9         4.68%         4,692          1.8         3.03%
Money Market                     360           0.1         4.11            973          0.4         4.64
Savings and Passbook          22,852           8.1         4.00         19,271          7.6         4.66
Time                         213,625          75.8         6.40        224,934         88.2         5.80
                           ---------       --------                   ---------       -------
                           $ 281,932         100.00%       5.95%     $ 255,038        100.00%       5.58%
                           =========       ========                   =========       =======
</TABLE>




At December 31, 2000, our time deposits had the following stated maturities.

          Maturity Period                                     Amount
          ---------------                                ---------------
                                                          (In Thousands)
          Within 12 months............................       $ 94,201
          Within 13 to 36 months .....................         74,101
          Beyond 36 months ...........................         45,323
                                                             --------
          Total ......................................       $213,625
                                                             ========


         The following table presents, by various rate categories, the amount of
certificates of deposit outstanding at December 31, 2000.

                                       Outstanding
Certificate Rates:                        Amount
------------------                   ---------------
                                      (In Thousands)
  0 to 3.99% .....................       $    579
  4.00% to 5.99% .................         40,983
  6.00% to 7.99% .................        171,538
  Over 8.00% .....................            525
                                         --------
  Total ..........................       $213,625
                                         ========


         The following table summarizes the maturity composition of certificates
of deposit with balances of $100,000 or more at December 31, 2000.

                                                     Balance        %
                                                    ---------   ---------
                                                    (Dollars in Thousands)
       Three months or less .....................   $  8,555        8.43%
       Over three months to six months ..........      7,719        7.60
       Over six months to twelve months .........     21,837       21.51
       Over twelve months .......................     63,391       62.46
                                                    --------      ------
                                                    $101,502      100.00%
                                                    ========      ======


                                                                              19



<PAGE>
         Borrowings. If the need arises, we may rely upon advances from the FHLB
and the Board of Governors of the Federal Reserve System discount window to
supplement our supply of lendable funds and to meet deposit withdraw
requirements. Advances from the FHLB typically are collateralized by our stock
in the FHLB, investment securities and a portion of our first mortgage loans. At
December 31, 2000, we had approximately $45.1 million in borrowing capacity
under a collateralized line of credit with the FHLB, of which $30.0 million had
been drawn upon as of such date.

         The FHLB functions as a central reserve bank providing credit for the
Bank and other member savings and financial institutions. As a member, the Bank
is required to own capital stock in the FHLB and is authorized to apply for
advances on the security of such stock and certain of its 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.

         At December 31, 2000, we had four callable fixed-rate advances for
$30.0 million from the FHLB. Of these callable advances, $10.0 million mature
within five years, and $20.0 million mature between seven and ten years with
call options ranging from 12 months to 51 months. The interest rates on the
callable advances range from 4.84% to 6.67%, with a weighted average interest
rate of 6.07% at December 31, 2000. At December 31, 2000 we also had a loan with
a local financial institution for $2,600,000, this loan has a variable rate
feature and is based on Wall Street Journal Prime, this loan has a maturity date
of December 1, 2001, and is secured by the stock of the Bank.

         The following table sets forth certain information regarding our
borrowed funds, which consist solely of the advances from the FHLB, at or for
the periods ended on the dates indicated.

                                               At or for the
                                          Year Ended December 31,
                                        ---------------------------
                                            2000           1999
                                        ---------------------------
                                           (Dollars in Thousands)

FHLB advances:
 Maximum month-end balance ..........     $ 43,000       $ 35,000
 Balance at end of period ...........       30,000         35,000
 Average balance ....................       32,750         32,018
Weighted average interest rate on:
 Balance at end of period ...........        6.07%          5.61%
 Average balance for period .........        5.96%          5.31%

Products and Services

         Deposit Products and Services. We offer a variety of deposit products
at attractive interest rates in order to build our customer base. We also seek
to attract retail customers by offering convenient services such as free
electronic bill payment. Our on-line deposit products and services include
deposit products, bill payment services, overdraft protection, ATM/debit cards,
lending programs, credit cards, and commercial loans.

Core Banking Operations

         Customers are able to access USABancShares.com through any Internet
service provider by means of an acceptable secure web browser and through
Internet accessible phone services and PDA's. When customers access
USABancShares.com's service menu, they are able to open a new account, review
the status of an existing account or engage in a transaction. To open a new
account, the customer completes the on-line enrollment form, prints the
signature card, signs it and mails it to us. Customers are able to make deposits
into an open account via direct deposit programs, by transferring funds between
accounts at the Bank, by wire transfer, by mail or in person at our principal
executive offices. Customers also have the ability to make withdrawals and
access their accounts at ATMs that are affiliated with the MAC, Cirrus, Honor
and NYCE networks, which we believe provides added customer convenience.
Customers are able to apply for loans, review account activity, pay bills
electronically, receive statements by mail and print bank statement reports from
any PC with a secure Web browser, regardless of its location.

         We have negotiated relationships with a select group of service
providers who not only provide us with significant quality, security,
reliability, performance and marketing capabilities, but also play an integral
role in implementing our banking strategy. Because we outsource our principal
operational functions to experienced third party service providers that have the
capacity to process a high volume of transactions, we believe we will be able to

                                                                              20

<PAGE>
respond easily to growth. Moreover, we intend to preserve a degree of
flexibility that will enable us to assess and evaluate our product offerings and
delivery structure on an ongoing basis and to incorporate other alliance
opportunities as they present themselves. Should any of these relationships
terminate however, we believe we will be able to secure the required services
from an alternative source without material interruption of our operations. Our
principal service providers are Aurum Technology Inc., which provides core
systems processing services, such as deposit accounting and year end processing
services, and EDS, which provides operational support and hosting services for
our Internet banking and bill payment applications.

Security

         Our ability to provide our customers with secure financial services
over the Internet is of paramount importance. We have taken extensive measures
designed to ensure that our Internet operations are set up in a secure manner.
We will continually evaluate the Internet systems, services and software used in
our operations to ensure that they meet the highest standards of security.

Subsidiaries

         The operations of USACredit, Inc. and USARealEstate, Inc., wholly-owned
subsidiaries of the Corporation, have not been material to our operations. On
May 25, 2000, the Corporation sold all of the capital stock of USACapital, Inc.,
a wholly-owned subsidiary, to Bondsonline Group, Inc., for $300,000, and 49% of
the capital stock of Bondsonline. The Corporation took such action because it no
longer intended to fund the subsidiary operations. The Corporation divested
itself of its 49% interest in Bondsonline in the second quarter of 2001, in
accordance with the requirements of the Federal Reserve Bank of Philadelphia.

USA Capital Trust I

        USA Capital Trust I is a Delaware statutory business trust with the
exclusive purpose of issuing and selling trust securities and using the proceeds
from the sale of the Trust securities to acquire the Junior Subordinated
Debenture's issued by USABancShares.com, Inc. The sole asset of the Trust is the
Junior Subordinated Debentures.

Personnel

         As of December 31, 2000, we had a total of 56 full-time and 2 part-time
employees.

                   REGULATION OF THE CORPORATION AND THE BANK

         The Corporation and the Bank are extensively regulated under both
federal and state law. From time to time, various new types of federal and state
legislation have been proposed that could result in additional or diminished
regulation of and restrictions on, or altered forms of supervision of, banks or
bank holding companies. We cannot predict whether any such legislation will be
adopted or how such legislation, if adopted, would affect the Corporation's
business or the Bank's business. As a consequence of the extensive regulation of
commercial banking activities and financial institutions in the United States,
the business and activities of the Corporation and the Bank are susceptible to
changes in federal and state legislation which may affect the scope, nature and
costs of such business and activities. The following description of statutory
and regulatory provisions, which is not intended to be a complete description of
these provisions or their effects on the Corporation or the Bank, is qualified
in its entirety by reference to the particular statutory or regulatory
provisions.

The Corporation

         General. The Corporation is a registered bank holding company pursuant
to the Bank Holding Corporation Act of 1956, as amended, and the Corporation is
subject to regulation and supervision by the Board of Governors of the Federal
Reserve System and the Pennsylvania Department of Banking. The Corporation is
required to file annually a report of its operations with, and is subject to
examination by, the Board of Governors of the Federal Reserve System and the
Pennsylvania Department of Banking. The Bank Holding Company Act and other
federal laws subject bank holding companies to particular restrictions on the
types of activities in which they may engage, and to a range of supervisory
requirements and activities, including regulatory enforcement actions for
violations of laws and regulations. Certain of these laws and regulations are
described below.

         With certain limited exceptions, the Bank Holding Company Act
requires every bank holding company to obtain the prior approval of the Board of
Governors of the Federal Reserve System before (i) acquiring substantially all
of the assets of any bank, (ii) acquiring direct or indirect ownership or
control of any voting shares of any bank if after such acquisition it would own
or control more than 5% of the voting shares of such bank (unless it already
owns or controls the majority of such shares), or (iii) merging or consolidating
with another bank holding company.

                                                                              21
<PAGE>

         Under the Bank Holding Company Act, the Board of Governors of the
Federal Reserve System is authorized to approve the ownership of shares by a
bank holding company in any company, the activities of which the Board of
Governors of the Federal Reserve System has determined to be so closely related
to banking or to managing or controlling banks as to be a proper incident
thereto. In making such determinations, the Board of Governors of the Federal
Reserve System is required to weigh the expected benefit to the public, such as
greater convenience, increased competition or gains in efficiency, against the
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices.

         The Board of Governors of the Federal Reserve System has by regulation
determined that certain activities are closely related to banking within the
meaning of the Bank Holding Company Act. These activities include operating a
mortgage company, finance company, credit card company, factoring company, trust
company or savings association; performing certain data processing operations;
providing limited securities brokerage services; acting as an investment or
financial advisor; acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full-payout,
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier services.

         In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Control Act, together with regulations thereunder,
require approval of the Board of Governors of the Federal Reserve System (or,
depending on the circumstances, no notice of disapproval) prior to any person or
company acquiring "control" of a bank holding company, such as the Corporation.
Control is conclusively presumed to exist if any individual or company acquires
25% or more of any class of voting securities of the bank holding company. With
respect to corporations with securities registered under the Securities Exchange
Act of 1934, as amended (such as the Corporation), control will be presumed to
exist if a person acquires at least 10% of any class of voting securities of the
corporation.

         A registered bank holding company is generally required to give the
Board of Governors of the Federal Reserve System prior notice of any redemption
or repurchase of its own equity securities if the consideration to be paid,
together with the consideration paid for any repurchases or redemptions in the
preceding year, is equal to 10% or more of its consolidated net worth. The
Federal Reserve Board may oppose the transaction if it believes that the
transaction would constitute an unsafe or unsound practice or would violate any
law or regulation.

         See also "--Other Regulations" for a discussion of amendments to the
Bank Holding Company Act.

         Anti-Tying Restriction. Bank holding companies and their affiliates are
prohibited from tying the provision of certain services, such as extensions of
credit, to other services offered by a bank holding company or its affiliates.

         Capital Adequacy Requirements. The Board of Governors of the Federal
Reserve System has adopted capital adequacy guidelines pursuant to which it
assesses the adequacy of capital in examining and supervising a bank holding
company and in analyzing applications to it under the Bank Holding Company Act.
The Board of Governors of the Federal Reserve System capital adequacy guidelines
generally require bank holding companies to maintain total capital equal to 8%
of total risk-weighted assets, with at least one-half of that amount (4%)
consisting of Tier 1 or core capital and up to one-half of that amount
consisting of Tier 2 or supplementary capital. Tier 1 capital for bank holding
companies generally consists of the sum of common stockholders' equity and
perpetual preferred stock (subject in the case of the latter to limitations on
the kind and amount of such stocks which may be included as Tier 1 capital),



                                                                              22
<PAGE>

less goodwill and, with certain exceptions, intangibles. Tier 2 capital
generally consists of hybrid capital instruments; perpetual preferred stock
which is not eligible to be included as Tier 1 capital; term subordinated debt
and intermediate-term preferred stock; and, subject to limitations, general
allowances for loan losses. Under the risk-based capital guidelines, specific
categories of assets and certain off-balance sheet assets such as letters of
credit are assigned different risk weights to take into account different risk
characteristics of the assets. These risk weights are multiplied by
corresponding asset balances to determine a "risk-weighted" asset base. The risk
weightings range from 0% (requiring no additional capital) for assets such as
cash to 100% for the bulk of assets which are typically held by a bank holding
company, including multi-family residential and commercial real estate loans,
commercial business loans and consumer loans. Single-family residential first
mortgage loans which are not past-due (90 days or more) or non-performing and
which have been made in accordance with prudent underwriting standards are
assigned a 50% level in the risk-weighting system, as are certain
privately-issued mortgage-backed securities representing indirect ownership of
such loans. Off-balance sheet items also are adjusted to take into account
certain risk characteristics.

         In addition to the risk-based capital guidelines, the Board of
Governors of the Federal Reserve System uses a leverage ratio as an additional
tool to evaluate the capital adequacy of bank holding companies. The leverage
ratio is a company's Tier 1 capital divided by its average total consolidated
assets. Total assets for this purpose does not include goodwill, certain
mortgage and non-mortgage servicing assets, purchased credit card relationships
and any other intangible assets and investments that the Board of Governors of
the Federal Reserve System determines should be deducted from Tier 1 capital.
Bank holding companies must maintain a minimum leverage ratio of at least 3%,
although most organizations are expected to maintain leverage ratios that are
100 to 200 basis points above this minimum ratio.

         The risk-based and leverage ratios are minimum supervisory ratios
generally applicable to banking organizations that meet certain specified
criteria, assuming that they have the highest regulatory rating. Banking
organizations not meeting these criteria are expected to operate with capital
positions well above the minimum ratios. The federal bank regulatory agencies
may set capital requirements for a particular banking organization that are
higher than the minimum ratios when circumstances warrant. Federal Reserve Board
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant reliance
on intangible assets. In addition, the regulations of the Federal Reserve Board
provide that concentration of credit risk and certain risks arising from
nontraditional activities, as well as an institution's ability to manage these
risks, are important factors to be taken into account by regulatory agencies in
assessing an organization's overall capital adequacy.

         As of December 31, 2000, the Corporation was not in compliance with the
minimum regulatory capital requirements established by the Board of Governors of
the Federal Reserve System. See Note T of the Notes to Consolidated Financial
Statements, included in Item 7 hereof.

         Financial Support of Affiliated Institutions. In accordance with
established policy of the Board of Governors of the Federal Reserve System,
USABancShares.com, Inc. will be expected to act as a source of financial
strength to the Bank and to commit resources to support the Bank in
circumstances when it might not do so absent such policy.

         In March 2001, as a result of a regulatory examination completed by the
Federal Reserve Bank, the Corporation entered into the Written Agreement with
the Board of Governors of the Federal Reserve System. See Note W of the Notes to
Consolidated Financial Statements included in Item 7 hereof.


vBank

         General. The Bank operates as a state-chartered savings bank
incorporated under the Pennsylvania Banking Code and is subject to extensive
regulation and examination by the Pennsylvania Department of Banking and by the
FDIC. These regulatory authorities regulate or monitor all areas of the Bank's
operations, including capital requirements, loans, interest rates, investments,
borrowings, deposits, record keeping, security devices, issuances of securities,
payment of dividends, interest rate risk management, acquisitions, mergers,



                                                                              23
<PAGE>
establishment of branches, and corporate reorganizations. There are periodic
examinations by the Pennsylvania Department of Banking and the FDIC to test the
Bank's compliance with various regulatory requirements. 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 regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulation, whether by
the Pennsylvania Department of Banking, the FDIC or the Congress could have a
material adverse impact on the Corporation and the Bank, and their operations.

         Federal Deposit Insurance Corporation Assessments. The deposits of
the Bank are insured by the Bank Insurance Fund of the FDIC, up to applicable
limits, and are subject to deposit premium assessments by the Bank Insurance
Fund. Under the FDIC's risk-based insurance system, Bank Insurance Fund-assessed
deposits have been subject to premiums which have varied, depending upon the
institution's capital position and other supervisory factors.

         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. The FDIC may also suspend deposit insurance temporarily prior to the
hearing process for the permanent termination of insurance, if, among other
things, 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. The Corporation is not aware of any
circumstances which would result in termination of the Bank's deposit insurance.

         Capital Requirements. The FDIC has promulgated regulations and adopted
a statement of policy regarding the capital adequacy of state-chartered banks
which, like the Bank, are not members of the Federal Reserve System. These
requirements are substantially similar to those adopted by the Board of
Governors of the Federal Reserve System regarding bank holding companies, as
previously described.

         The FDIC's capital regulations establish a minimum 3% Tier 1 leverage
capital requirement for the most highly-rated state-chartered, non-member banks,
with an additional cushion of at least 100 to 200 basis points for all other
state-chartered, non-member banks, which effectively will increase the minimum
Tier 1 leverage ratio for such other banks to 4% to 5% or more. Under the FDIC's
regulation, highest-rated banks are those that the FDIC determines are not
anticipating or experiencing significant growth and have well diversified risk,
including no undue interest rate risk exposure, excellent asset quality, high
liquidity, good earnings and, in general, which are considered a strong banking
organization and are rated composite 1 under the Uniform Financial Institutions
Rating System. Tier 1 or core capital is defined as the sum of common
stockholders' equity (including retained earnings), non-cumulative perpetual
preferred stock and related surplus, and minority interests in consolidated
subsidiaries, minus all intangible assets other than certain qualifying
supervisory goodwill and certain purchased mortgage servicing rights.

         The FDIC also requires that banks meet a risk-based capital standard.
Risk-based capital standard for banks requires the maintenance of total capital
(which is defined as Tier 1 capital and supplementary (Tier 2) capital) to
risk-weighted assets of 8.0%, of which at least 4.0% shall be Tier 1 capital. In
determining the amount of risk-weighted assets, all assets, plus certain off
balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based on
risks the FDIC believes are inherent in the type of asset or item. The
components of Tier 1 capital are equivalent to those discussed above under the

                                                                              24
<PAGE>

leverage capital standard. The components of supplementary capital include
certain perpetual preferred stock, certain mandatory convertible securities,
certain subordinated debt and intermediate preferred stock and general
allowances for loan and lease losses. Allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. As of December 31,
2000, the Bank met each of its capital requirements.

         A bank may be subject to higher minimum requirements than those
described above if, for example, a bank has previously received special
attention or has a high susceptibility to interest rate risk. Banks with capital
ratios below the required minimum are subject to certain administrative actions,
including prompt corrective action, the termination of deposit insurance upon
notice and hearing, or a temporary suspension of insurance without a hearing.

         The Bank is also subject to more stringent Pennsylvania Department of
Banking capital guidelines. Although not adopted in regulation form, the
Pennsylvania Department of Banking utilizes capital standards requiring a
minimum of 6% leverage capital and 10% risk-based capital. The components of
leverage and risk-based capital are substantially the same as those defined by
the FDIC. As of December 31, 2000, the Bank exceeded the Pennsylvania Department
of Banking's capital guidelines.

         Prompt Corrective Action. In addition to the capital adequacy
guidelines, the FDIC is required to take "prompt corrective action" with respect
to any state-chartered bank which does not meet specified minimum capital
requirements. Federal regulations applicable to financial institutions establish
five capital levels: "well capitalized," "adequately capitalized,"
"undercapitalized," "severely undercapitalized" and "critically
undercapitalized."

     o An institution is considered "well capitalized" if it has a total
       risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital
       ratio of 6% or greater, and a leverage ratio of 5% or greater, and it is
       not subject to an order, written agreement, capital directive, or prompt
       corrective action directive to meet and maintain a specific capital level
       for any capital measure.

     o An institution is considered "adequately capitalized" if it has a total
       risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
       ratio of at least 4% and leverage capital ratio of 4% or greater (or a
       leverage ratio of 3% or greater if the institution is rated composite 1
       in its most recent report of examination, subject to appropriate federal
       banking agency guidelines), and the institution does not meet the
       definition of an undercapitalized institution.

     o A bank is considered "undercapitalized" if it has a total risk-based
       capital ratio that is less than 8%, a Tier 1 risk-based capital ratio
       that is less than 4%, or a leverage ratio that is less than 4% (or a
       leverage ratio that is less than 3% if the institution is rated composite
       1 in its most recent report of examination, subject to appropriate
       federal banking agency guidelines).

                                                                              25
<PAGE>


     o A "significantly undercapitalized" institution is one which has a total
       risk-based capital ratio that is less than 6%, a Tier 1 risk-based
       capital ratio that is less than 3%, or a leverage ratio that is less than
       3%.

     o A "critically undercapitalized" institution is one which has a ratio of
       tangible equity to total assets that is equal to or less than 2%.

         Under certain circumstances, a "well capitalized," "adequately
capitalized" or "undercapitalized" institution may be treated as if the
institution were in the next lower capital category.

         Certain Consequences of Failure to Comply with Regulatory Capital
Requirements. A bank's failure to maintain capital at or above the minimum
capital requirements may be deemed an unsafe and unsound practice and may
subject the insured savings bank to enforcement actions and other proceedings.
Any bank not in compliance with all of its capital requirements is required to
submit a capital plan that addresses the bank's need for additional capital and
meets certain additional requirements. While the capital plan is being reviewed,
the bank must certify, among other things, that it will not, without the
approval of its appropriate regulatory agency, grow beyond net interest credited
or make capital distributions. If a bank's capital plan is not approved, the
bank will become subject to additional growth and other restrictions. In
addition, a bank's regulator through a capital directive or otherwise may
restrict the ability of a bank not in compliance with the capital requirements
to pay dividends and compensation and may require such a bank to take one or
more of certain corrective actions, including, without limitation: (i)
increasing its capital to specified levels, (ii) reducing the rate of interest
that may be paid on savings accounts, (iii) limiting receipt of deposits to
those made to existing accounts, (iv) ceasing issuance of new accounts of any or
all classes or categories except in exchange for existing accounts, (v) ceasing
or limiting the purchase of loans or the making of other specified investments,
and (vi) limiting operational expenditures to specified levels.

         The FDIC may take any of certain additional supervisory actions against
an undercapitalized institution if the agency determines that such actions are
necessary to resolve the problems of the institution at the least possible
long-term cost to the deposit insurance fund. These supervisory actions include:
(i) requiring the institution to raise additional capital or be acquired by
another institution or holding company if certain grounds exist, (ii)
restricting transactions between the institution and its affiliates, (iii)
restricting interest rates paid by the institution on deposits, (iv) restricting
the institution's asset growth or requiring the institution to reduce its
assets, (v) requiring replacement of senior executive officers and directors,
(vi) requiring the institution to alter or terminate any activity deemed to pose
excessive risk to the institution, (vii) prohibiting capital distributions by
bank holding companies without prior approval, (viii) requiring the institution
to divest certain subsidiaries, or requiring the institution's holding company
to divest the institution or certain affiliates of the institution, and (ix)
taking any other supervisory action that the agency believes would better carry
out the purposes of the prompt corrective action regulations.

         Institutions classified as undercapitalized that fail to submit a
timely, acceptable capital restoration plan or fail to implement such a plan are
subject to the same supervisory actions as significantly undercapitalized
institutions. Significantly undercapitalized institutions are subject to the
mandatory provisions applicable to undercapitalized institutions. The regulation
also makes mandatory for significantly undercapitalized institutions certain of
the supervisory actions that are discretionary for institutions classified as
undercapitalized, creates a presumption in favor of certain discretionary
supervisory actions, and subjects significantly undercapitalized institutions to
additional restrictions, including a prohibition on paying bonuses or raises to
senior executive officers without the prior written approval of the appropriate
federal bank regulatory agency. In addition, significantly undercapitalized
institutions may be subjected to certain of the restrictions applicable to
critically undercapitalized institutions.

         The regulation requires that an institution be placed into
conservatorship or receivership within 90 days after it becomes critically
undercapitalized, unless the regulators determine that other action would better
achieve the purposes of the prompt corrective action provisions. Any such
determination must be renewed every 90 days. A depository institution also must
be placed into receivership if the institution continues to be critically
undercapitalized on average during the fourth quarter after the institution
initially became critically undercapitalized, unless the institution's federal
bank regulatory agency, with concurrence of the FDIC, makes certain positive
determinations with respect to the institution.


                                                                              26
<PAGE>


         Conservatorship/Receivership. In addition to the grounds discussed
under "--Prompt Corrective Action," the FDIC may appoint a conservator or
receiver for a bank if any one or more of a number of circumstances exist,
including, without limitation, the following: (i) the institution's assets are
less than its obligations to creditors and others, (ii) a substantial
dissipation of assets or earnings due to any violation of law or any unsafe or
unsound practice, (iii) an unsafe or unsound condition to transact business,
(iv) a willful violation of a final cease-and-desist order, (v) the concealment
of the institution's books, papers, records or assets or refusal to submit such
items for inspection to any examiner or lawful agent of the appropriate federal
banking agency or state bank or savings association supervisor, (vi) the
institution is likely to be unable to pay its obligations or meet its depostors'
demands in the normal course of business, (vii) the institution has incurred, or
is likely to incur, losses that will deplete all or substantially all of its
capital, and there is no reasonable prospect for the institution to become
adequately capitalized without federal assistance, (viii) any violation of law
or unsafe or unsound practice that it likely to cause insolvency or substantial
dissipation of assets or earnings weaken the institution's condition, or
otherwise seriously prejudice the interests of the institution's depositors or
the federal deposit insurance fund, (ix) the institution is undercapitalized and
the institution has no reasonable prospect of becoming adequately capitalized,
fails to become adequately capitalized when required to do so, fails to submit a
timely and acceptable capital restoration plan, or materially fails to implement
an accepted capital restoration plan, (x) the institution is critically
undercapitalized or otherwise has substantially insufficient capital, or (xi)
the institution is found guilty of certain criminal offenses related to money
laundering.

         Enforcement Powers. The FDIC has substantial enforcement authority,
including authority to bring various enforcement actions against a bank and any
of its "institution-affiliated parties" (a term defined to include, among other
persons, directors, officers, employees, controlling stockholders, agents and
stockholders who participate in the conduct of the affairs of the institution).
This enforcement authority includes, without limitation: (i) the ability to
terminate a banks' deposit insurance, (ii) institute cease-and-desist
proceedings, (iii) bring suspension, removal, prohibition and criminal
proceedings against institution-affiliated parties, and (iv) assess substantial
civil money penalties. As part of a cease-and-desist order, a bank's regulatory
agency may require a bank or an institution-affiliated party to take affirmative
action to correct conditions resulting from that party's actions, including to
make restitution or provide reimbursement, indemnification or guarantee against
loss; restrict the growth of the institution; and rescind agreements and
contracts.


         Activities and Investments of Insured State-chartered Banks. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally may
not directly or indirectly acquire or retain any equity investment of a type, or
in an amount, that is not permissible for a national bank unless the FDIC has
determined that such activities would pose no risk to the insurance fund of
which it is a member and the bank is in compliance with applicable regulatory
capital requirements. An insured state bank is not prohibited from, among other
things, (1) acquiring or retaining a majority interest in a subsidiary, (2)
investing as a limited partner in a partnership the sole purpose of which is
direct or indirect investment in the acquisition, rehabilitation or new
construction of a qualified housing project, provided that such limited
partnership investments may not exceed 2% of the bank's total assets, (3)
acquiring up to 10% of the voting stock of a company that solely provides or
reinsures directors', trustees' and officers' liability insurance coverage or
bankers' blanket bond group insurance coverage for insured depository
institutions, and (4) acquiring or retaining the voting shares of a depository
institution if certain requirements are met. In addition, an insured
state-chartered bank may not, directly, or indirectly through a subsidiary,
engage as "principal" in any activity that is not permissible for a national
bank unless the FDIC has determined that such activities would pose no risk to
the insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements. Any insured state-chartered bank
directly or indirectly engaged in any activity that is not permitted for a
national bank must cease the impermissible activity.

         Pennsylvania Banking Law. The Pennsylvania Banking Code contains
detailed provisions governing the organization, location of offices, rights and
responsibilities of directors, officers, employees and members, as well as
corporate powers, savings and investment operations and other aspects of the
Bank and its affairs. The Pennsylvania Banking Code delegates extensive
rulemaking power and administrative discretion to the Pennsylvania Department of
Banking so that the supervision and regulation of state-chartered savings banks
may be flexible and readily responsive to changes in economic conditions and in
savings and lending practices.


                                                                              27
<PAGE>

         One of the purposes of the Pennsylvania Banking Code is to provide
banks with the opportunity to be competitive with each other and with other
financial institutions existing under other Pennsylvania laws and other state,
federal and foreign laws. A Pennsylvania bank may locate or change the location
of its principal place of business and establish an office anywhere in the
Commonwealth, with the prior approval of the Pennsylvania Department of Banking.

         The Pennsylvania Department of Banking generally examines each savings
bank not less frequently than once every two years. Although the Pennsylvania
Department of Banking may accept the examinations and reports of the FDIC in
lieu of the Pennsylvania Department of Banking's examination, the present
practice is for the Pennsylvania Department of Banking to conduct individual
examinations. The Pennsylvania Department of Banking may order any savings bank
to discontinue any violation of law or unsafe or unsound business practice and
may direct any trustee, officer, attorney or employee of a savings bank engaged
in an objectionable activity, after the Pennsylvania Department of Banking has
ordered the activity to be terminated, to show cause at a hearing before the
Pennsylvania Department of Banking why such person should not be removed.

         Restrictions on Payment of Dividends. Under the Federal Deposit
Insurance Act, insured depository institutions such as the Bank are prohibited
from making capital distributions, including the payment of dividends, if, after
making any such distribution, the institution would become "undercapitalized"
(as such term is used in the statute). Under the Federal Deposit Insurance Act,
no dividends may be paid by an insured bank if the bank is in arrears in the
payment of any insurance assessment due to the FDIC. Dividend payments by the
Bank are subject to the Pennsylvania Banking Code. Under the Pennsylvania
Banking Code, no dividends may be paid except from "accumulated net earnings"
(generally, undivided profits). As previously discussed, state and federal
regulatory authorities have adopted standards for the maintenance of adequate
levels of capital by banks. Adherence to such standards further limits the
ability of the Bank to pay dividends. In addition, the Bank's regulators have
authority to prohibit us or the Bank from engaging in an unsafe or unsound
practice in conducting their business. The payment of dividends, depending upon
our financial condition or the financial condition of the Bank, could be deemed
to constitute such an unsafe or unsound practice.

         Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. Other actions or
inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with regulatory authorities.

         Limitations on Transactions with Affiliates and Insiders. Transactions
between banks and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of a bank is any company or entity which
controls, is controlled by or is under common control with the bank. In a
holding company context, the parent holding company of a bank (such as the
Corporation) and any companies which are controlled by such parent holding
company are affiliates of the bank. Generally, Section 23A places limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates. In addition, limits are placed on the amount of
advances to third parties collateralized by the securities or obligations of
affiliates. Most of these loans and certain other transactions must be secured
in prescribed amounts. Section 23B of the Federal Reserve Act, among other
things, prohibits an institution from engaging in transactions with certain
affiliates unless the transactions are on terms substantially the same, or at
least as favorable to such institution or its subsidiaries, as those prevailing
at the time for comparable transactions with non-affiliated companies. As
discussed elsewhere in this report, in connection with recent examinations of
the Corporation and the Bank, its regulators have identified a $2.6 million loan
as violative of Sections 23A and 23B of the Federal Reserve Act and have
required the Corporation and the Bank to take corrective action.


                                                                              28
<PAGE>

         In addition, the Corporation is subject to restrictions on extensions
of credit to executive officers, directors, certain principal stockholders, and
their related interests. Such extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with third parties and (ii)
must not involve more than the normal risk of repayment or present other
unfavorable features.

         Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions, the federal
regulatory authorities evaluate the record of such financial institutions in
meeting the credit needs of their local communities, including low and
moderate-income neighborhoods, consistent with the safe and sound operation of
those institutions. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility.

         As previously indicated, as a result of weaknesses noted by the FDIC in
recent regulatory examinations the Board of Directors of the Bank entered into a
Memorandum of Understanding with the Regional Director of the FDIC. Pursuant to
the terms of the Memorandum, the Bank is required to adopt and implement
comprehensive written plans to address various deficiencies or concerns
identified by federal and state regulators relating to earnings performance,
capital adequacy, capital ratios, funding growth, funding mix, non-core funding
dependence and interest rate risk exposure. Pursuant to the Memorandum, the Bank
is also required to adopt and implement formal internal review procedures which
identify, measure, monitor and control risks associated with all electronic
banking activities and to take all steps necessary to correct deficiencies
related to certain identified loans, credit data and collateral. The Bank is
prohibited from declaring or paying dividends without the prior approval of the
Regional Director of the FDIC. The Memorandum also provides for periodic
progress reports detailing actions taken to secure compliance with the
Memorandum.

Other Regulations

         The Gramm Leach-Bliley Act of 1999 ("Act") was enacted on November 12,
1999 and amends the Bank Holding Company Act. The Act permits the creation of
new financial services holding companies that can offer a full range of
financial and banking products and services. The Act eliminates legal barriers
which previously prevented affiliations among banks and bank holding companies
with securities firms, insurance companies and other financial services
companies.

         The Act preserves the role of the Federal Reserve Board as the umbrella
supervisor for holding companies while at the same time incorporating a system
of functional regulation designed to assure that various financial activities
will be overseen by the appropriate state or federal regulator with the
corresponding regulatory experience and expertise. Banking related activities
will be supervised by the banking regulators, securities activities will be
regulated by the Securities and Exchange Commission and state regulators, and
insurance activities by the state insurance regulators.

         Lending Activities. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as (i) the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, (ii) the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to help
meet the housing needs of the community it serves, (iii) the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit, (iv) the Fair Credit Reporting Act of
1978 governing the use and provision of information to credit reporting
agencies, (v) the Fair Debt Collection Act governing the manner in which


                                                                              29
<PAGE>

consumer debts may be collected by collection agencies, and (vi) the rules and
regulations federal agencies charged with the responsibility of implementing
such federal laws.

         Deposit Activities. The deposit operations of the Bank also are subject
to (i) the Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records, and (ii) the
Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve
Board to implement that act, which govern automatic deposits to and withdrawals
from deposit accounts and customers' rights and liabilities arising from the use
of automated teller machines and other electronic banking services.

Item 2.  Description of Properties

         On December 23, 1997, we purchased a building at 1535 Locust Street in
Center City Philadelphia, formerly owned and operated by PNC Bank, which serves
as our corporate offices and flagship retail operation.

         Pursuant to a lease dated July 27, 1998, we lease a building at 18 East
Wynnewood Road, Wynnewood, Pennsylvania. We opened a retail branch at this
location in April 1999. The lease is for an initial period of 10 years with an
option to renew for an additional 10 years. The monthly lease payment is $5,000.

         We lease the building located at 930 Germantown Pike in Plymouth
Meeting, Pennsylvania, which contains a retail branch as well as administrative
offices, on a month-to-month basis. The monthly lease payment is $6,362.

         We also lease an additional "mini" branch, known as "eBank" in the
office, restaurant and retail complex known as "the Bellevue" which is located
in Center City Philadelphia. The monthly lease payment is $900.

         Deposits are received at the Locust Street headquarters, the Norristown
branch, the Wynnewood branch and the eBank. At December 31, 2000, our branches
had the following deposits: Locust Street, $128.2 million; Norristown, $38.7,
Wynnewood, $32.6 million; eBank, $3.4 million, and Internet operations, $79.0
million.

         In March 2000, the Bank acquired a facility to house its Internet
operations in Chestnut Hill, Pennsylvania. The purchases price of the building
and surrounding land was $1.6 million and will be depreciated over 31.5 years.

Item 3.  Legal Proceedings

         On December 12, 2000, eMachines, Inc. filed a complaint for breach of
contract against us with the American Arbitration Association alleging that we
breached an agreement which we entered into with eMachines in November, 1999.
eMachines is seeking approximately $1,400,000 in damages plus interest,
arbitration fees, attorneys fees, and other expenses related to the dispute. In
January, 2001, we filed a counterclaim denying that eMachines is entitled to
relief, and we are seeking damages in the amount of $1,000,000 plus interest,
arbitration fees, attorneys' fees, and other costs and expenses associated with
the matter. We believe that we have a meritorious defense to these claims and
intend to contest this matter vigorously. However, this matter is in a
preliminary stage and no prediction can be made as to its ultimate outcome.

         On March 29, 2001, an arbitrator from the American Arbitration
Association awarded $648,000 to a former employee of the Corporation in
connection with such former employee's claim for certain commissions under his
employment agreement with the Corporation. The Corporation is currently
reviewing the award.

         The Corporation is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not
materially affect the Corporation's consolidated financial statements or results
of operations.


Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of shareholders during the fourth
quarter of 2000.


                                                                              30
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         The common stock of the Corporation is listed for trading on the NASDAQ
National Market under the symbol "USAB". As of March 30, 2001, there were
approximately 200 holders of record of the Corporation's common stock. The
Corporation has not, since its inception, paid any cash dividends.

         The Corporation is a bank holding company regulated by the Board of
Governors of the Federal Reserve System (the "FRB"), all of the operating assets
of the Corporation are owned by the Bank. The Corporation relies primarily on
capital raising efforts, and to a much lesser extent, dividends from the Bank to
meet its corporate expenses and to satisfy its financial obligations. Dividend
payments from the Bank are subject to (1) regulatory limitations, generally
based on current and retained earnings, imposed by the various regulatory
agencies with authority over the Bank, (2) regulatory restrictions if such
dividends would impair the capital of the Bank or cause the Bank to be
undercapitalized, (3) FRB prudent banking standards relating to the amount of
net income available to common shareholders and the prospective rate of earnings
retention, (4) the Bank's profitability, financial condition and capital
expenditures and other cash flow requirements, and (5) regulatory restrictions
presently imposed by agreement with the Federal Deposit Insurance Corporation.
See "Regulation and Supervision."

         Our common stock has been quoted on the Nasdaq SmallCap Market under
the symbol "USAB" since the first quarter of 1996 and on the Nasdaq National
Market under the same symbol since September 16, 1999. All prices have been
adjusted to reflect a 33% stock dividend paid on July 18, 1997 and August 17,
1998 and a two-for-one stock split effected in the form of a dividend paid on
June 15, 1999. The following table shows trading prices for the Corporation's
common stock from January 1, 1998 through March 27, 2001, adjusted for all
common stock dividends and splits:


2001                             High                          Low
----                          ---------                     ----------
First Quarter (1)               $2 7/16                      $1 1/4

2000
----

Fourth Quarter                   2 25/32                      1
Third Quarter                    4 3/4                        2 5/16
Second Quarter                   8                            2 3/4
First Quarter                   12 7/16                       7 1/4

1999
----
Fourth Quarter                  12 3/4                        5 3/8
Third Quarter                   16 1/2                        6 7/8
Second Quarter                  11                            4
First Quarter                    4 1/2                        4

1998
----
Fourth Quarter                   4 1/2                        3 3/8
Third Quarter                    6 49/64                      3 3/4
Second Quarter                   5 59/64                      4 51/64
First Quarter                    5 41/64                      3 19/64

(1) Through and including March 27, 2001.


                                                                              31
<PAGE>

                        SELECTED FINANCIAL AND OTHER DATA

         Set forth below are selected financial and other data of the
Corporation and the Bank. This financial data is derived in part from, and it
should be read in conjunction with the consolidated financial statements and
related notes included in this report beginning on page F-1.


<TABLE>
<CAPTION>

                                                                                   At or for the                At or for the
                                                                                 Twelve Months Ended          Twelve Months Ended
                                                                                    December 31,                  December 31,
(in Thousands, except per share data)                                                   2000                          1999
                                                                                 ---------------------        --------------------
<S>                                                                                  <C>                           <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets                                                                         $ 332,958                     $ 323,335
Loans receivable, net                                                                  179,165                       197,623
Securities (1)                                                                         121,638                        97,815
Deposits                                                                               281,932                       255,038
Borrowings (2)                                                                          32,600                        35,000
Guaranteed preferred beneficial interests in subordinated debt                          10,000                        10,000
Stockholders' equity                                                                     5,157                        17,928
Non-performing assets, net of discount (3)                                                 260                         1,266
Book value per share (4)                                                                $  .96                        $ 3.18

AVERAGE BALANCE DATA:
Total assets                                                                         $ 346,844                     $ 250,427
Loans receivable, net                                                                  190,242                       150,182
Securities                                                                             105,033                        76,720
Deposits                                                                               283,031                       188,612
Borrowings                                                                              44,768                        40,352
Stockholders' equity                                                                    14,660                        15,424

SELECTED OPERATIONS DATA:
Total interest income                                                                 $ 30,465                      $ 21,870
Total interest expense                                                                  20,044                        13,110
                                                                                      --------                      --------
Net interest income                                                                     10,421                         8,760
Provision for loan losses                                                                    -                         1,175
                                                                                      --------                      --------
Net interest income after provision for loan losses                                     10,421                         7,585
Total non-interest income                                                                  670                         1,767
Total non-interest expense                                                              20,756                        12,430
                                                                                      --------                      --------
Loss before income taxes                                                                (9,665)                       (3,078)
Income tax benefit                                                                           -                          (588)
                                                                                      --------                      --------
Net loss                                                                              $ (9,665)                     $ (2,490)
                                                                                      ========                      ========
Net loss per share basic and diluted                                                   $ (1.70)                      $ (0.54)
                                                                                      ========                      ========

PERFORMANCE RATIOS: (5)
Loss return on average assets                                                            (2.79)%                       (0.99)%
Loss return on average stockholders' equity                                             (65.93)                       (16.14)
Net interest margin (6)                                                                   3.22                          3.72
Interest rate spread (6)                                                                  3.22                          3.57
Efficiency Ratio (7)                                                                    187.14                        137.65
Non-interest expense to average total assets                                              5.98                          4.96
Average interest-earning assets to average interest-bearing liabilities                  99.99                        102.75

ASSET QUALITY RATIOS:
Non-performing loans, net of discount, to total loans, net of discount                   0.15%                         0.63%
Non-performing assets, net of discount, to total assets                                   0.08                          0.39
Allowance for loan losses to total loans, net of discount                                 1.15                          1.06
Allowance for loan losses and purchase discount as a percentage of total loans            2.86                          3.82
Allowance for loan losses to total non-performing loans, net of discount                803.85                        167.06

CAPITAL RATIOS: (8)
Stockholders' equity to assets                                                             1.5%                          5.5%
Tier 1 leverage capital ratio                                                              3.0                           8.8
Tier 1 risk-based capital ratio                                                            3.7                          10.3
Total risk-based capital ratio                                                             7.5                          11.1

OTHER:
Number of full-service branches                                                              4                             4
Number of full-time employee equivalents                                                    57                            77
</TABLE>

<PAGE>

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

(1) Includes Securities classified as held- to- maturity and available for sale
    for 1999.

(2) Consists of FHLB advances and, to a lesser extent, borrowings pursuant to a
    line of credit facility with a local financial institution.

(3) Non-performing loans consist of non-accrual loans and accruing loans 90 days
    or more overdue, net of applicable purchase discounts. Non-performing assets
    consist of non-performing loans and other real estate.

(4) All per share data has been adjusted to reflect such stock dividends and has
    been calculated based on the weighted average number of shares outstanding
    during the period, assuming the conversion of the shares of Class B common
    stock into shares of Class A common stock.

(5) With the exception of end of period ratios, all ratios are based on average
    monthly balances and are annualized where appropriate.

(6) Interest rate spread represents the difference between the weighted average
    yield on interest-earning assets and the weighted average cost of
    interest-bearing liabilities, and net interest margin represents net
    interest income as a percentage of average interest-earning assets.

(7) Efficiency ratio represents non-interest expense as a percentage of the
    aggregate of net interest income and non-interest income (less gains/losses
    on sales of assets and other non-recurring items).

(8) For information on the Corporation's and Bank's regulatory capital
    requirements, see Regulation of the Corporation and the Bank.


                                                                              32
<PAGE>

Item 6.  Management's Discussion and Analysis.

         The purpose of this discussion is to focus on significant and ongoing
changes in the financial condition and results of operations of the Corporation
and its subsidiaries during the periods indicated. The discussion and analysis
is intended to supplement and highlight information contained in the
accompanying consolidated financial statements and the selected financial data
presented elsewhere in this report.

Financial Condition

         The Corporation's total assets increased from $323.3 million at
December 31, 1999 to $333.0 million at December 31, 2000, an increase of $9.7
million, or 3.0%. The increase was due primarily to an increase in the
securities portfolio of $23.8 million and was offset by a decrease in the loan
portfolio of $18.5 million. The decline in the loan portfolio is primarily
attributable to prepayments made by customers. This growth was funded by
increases in deposits, which is attributable to the Corporation's internet
initiative, which was not de-emphasized until the fourth quarter. Deposits
increased from $26.9 million to $281.9 million at December 31, 2000. The
increase in deposits was comprised of an increase in NOW deposits of $34.5
million and an increase in Savings and Passbook accounts of $3.6 million, which
was offset by a decrease in time deposits of $11.3 million. The increase in the
securities portfolio was primarily due to the acquisition of government backed
investment grade agencies. Borrowed funds consist of fixed-rate callable
advances from the FHLB.

         The Corporation issued $10.0 million of trust preferred securities in
March of 1999 and raised approximately $8.1 million of net proceeds in September
of 1999 in a secondary public offering. In March, 2000, the Corporation also
received a loan from a local financial institution in the amount of $2.6
million. Both capital market efforts funded the Corporation's asset growth and
Internet infrastructure investment. Management plans to continue to utilize FHLB
advances, deposit gathering and capital raising efforts to provide the necessary
liquidity for the Bank. The Bank's borrowing limit at the FHLB as of December
31, 2000, was approximately $43.1 million, of which $30.0 was drawn upon as of
such date. Stockholders' equity decreased from $17.9 million at December 31,
1999 to $5.2 million at December 31, 2000. The $12.7 million or 70.9% decrease
in stockholders' equity was primarily due to the Corporation's Internet strategy
and resultant losses and the reclassification of the investment securities from
held-to-maturity to available-for-sale.





                                                                              33
<PAGE>

Results of Operations

         The Corporation reported a net loss of $9.7 million, or $1.70 per
share, basic and diluted, for the year ended December 31, 2000, compared to a
net loss of $2.5 million, or $0.54 per share, basic and diluted, for the year
ended December 31, 1999. Our operating loss was primarily the result of the
investment in our Internet strategy. As a consequence of the expenses involved
in implementing the Corporation's Internet initiative and changed market
conditions regarding the Internet as a delivery platform for national banking
services, the Corporation and the Bank determined to de-emphasize the initiative
and have renegotiated, terminated or are allowing to expire all strategic
partnership relationships associated with the Corporation's Internet initiative.
Due to the renegotiation of these relationships, the Bank took a $2.5 million
charge to earnings in the fourth quarter of 2000. Non-interest expenses
increased $8.4 million during the year to $20.8 million primarily from increases
in online partnership expenses of $5.6 million and data processing expense of
$1.1 million, respectively relating to the implementation of our Internet
strategy. The Corporation's net interest income before provision for loan losses
increased 15.9% to $10.4 million and non-interest income decreased $1.1 million
to $670,000 for 2000.

         Interest Income. Interest income increased 28.2% or $8.6 million to
$30.5 million, for the year ended December 31, 2000, compared to the prior year.
The increase in interest income was the result of an increase in interest income
on loans and investment securities, of $4.9 million, and $2.6 million,
respectively. The increase in interest income on loans was due to an increase in
the average balance of the loan portfolio along with an increase in the average
yield. The discount associated with loan pools is recognized as a yield
adjustment and is included as interest income using the level yield method (to
the extent that the timing and amount of cash flows can reasonably be
determined). During the years ended December 31, 2000 and 1999, the Bank
recognized $1.6 million and $952,000 in accretion income, respectively,
representing 8.4% and 6.5% of total interest income on loans, respectively. The
significant increase in the average balance of the Bank's loan portfolio
reflects the more than $27.6 million of loan originations (including
participations with local financial institutions) which were closed during the
year ended December 31, 2000.

         Interest Expense. Interest expense increased 34.6% or $6.9 million to
$20.0 million, for the year ended December 31, 2000, compared to the year ended
December 31, 1999, due to higher volumes of NOW accounts and a loan from a local
financial institution. The increase in interest expense during the year ended
December 31, 2000 was due to the Bank relying on higher cost of fund
certificates of deposits and other borrowings. The average cost of funds,
including borrowings, increased 0.46% to 6.19% for the year ended December 31,
2000.

         Net Interest Income. The Corporation's profitability, like that of many
financial institutions, is dependent to a large extent upon net interest income.
Net interest income is the difference between interest income (principally from
loans and investment and mortgage-backed securities) and interest expense
(principally on customer deposits and borrowings). Changes in net interest
income result from changes in the mix of rates and volumes of interest-earning
assets and interest-bearing liabilities that occur over time. Volume refers to
the average dollar level of interest-earning assets and interest bearing
liabilities. Net interest spread refers to the differences between the average
yield on interest-earning assets and the average cost of interest-bearing
liabilities. Net interest margin refers to net interest income divided by
average interest-earning assets.

         Net interest income for the year ended December 31, 2000 increased $1.7
million, or 15.9% to $10.4 million from $8.8 million for the same period in
1999. Average interest-earning assets increased by $88.5 million, or 37.6% to
$323.8 million, for the year ended December 31, 2000 compared to the same period
in 1999. Average interest-bearing liabilities increased $94.8 million, or 41.4%
over the same period. The net interest spread and net interest margin decreased
for the year ended December 31, 2000 compared to December 31, 1999, from 3.57%
to 3.22% and from 3.72% to 3.22%, respectively. The decrease in net interest
margin and net interest spread is reflective of two items: first, average
interest-bearing liabilities exceeded average interest-earning assets, and
second, the yield on the interest-bearing liabilities increased 0.46% from 5.73%
to 6.19% at December 31, 2000 as compared to December 31, 1999.

         Analysis of Net Interest Income. The following table presents
information regarding yields on interest-earning assets, expense on interest-
bearing liabilities and net yield on interest earning assets for the period
indicated:

                                                                              34
<PAGE>

<TABLE>
<CAPTION>
(in Thousands)
                                                                      Year ended December 31,
                                           ---------------------------------------------------------------------------------
                                                              2000                                    1999
                                           --------------------------------------   ----------------------------------------
                                              Average                   Average        Average                    Average
                                              Balance      Interest    Yield/Rate      Balance      Interest     Yield/Rate
                                           -------------  -----------  -----------   ------------   ----------   -----------
<S>                                         <C>             <C>          <C>           <C>            <C>          <C>
Interest-earning assets:
Loans                                         $ 190,242     $ 19,488        10.24%     $ 150,182     $ 14,609         9.73%
Investment securities                           105,033        9,501         9.05         76,720        6,934          9.04
Interest-bearing deposits and other              28,456        1,476         5.19          8,367          327          3.91
                                              ---------     --------      -------      ---------     --------       -------
 Total interest-earning assets                $ 323,731     $ 30,465         9.41%     $ 235,269     $ 21,870         9.30%

Interest-bearing liabilities:
Deposits:
   NOW                                         $ 21,765      $ 1,018         4.68%       $ 1,879         $ 57         3.03%
   Money Market                                     604           25         4.11          1,615           75          4.64
   Savings and Passbook                          21,219          849         4.00         17,224          802          4.66
   Time                                         235,388       15,067         6.40        167,894        9,737          5.80
Borrowed funds                                   44,768        3,085         6.29         40,352        2,439          6.04
                                              ---------     --------      -------      ---------     --------       -------
 Total interest-bearing liabilities           $ 323,749     $ 20,044         6.19%     $ 228,964     $ 13,110         5.73%
                                              ---------     --------      -------      ---------     --------       -------

Excess of interest-earning assets over
interest-bearing liabilities                  $     (18)                               $   6,305
                                              =========                                =========

Net interest income                                         $ 10,421                                  $ 8,760
                                                            ========                                  =======

Net interest rate spread                                                     3.22%                                     3.57%
                                                                          =======                                   =======

Net interest margin                                                          3.22%                                     3.72%
                                                                          =======                                   =======

Average interest-earning assets to average
interest-bearing liabilities                                                99.99%                                   102.75%
                                                                          =======                                   =======
</TABLE>


         Provision for Loan Losses. Management records a provision for loan
losses in an amount that it believes will result in an allowance for loan losses
sufficient to cover all potential net charge-offs and risks believed to be
inherent in the loan portfolio. Management's evaluation includes such factors as
past loan loss experience as related to current loan portfolio mix, evaluation
of actual and potential losses in the loan portfolio, prevailing regional and
national economic conditions that might have an impact on the portfolio, regular
reviews and examinations of the loan portfolio conducted by bank regulatory
authorities, and other factors that management believes deserve current
recognition. As a result of management's evaluation of these factors, including
a decline in total loans receivable, net of $18.5 million or 9.3% and a
reduction in nonperforming assets by $1.0 million or 79.5%, the Corporation did
not establish a provision during 2000, compared to the prior year. The allowance
for loan losses as a percentage of loans outstanding, net of discount, was 1.15%
at December 31, 2000, compared to 1.06% at December 31, 1999. In addition, the
allowance for loan losses as a percentage of total non-performing loans, net of
discount, was 803.85% at December 31, 2000, compared 167.06% at December 31,
1999.

         Management believes that the allowance for loan losses is adequate to
cover actual and potential losses in the loan portfolio under current
conditions. Nevertheless, there can be no assurance that additions to such
allowance will not be necessary in future periods.

         Non-Interest Income. Non-interest income decreased by $1.1 million to
$670,000, for the year ended December 31, 2000. The decrease was primarily the
result of a decrease in gain on sales of loans receivable of $1.4 million, a
loss on sale of investment securities of $312,000 and loss from brokerage
operations. Brokerage operations loss increased $123,000 to $380,000 in 2000 in
connection with the Corporation's Internet initiative and due to substantial
expenses by USACapital Inc. during the years ended 1999 and 2000, due to
salaries to increase staff to develop an Internet presence, advertising to
market the new Internet presence, and cost associated with maintaining the
Internet presence. Gain on sales of loans receivable decreased $1.4 million as
the Corporation sold loans in 2000 at par, with no gain or loss as compared to
loans sold in 1999 at a premium. Of the loss on investment securities, $202,000
was related to the sale of all remaining shares of stock in a local financial
institution which was held by the Corporation. In 2000, the Corporation
inadvertently sold one security classified as held-to-maturity with an amortized
cost of $1.0 million; the sale resulted in no realized gain or loss.

         In 1999, the Corporation sold one security classified as
held-to-maturity with an amortized cost of $1.2 million; the sale resulted in a
realized gain of $5,000. In 2000, the Corporation sold one security classified
as held-to-maturity with an amortized cost of $1.0 million; the sale resulted in
no gain or loss. These increased losses were partially offset by an increase in
service charges and fees of $768,000 and other income of $67,000.


                                                                              35
<PAGE>
         Non-Interest Expense. Non-interest expense increased $8.4 million to
$20.8 million, for the year ended December 31, 2000. The major reason for the
increase were expenses associated with the Corporation's former Internet
initiative. The Corporation and the Bank entered into a number of agreements
with strategic partners to provide on-line related services. Accordingly, online
partnerships expense increased $5.6 million. Salaries and employee benefits
increased by $1.4 million due to the addition of staff to support the Internet
infrastructure. Occupancy expense increased $265,000 due to the costs associated
with the Corporation's headquarters, branch network and customer service
facilities. Data Processing expenses increased $1.1 million due to our increased
number of deposit accounts. Professional fees increased $431,000 related to
litigation and contract negotiations with e-commerce companies. Office expense
increased $169,000 due to customer service initiatives.

         As discussed herein, the Corporation and the Bank have determined to
de-emphasize the Internet initiative and have renogiated, terminated or allowed
to expire such strategic relationships. Managements' plan to de-emphasize its
Internet initiative is centered on a reduction of expenses, including capital
expenditures, personnel reductions, advertising, and strategic contracts that
caused payments to be made to the third party companies. Beginning in the fourth
quarter of 2000, the Corporation expensed $2.5 million of contracts with
strategic on-line partners that were viewed to have no long-term value since the
programs had been eliminated. The nature of the contracts renegotiated related
to increasing Internet deposit accounts with incentive fees paid to the
partners. Partners would promote the Corporation's website on computer hardware,
communication devices, or their own websites. The amount written off represented
the remaining un-amortized balance of the contracts outstanding at year-end.
Future benefits will be the monthly reduction in amortization relating to the
contracts, which was $141,000. Future cash requirements will not be significant
since no new contracts have been signed or are being considered. The Corporation
is not exiting the business of generating Internet deposits, but rather simply
no longer actively promoting or paying for ways to attain such deposits. The
Corporation's Internet de-emphasis will not effect ongoing Internet operations
except for the reduction of new deposit accounts opened through the Internet.

         Income Tax Expense. The Corporation has recorded no tax expense for the
year ended December 31, 2000 versus a tax benefit of $588,000 as compared to
December 31, 1999.

         Asset and Liability Management. A principal objective of our asset and
liability management is to minimize the Bank's exposure to changes in interest
rates. The Bank's policy is to attempt to manage assets and liabilities in such
a way as to maximize net interest income through changing interest rate
environments. An interest rate sensitive asset or liability is one that, within
a defined time period, either matures or experiences an interest rate change in
line with general market rates. Interest rate sensitivity measures the relative
volatility of our net interest margin resulting from changes in market interest
rates.

         The following table summarizes repricing intervals for interest-earning
assets and interest-bearing liabilities for the period ended December 31, 2000
and the difference or "gap" between them on an actual and cumulative basis for
the periods indicated. The table was prepared with the following assumptions:
(1) 50% of the Bank's transaction accounts are considered core deposits and are
assumed to mature in the "Over 5 Years" category; the remaining 50% are not
considered to be core transaction accounts, are sensitive to rate changes, and,
as such, are placed in the "1-90 Days" category; (2) interest-earning assets are
calculated based on contractual adjustments, stated maturities in the
instruments and instruments with stated maturities that are homogeneous such
that prepayment assumptions can be used based on experience, are adjusted to
better reflect the sensitivity of the asset for prepayment; and (3) certificates
of deposit and borrowings are scheduled based on the applicable stated
maturities.


                                                                              36
<PAGE>

The Corporation

<TABLE>
<CAPTION>

                                                                                 December 31, 2000
                                             ---------------------------------------------------------------------------------------
(in Thousands)
                                              1 - 90 Days        91 - 364 Days      1 - 5 Years        Over 5 Years         Balance
                                             -------------       -------------     -------------      --------------       ---------
<S>                                           <C>                 <C>                <C>                <C>                 <C>
Interest-earning assets
Loans receivable                               $ 52,706             $ 38,460         $ 73,827            $ 16,502         $ 181,495
Investments                                      29,248                3,738           13,430              84,961           131,377
Interest-bearing deposits and other              10,308                                                                      10,308
                                               --------             --------         --------           ---------         ---------
     Total Assets                              $ 92,262             $ 42,198         $ 87,257           $ 101,463         $ 323,180
                                               ========             ========         ========           =========         =========

Interest-bearing liabilites
  Demand                                        $ 2,946                  $ -              $ -             $ 2,947           $ 5,893
  Now accounts                                   19,601                    -                -              19,601            39,202
  Money Market accounts                             180                    -                -                 180               360
  Savings & Passbook accounts                    11,426                    -                -              11,426            22,852
  Borrowings                                          -               12,600           20,000                   -            32,600
  Guaranteed Subordinated Debt                        -                    -                -              10,000            10,000
  Certificates of deposit                        26,686               67,515          118,924                 500           213,625
                                               --------             --------         --------           ---------         ---------
     Total interest-bearing liabilites         $ 60,839             $ 80,115         $138,924            $ 44,654         $ 324,532
                                               ========             ========         ========           =========         =========

Periodic gap                                   $ 31,423            $ (37,917)        $(51,667)           $ 56,809          $ (1,352)
                                               ========             ========         ========           =========         =========
Cumulative gap                                 $ 31,423             $ (6,494)        $(58,161)           $ (1,352)
                                               ========             ========         ========           =========
Ratio of gap to interest-earning
     assets                                        9.7%                (11.7)%          (16.0)%             17.6%
                                               ========             ========         ========           =========
Ratio of cumulative gap to interest-
     earning assets                                9.7%                 (2.0)%          (18.0)%             (0.4)%
                                               ========             ========         ========           =========
</TABLE>

         A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds interest rate sensitive assets.

         During a period of falling interest rates, a positive gap would tend to
adversely affect net interest income, while a negative gap would tend to result
in an increase in net interest income. During a period of rising interest rates,
a positive gap would tend to result in an increase in net interest income while
a negative gap would tend to affect net interest income adversely.

         If repricing of the Bank's assets and liabilities were equally flexible
and moved concurrently, the impact of an increase or decrease in interest rates
on net income would be minimal. At December 31, 2000, the Bank had a negative
cumulative one year gap, which suggests that net interest income may increase
during periods of declining interest rates.

         The method used to analyze interest rate sensitivity in the table above
has a number of limitations. Certain assets and liabilities may react
differently to changes in interest rates even though they reprice or mature in
the same or similar time periods. The interest rates on certain assets and
liabilities may change at different times than changes in market interest rates,
with some changing in advance of changes in market rates and some lagging behind
changes in market rates. Also, certain assets, such as adjustable-rate loans,
often have provisions which may limit changes in interest rates each time market
interest rates change and on a cumulative basis over the life of the loan.
Additionally, the actual prepayments and withdrawals experienced by  the Bank in
the event of a change in interest rates may deviate significantly from those
assumed in calculating the data shown in the table.


                                                                              37
<PAGE>

         In the event that we should experience a mismatch in its desired gap
ranges or an excessive decline in its market value of equity resulting from
changes in interest rates, we have a number of options which we could utilize to
remedy such mismatch. The Bank could restructure its investment portfolio
through sales or purchases of securities with more favorable repricing
attributes. It could also emphasize loan products with appropriate maturities or
repricing attributes, or it could attract deposits or obtain borrowings with
desired maturities.

                         Liquidity and Capital Resources

         Liquidity. As the Bank is the primary operating subsidiary of the
Corporation, liquidity management is generally handled by the Bank's management.
Liquidity refers to a company's ability to generate sufficient cash to meet the
funding needs of current loan demand, deposit withdrawals, principal and
interest payments with respect to outstanding borrowings and to pay operating
expenses. We monitor our liquidity in accordance with guidelines established by
the Board of Directors and applicable regulatory requirements. The Bank can
minimize the cash required during times of heavy loan demand by modifying its
credit policies or reducing its marketing efforts. Liquidity demand caused by
net reductions in deposits are usually caused by factors over which we have
limited control. The Bank derives its liquidity from both its assets and
liabilities. Liquidity is derived from assets by receipt of interest and
principal payments and prepayments, by the ability to sell assets at market
prices and by utilizing unpledged assets as collateral for borrowings. Liquidity
is derived from liabilities by maintaining a variety of funding sources,
including deposits, advances from the FHLB and other short and long-term
borrowings.

         The Bank's liquidity management is both a daily and long-term function
of funds management. Liquid assets are generally invested in short-term
investment securities and other short-term investments. If the Bank requires
funds beyond its ability to generate them internally, various forms of both
short and long-term borrowings provide an additional source of funds. At
December 31, 2000, the Bank had $43.1 million in borrowing capacity under a
collateralized line of credit with the FHLB of which $30.0 million had been
drawn upon through four long term fixed rate callable advances.

         At December 31, 2000, we had outstanding commitments, including unused
lines of credit, of $6.4 million and letters of credit of $504,000. Certificates
of deposit which are scheduled to mature within one year totaled $94.2 million
at December 31, 2000. The Bank anticipates that it will have sufficient funds
available to meet its current loan commitments.

         The Corporation believes that the execution of our business plan will
require us to raise additional capital in the future to support our capital
needs and to allow us to meet applicable regulatory capital requirements. There
can be no assurance that the Corporation will be successful in raising
additional capital when required in sufficient amounts and on terms acceptable
to the Corporation. The failure to raise such capital could have a material
adverse affect on the Corporation's business, results of operations and
financial condition. If additional funds are raised through the issuance of
equity securities, the percentage ownership of our current shareholders would be
reduced.

         Capital Resources. The Corporation and the Bank are subject to various
regulatory capital requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements can result in certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Corporation's financial
condition or results of operations. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Corporation and the Bank
must meet specific capital guidelines that involve quantitative measures


                                                                              38
<PAGE>

of the Corporation's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Corporation and the Bank's
capital amounts and classifications are also subject to qualitative judgements
by the regulators about components, risk weightings, and other factors. See
"Regulation of the Corporation and the Bank".

         Quantitative measures established by regulation to ensure capital
adequacy require the Corporation and the Bank to maintain minimum amounts and
ratios (set forth in the table below) of Total and Tier 1 capital to
risk-weighted assets and of Tier 1 capital to average assets. As of December 31,
2000, the Corporation and the Bank met all capital adequacy ratio requirements
to which they were subject. While the Corporation has not completed its
financial statements for the quarter ended March 31, 2001, the Corporation
believes that it may fail to comply with the leverage ratio as of March 31,
2001. However, the Corporation believes it will be in compliance with its
remaining capital adequacy ratios and each of the capital adequacy ratios
applicable to the Bank as of March 31, 2001.

         During the year 2000, the Bank began to purchase shares of the
Corporation's common stock in open market transactions for the benefit of some
of the Corporation's employee benefit plans. As of March 30, 2001, the Bank had
purchased an aggregate of approximately 670,000 shares of the Corporation's
common stock. In view of the losses incurred by the Corporation as discussed
elsewhere in this report, the Corporation may sell such shares or newly-issued
shares in the future to raise additional capital.

         As previously indicated, as a result of weaknesses noted by the FDIC in
recent regulatory examinations, the Board of Directors of the Bank entered into
a Memorandum of Understanding with the Regional Director of the FDIC. Pursuant
to the terms of the Memorandum, the Bank is required to adopt and implement
comprehensive written plans to address various deficiencies or concerns
identified by federal and state regulators relating to earnings performance,
capital adequacy, capital ratios, funding growth, funding mix, non-core funding
dependence and interest rate risk exposure. Pursuant to the Memorandum, the Bank
is also required to adopt and implement formal internal review procedures which
identify, measure, monitor and control risks associated with all electronic
banking activities and to take all steps necessary to correct deficiencies
related to certain identified loans, credit data and collateral. The Bank is
prohibited from declaring or paying dividends without the prior approval of the
Regional Director of the FDIC. The Memorandum also provides for periodic
progress reports detailing actions taken to secure compliance with the
Memorandum.

         In March 2001, as a result of a regulatory examination completed by the
Federal Reserve Bank, the Corporation entered into a written agreement with the
Board of Governors of the Federal Reserve System with regard to declaration or
payment of cash or stock dividends, incurring of new debt, transactions the
purchase or redemption of our securities, management's capital raising efforts
and any actions taken to control asset growth of the consolidated organization
and restore it to profitability. Failure to comply with the agreement could
result in additional regulatory supervision or actions.

             At December 31, 2000 and December 31, 1999, the Bank's actual and
required minimum capital ratios were as follows:
<TABLE>
<CAPTION>


                                                                                                               To be well
For the Bank:                                                                                                Capitalized under
-------------                                                                        For Capital             Prompt Corrective
(in Thousands)                                                                     Adequacy Purposes         Action Provisions
As of December 31, 2000:                             Amount           Ratio          Amount       Ratio        Amount      Ratio
------------------------                           ----------       ---------      ----------   ---------    ----------  ---------
<S>                                                <C>              <C>             <C>           <C>         <C>         <C>
  Total Capital
    (to Risk Weighted Assets)                      $ 22,340             8.3%        $ 21,427        8.0%      $ 26,783       10.0%
  Tier I Capital
    (to Risk Weighted Assets)                        20,250             7.6           10,713        4.0         16,070        6.0
  Tier I Capital
    (to Average Assets)                              20,250             6.0           13,573        4.0         16,966        5.0
As of December 31, 1999:
  Total Capital
    (to Risk Weighted Assets)                      $ 28,266            10.1%        $ 22,460        8.0%      $ 28,075       10.0%
  Tier I Capital
    (to Risk Weighted Assets)                        26,151             9.3           11,230        4.0         16,845        6.0
  Tier I Capital
    (to Average Assets)                              26,151             7.9           13,171        4.0         16,464        5.0
</TABLE>

                                                                              39
<PAGE>

         At December 31, 2000 and December 31, 1999, the Corporation's actual
and required minimum capital ratios were as follows:
<TABLE>
<CAPTION>


For the Corporation:
--------------------                                                                     For Capital
(in Thousands)                                                                         Adequacy Purposes
As of December 31, 2000:                             Amount           Ratio          Amount        Ratio
------------------------                           ----------       ---------      ----------    ---------
<S>                                                <C>               <C>            <C>          <C>
  Total Capital
    (to Risk Weighted Assets)                      $ 19,990             7.5%        $ 21,442        8.0%
  Tier I Capital
    (to Risk Weighted Assets)                         9,995             3.7           10,721        4.0
  Tier I Capital
    (to Average Assets)                               9,995             3.0           13,493        4.0
As of December 31, 1999:
  Total Capital
    (to Risk Weighted Assets)                      $ 31,331            11.2%        $ 22,473        8.0%
  Tier I Capital
    (to Risk Weighted Assets)                        19,216             6.8           11,237        4.0
  Tier I Capital
    (to Average Assets)                              19,216             5.9           13,124        4.0
</TABLE>


Inflation and Changing Prices

         Management is aware of the impact of inflation on interest rates and
the corresponding impact on a bank's performance. The ability of a financial
institution to cope with inflation can only be determined by ongoing analysis
and monitoring of its asset and liability structure. We monitor our asset and
liability position with particular emphasis on the mix of interest-sensitive
assets and liabilities in order to reduce the effect of inflation upon its
performance.

         Inflation can have a more direct impact on categories of non-interest
expenses such as salaries and wages, supplies, and employee benefit costs. These
expenses are very closely monitored by management for both the effects of
inflation and non-inflationary increases in such items as staffing levels, usage
of supplies and occupancy costs.

RISK FACTORS

         Each of the risks set forth below could adversely affect our business,
financial condition or results of operations.

We have recently incurred losses as a result of implementing our Internet
strategy.

         For the past two years, we expended significant resources on
technology, website development, marketing, hiring of personnel and other
startup costs related to the development and operation of our Internet banking
platform. This resulted in increases in advertising and marketing expenses and
compensation costs. We have also expended financial and management resources in
upgrading our internal control systems, customer service systems and financial
reporting systems to accommodate the use of our Internet services. As a result
of these efforts, we incurred significant losses in 1999 and 2000. To reduce
expenses, we reduced our employee payroll, advertising and operating expenses.
Many of these employee reductions resulted from our reduced emphasis on offering
Internet banking services, and our renewed focus on community banking. If we are
successful in executing our renewed community banking strategy, we expect to be
profitable in 2001. Although management expects to return to profitability in
2001, there can be no assurance that we will achieve or maintain profitability
or generate positive cash flow from operations in future periods.

In July 2001, the Bank entered into a Stipulation and Consent to entry of Order
to Cease and Desist with each of the Federal Deposit Insurance Corporation and
the Department of Banking of the Commonwealth of Pennsylvania (the "Orders").
The Orders set forth requirements with respect to the Bank's assets, capital
position, and policies and procedures. Each of the Orders further require the
Bank to conduct its business in accordance with its terms and conditions and
requires that periodic reports be made to the Bank's banking regulators.
Pursuant to the Orders, the Bank is also required to adopt and implement formal
internal review procedures which identify, measure, monitor and control risks
associated with all electronic banking activities and to take all steps
necessary to correct deficiencies related to certain identified loans, credit
data and collateral. The Bank is prohibited from declaring or paying dividends
without the prior approval of the Regional Director of the FDIC. The Orders also
provide for periodic progress reports detailing actions taken to secure
compliance with the Orders.

In March 2001, as a result of a regulatory examination completed by the Federal
Reserve Bank, the Corporation entered into a Written Agreement with the Board of
Governors of the Federal Reserve System. The Written Agreement provides
restrictions on the declaration or payment of cash or stock dividends, incurring
of new debt, the redemption or repurchase of our securities, management's
capital raising efforts and any actions taken to control asset growth of the
consolidated organization and restore it to profitability.

Failure to comply with the provisions included in the agreements noted above,
would expose the Corporation and the Bank to further regulatory sanctions that
may include additional asset restrictions, restrictions on operations and
growth, mandatory asset disposition and possible seizure.




                                                                              40
<PAGE>




Changes in interest rates could adversely affect us.

         Like most banks, our results of operations are primarily dependent on
net interest income. Net interest income results from the "margin" between
interest earned on interest-earning assets, such as investments and loans, and
interest paid on interest-bearing liabilities, such as deposits and borrowings.
As of December 31, 2000, based on certain assumptions, our interest-bearing
liabilities that were estimated to mature or reprice within one year exceeded
similar interest-earning assets by $6.5 million, or 2.0% of total interest-rate
sensitive assets.

         Interest rates are highly sensitive to many factors that are beyond our
control. Some of these factors include: governmental monetary policies,
inflation, recession, unemployment, the money supply, domestic and international
economic and political conditions, and domestic and international crises.
Changes in interest rates could have adverse effects on our operations.
Specifically,

         o     Historically, we have relied on short-term and institutional
               deposits as a source of funds. Our ability to retain these
               deposits is highly dependent upon the interest paid by us.

         o     When interest-bearing liabilities mature or reprice more
               quickly than interest-earning assets, in a particular period
               of time, a significant increase in interest rates could
               adversely impact our net interest income.

         o     Changes in interest rates could adversely affect:

              o    the volume of loans we originate;

              o    interest-earning assets, particularly our investment
                   securities and trust preferred securities portfolio; and

              o    loan repayments and prepayments.


                                                                              41
<PAGE>

We rely on short-term deposits.

         Historically, we have employed a wholesale funding strategy consisting
primarily of non-retail certificates of deposit. We have been able to maintain
sufficient funds to support our lending activities by offering rates of interest
on certificates of deposit marginally higher than rates offered by other banks
on comparable deposits. As of December 31, 2000, $213.6 million, or 75.7%, of
our deposits consisted of certificates of deposit. Of this amount, $95.3
million, or 44.6%, were placed with institutional investors. In addition, as of
December 31, 2000, $94.2 million, or 44.1%, of our total certificates of deposit
were due to mature within one year. Management has been focusing on reducing the
Bank's dependency on non-core funding including brokered deposits by increasing
local branch and internet deposits. However, our ability to attract and maintain
deposits, as well as our cost of funds, has been, and will continue to be,
significantly affected by money market rates and general economic conditions. In
addition, our ability to internally fund any additional growth through lending
will be impacted by our ability to maintain or generate deposits. In the event
we increase interest rates further to retain deposits, earnings may be
negatively affected.

Our loan acquisition strategy involves significant risks.

         In addition to originating loans, our lending activities have
historically included identifying and purchasing at a discount loans which we
believe to be undervalued. We have historically purchased loans either from
institutions which were seeking to eliminate certain loans or categories of
loans from their portfolios or in connection with the failure or consolidation
of other financial institutions. While Management expects to increase the
Bank's focus on traditional loan originations, management may make periodic loan
acquisitions. Such loan acquisitions subject us to risks, including some risks
not experienced by financial institutions engaged in more traditional lending
activities. There can be no assurance that this component of our operations will
continue to provide the same level of profitability we have experienced in the
past. Our loan acquisition strategy is subject to the following risks:

         o   the shrinking pool of assets available because the decreasing
             number of failed or failing financial institutions that are
             being resolved by the FDIC may result in us not meeting our
             targeted level of loan purchases;

         o   the competitive nature of the market for loan pools may result in
             us having to acquire such loans at less attractive prices than
             we have in the past;

         o   the cost of resolving non-performing loan pools may be greater than
             that contemplated at the time of acquisition;

         o   the accretion of the discount associated with purchased loans
             is subject to management's assumptions with respect to the
             estimated value of the loans and future cash flows, all of which
             is uncertain and is subject to change, resulting in inter-period
             variations in income; and

         o  geographic concentrations of purchased loans, including loans in
            geographic areas with which we have little or no familiarity.


                                                                              42
<PAGE>

         We also originate loans by purchasing participations in loans from
other financial institutions. We consider such loan participations to be
originations because we underwrite each participation as an origination and the
participation is closed using our underwriting criteria. Although we have
participated in loans with various other financial institutions, as of December
31, 2000, we had six loan participations with an aggregate principal balance
of $8.7 million with affiliates of a local specialty finance and real estate
company. In each of these six loan participations, our interest and rights to
principal recovery are senior to the rights of the junior participant, are
collateralized by assets of an affiliate of the specialty finance company and
are serviced by the specialty finance company. The senior rights created under
the participation agreements were significant considerations in our
qualification of the loan. Although the finance company has agreed, in several
(but not all) transactions, to cause the participated loans owned by its
affiliates which may become non-performing to be substituted for performing
underlying loans, we are subject to risk to the extent the finance company
experiences financial difficulties and is unable to comply with its replacement
obligations. Furthermore, to the extent the finance company experiences
financial difficulties, our ability to receive principal and interest
payments on a timely basis from the finance company, as servicer of the loans,
could be temporarily interrupted.

Our yield on loans purchased at a discount is uncertain.

          At the time we purchase a pool of loans, the difference between the
note amount and the purchase price is accounted for as a discount. The purchase
price is based on our estimate of the value of the loan, including an estimate
of future cash flows. In accordance with generally accepted accounting
principles, to the extent we believe a purchased loan will be collected in full,
the discount associated with such purchased loan will be recognized as an
increase in the yield of the loan and will be included as interest income over
the estimated life of the loan. To the extent that we believe full repayment of
principal and interest is not reasonable and probable, the discount will be set
up as a cash discount and will not be recognized as an increase in the yield of
the loan until all principal and interest is received or a final resolution is
determined. To the extent that cash flows from the purchased loans may be
uncertain, recognition of this income will also be uncertain. The yield on our
portfolio of loans which have been purchased at a discount is subject to
significant inter-period variations due to the fact that the timing of actual
repayments and prepayment of the loans my differ from the original assumptions.
Such inter-period variations can also result from the reclassification of loans
from performing to non-performing status.


                                                                              43
<PAGE>

We could sustain losses if our asset quality deteriorates.

         Our results of operations are significantly dependent on the quality
of our assets, which is measured by the level of our non-performing assets.
Non-performing assets consist of non-accrual loans, net of discount, loans
which are 90 days or more overdue but still accruing interest and other
real estate owned. At December 31, 2000, our non-performing assets, net of
discount, amounted to $300,000 or .09% of total assets. Substantially, all of
the $300,000 of non-performing assets, net of discount, consisted of purchased
loans. Although we purchase loan pools at a discount to the face value of such
loans, we face the risk that in the event one or more of such purchased loans
becomes non-performing, the underlying discount may not be sufficient to
cover our cost of acquiring, servicing and, if necessary, taking legal action,
with respect to such loans. Although we have enhanced our policies and
procedures relating to monitoring asset quality and we continue to devote
a significant amount of time and resources to the identification, collection
and work-out of non-performing assets, the real estate markets and the overall
economy in the markets where we originate and purchase loans are likely to be
significant determinants of the quality of our assets in future periods and,
thus, our financial condition and results of operations.

         In addition, our investment portfolio exposes us to significant risks.
Our investment portfolio consists primarily of trust preferred securities,
corporate bonds and bonds issued by governmental agencies. The quality of our
investment portfolio can be measured by the mix of investment grade and
non-investment grade securities. As of December 31, 2000, we held $73.7 million
of investment grade securities and $55.1 million of non-investment grade
securities. Non-investment grade securities expose us to a higher degree of risk
because of the higher risk of default and greater market price volatility
associated with such securities. In addition we have a high concentration of
investments in the banking industry. The value and performance of our investment
portfolio is sensitive to economic downturns. Decreases in the market value or
performance of our investment portfolio could adversely affect our financial
condition or results of operations.

Increases in our reserve coverage for loan losses would adversely affect our
results of operations.

         At December 31, 2000, our allowance for loan losses amounted to 1.15%
of total loans, net of discount, and 803.85% of total non-performing loans, net
of discount. In addition, the applicable purchase discount for an individual
acquired loan may act as an additional reserve against loss for such loan to the
extent that the collectability of such loan becomes questionable. Although we
believe that we have established an adequate allowance for losses on our loan
portfolio, including purchased loans, material future additions to the allowance
for loan losses may be necessary due to changes in economic conditions, the
performance of our loan portfolio and increases in both loan originations and
purchases. In addition, the Pennsylvania Department of Banking and the FDIC, as
an integral part of their examination process, periodically review our allowance
for loan losses and could require increases in such allowance. Increases in the
allowance for loan losses would adversely affect our results of operations.


                                                                              44
<PAGE>

Our commercial lending activity exposes us to credit risks.

         At December 31, 2000, a majority of our real estate loan portfolio
consisted of loans secured by multi-family residential real estate and
commercial real estate properties. In addition, as of December 31, 2000, we had
an aggregate of $12.6 million of commercial business loans and we expect to
increase our emphasis on commercial business lending in the future. We make
commercial real estate and commercial business loans following analysis of
credit risk, the value of the underlying collateral and other more intangible
factors. This commercial lending activity exposes us to risks, particularly in
the case of loans to small businesses and individuals. These risks include
possible errors in our credit analysis, the uncertainty of the borrower's
ability to repay the loans, the uncertainty of future economic conditions and
the possibility of loan defaults. Commercial lending generally includes higher
interest rates and shorter terms of repayment than non-commercial lending.
Accordingly, we are subject to greater credit risk with our commercial lending.
As of December 31, 2000, we had no non-performing commercial business loans and
no non-performing loans secured by commercial real estate.

We need to raise additional capital to support our anticipated liquidity needs
and capital adequacy requirements.

         We are required by federal and state regulatory authorities to maintain
adequate levels of capital to support our operations. We are required to
increase our capital to acceptable regulatory levels and may need to raise
additional capital in the future. This may be accomplished through the sale of
additional securities, including the issuance of additional shares of our common
stock. Our shareholders do not have a specific right to purchase any new issue
of shares of our common stock in order to maintain their proportionate ownership
interests in us. Should we choose to raise capital through the sale of our
common stock, such action could dilute the voting power of the outstanding
shares and reduce the portion of any dividend and liquidation proceeds payable
to the holders of our common stock. At December 31, 2001, the Corporation did
not meet all of its minimum regulatory capital requirements. See Note T of the
Notes to Consolidated Financial Statements.


We face strong competition.

         We face strong competition from more established banks and from
non-bank financial institutions which are aggressively expanding into markets
traditionally served by banks. Most of these competitors have facilities and
financial resources greater than ours and have other competitive advantages over
us. Among the advantages of these larger institutions are their ability to make
larger loans, finance extensive advertising campaigns, conduct retail operations
at a significant number of branches, and to allocate their investment assets to
business lines of highest yield and demand.

         Our profitability in the past had been partially attributable to the
identification and purchase of discounted loans and the origination of
commercial loans. The primary factors in competing for loan pool acquisitions
are knowledge of the availability of such loans, the ability to efficiently and
accurately evaluate such loans and the ability to accurately price such loans.
The primary factors in competing for commercial loans are interest rates, loan
origination fees and the quality and range of lending services offered. We face
strong competition in attracting and retaining deposits and in purchasing and
originating loans. We can provide no assurance that we will maintain our
competitive position in the future or that we will continue to operate
profitably.


                                                                              45
<PAGE>

Our ability to meet our operating expenses, service our debt and pay dividends
to shareholders is limited by substantial regulatory restrictions.

         As a holding company, we are dependent upon the Bank for cash to meet
our operating expenses and service our debt. The ability of the Bank to pay
dividends to the Corporation, and therefore our ability to meet operating
expenses, service debt obligations and pay dividends to our stockholders, is
limited by regulatory restrictions, including agreements we have entered into
with our primary regulators, as well as by the Bank's ability under Pennsylvania
law to pay dividends to us. We have never paid a cash dividend and we cannot pay
cash dividends in the future without express regulatory approval.


We are vulnerable to unfavorable economic conditions.

         The performance of financial institutions is sensitive to general
economic conditions. Unfavorable economic conditions at the local, national or
international level may adversely affect our performance. For example, much of
the United States experienced a significant economic decline in the late 1980's
and early 1990's. This decline adversely affected the real estate market and the
banking industry. As a result of this decline, loan repayment delinquencies
increased and the value of properties underlying secured loans declined.
Numerous bank failures resulted in the placement of many properties in the hands
of a federal banking agency with the primary objective of prompt liquidation.
Economic conditions are unpredictable and the potential for downturns is always
present.

         Although we have historically focused on acquiring loans in the
Mid-Atlantic region of the United States, we have acquired loans secured by real
estate located in a number of other states including Minnesota, Florida and
California and we may acquire loans throughout the nation. To the extent that
these loans are secured by real estate outside the Mid-Atlantic region, such
loans may present a greater risk of collectability than loans located in our
historical primary market area. Thus, adverse economic conditions affecting any
of these market areas could have a negative impact on our financial condition
and results of operations.

We could be adversely affected by government regulation of the banking industry.

         Bank regulation. We are subject to a complex body of federal and state
banking laws and regulations which are intended primarily for the protection of
depositors. Governmental or regulatory authorities could revise existing
regulations or adopt new regulations at any time. Certain revisions could
subject us to more demanding regulatory compliance requirements and could
thereby adversely affect our ability to conduct, or the cost of conducting,
business. Legislation and regulatory initiatives containing wide-ranging
proposals for altering the structure, regulation and competitive relationships
of financial institutions are introduced regularly. We cannot predict whether or
what form of proposed statute or regulation will be adopted or the extent to
which such adoption will affect our business. Furthermore, given the rapid
expansion of the electronic commerce market, many regulatory bodies are adopting
measures to ensure that their regulations are keeping pace. For example,
Congress has held hearings on whether to regulate the electronic commerce
market, while numerous states are considering adopting their own laws to
regulate Internet banking. Furthermore, Congress is considering proposing new
laws relating to customer privacy. Moreover, the FDIC has proposed other
guidelines governing Internet operations. These and any other proposed laws,
rules and regulations could force us to comply with more complex and perhaps
more burdensome regulatory requirements, which could materially adversely affect
our business, financial condition, results of operations and cash flows.


                                                                              46
<PAGE>

Some of our loans may be secured by property subject to environmental
liabilities.

         In the course of our business, we may acquire properties through
foreclosure. There is a risk that hazardous substances could be discovered on
such properties. Various federal, state and local laws subject property owners
or operators to liability for the costs of removal or remediation of certain
hazardous substances released on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release of hazardous substances. There is a risk that we may be required to
bear the cost of removing hazardous substances from any affected properties. The
cost of such removal could exceed the value of the affected properties or the
loans secured by the properties. In addition, we may not have adequate remedies
against the prior owner or other responsible parties and may find it difficult
or impossible to sell the affected properties.

Our security could be breached, which could damage our reputation and deter
customers from using our Internet services.

         We must protect our computer systems and network from physical
break-ins, security breaches and other disruptive problems caused by the
Internet or other users. Computer break-ins could jeopardize the security of
information stored in and transmitted through our computer systems and network,
which would likely adversely affect our ability to retain or attract customers,
could damage our reputation and could subject us to litigation. Although we
intend to rely on encryption and authentication technology to provide the
security and authentication necessary to effect secure transmissions of
confidential information and to continue to implement security technology and
establish operational procedures to prevent break-ins, damage and failures,
these security measures may fail. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments could result in a
compromise or breach of the algorithms we and our third-party service providers
use to protect customer transaction data. If any compromise of our security were
to occur, it could have a material adverse effect on our Internet business,
financial condition, results of operations and cash flows.

We outsource many essential services to third-party providers who may terminate
their agreements with us, resulting in interruptions to our operations

         We receive essential technical and customer service support from
third-party providers. We outsource Webhosting, check processing, check imaging,
electronic bill payment, Internet processing, Internet software, statement
rendering services and other additional services to third party vendors. If one
or our third-party service providers terminates its agreement with us and we are
unable to replace such provider with another service provider, our operations
may be interrupted. If an interruption were to continue for a significant period
of time, our business, financial condition, results of operations and cash flows
could be materially adversely affected.

Item 7. Financial Statements.

         The financial statements of the Corporation are attached to this
report and begin on page F-1.


                                                                              47
<PAGE>

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

         None.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

         The information required by this Item is incorporated by reference from
the definitive proxy materials of the Corporation, to be filed with the
Commission in connection with our 2001 Annual Meeting of Shareholders.

Item 10. Executive Compensation.

         The information required by this Item is incorporated by reference from
the definitive proxy materials of the Corporation, to be filed with the
Commission in connection with our 2001 Annual Meeting of Shareholders.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The information required by this Item is incorporated by reference from
the definitive proxy materials of the Corporation, to be filed with the
Commission in connection with our 2001 Annual Meeting of Shareholders.

Item 12. Certain Relationships and Related Transactions.

         The information required by this Item is incorporated by reference from
the definitive proxy materials of the Corporation, to be filed with the
Commission in connection with our 2001 Annual Meeting of Shareholders.

Item 13. Exhibits, List and Reports on Form 8-K.

         (A) Exhibits

         The following Exhibits are filed as part of this report. (Exhibit
numbers correspond to the exhibits required by Item 601 of Regulation S-B.)


Exhibit No.

3.1      Articles of Incorporation of USABancShares.com, as amended*
3.2      Bylaws of USABancShares*
4.1      Indenture of USABancShares.com relating to Junior Subordinated
         Debentures**
4.2      Form of Certificate of Exchange Junior Subordinated Debenture**
4.3      Form of Certificate of Original Junior Subordinated Debenture**
4.4      Certificate of Trust of USA Capital Trust I**
4.5      Amended and Restated Declaration of Trust of USA Capital Trust I**


                                                                              48
<PAGE>

4.6      Form of Common Security**
4.7      Form of Exchange Capital Security Certificate**
4.8      Form of Certificate of Original Capital Security**
4.9      Form of Exchange Guarantee of USABancShares.com relating to the
         Exchange Capital Securities**
10.1     Stock Option Plan, as amended and restated+
10.2     Employee Stock Purchase Plan*****
10.3     Employee Savings Plan*****

10.4     Employment Agreement between vBank and Craig J. Scher+

10.5     Employment Agreement between USABancShares.com and Kenneth L. Tepper+
10.5.1   Letter Agreement among the Corporation, the Bank and Kenneth L. Tepper
         regarding departure
10.6     Warrant Agreement between USABancShares.com and Sandler O'Neill &
         Partners, L.P. dated February 13, 1998**
10.7     Registration Rights Agreement between USABancShares.com and certain
         shareholders dated February 13, 1998**
10.8     Indenture of USABancShares relating to the Junior Subordinated
         Debentures****
10.9     Registration Rights Agreement among USABancShares.com, USA Capital
         Trust I and Sandler O'Neill & Partners, L.P. as representative of the
         investors****
10.10    Agreement by and between Earthlink Network, Inc., Earthlink Operations,
         Inc. and USABancShares.com effective as of July 21, 1999+
10.11    Agreement by and between USABancShares.com and Systemax, Inc. dated
         August 18, 1999+
10.12    Asset Contribution Agreement among USABancShares.com, USACapital, Inc.,
         Bondsonline, Inc., David Landes and Bondsonline Group, Inc., dated as
         of May 25, 2000.++
11       Computation of Per Share Earnings (Included in Financial Statements on
         Page F-21)
21       Subsidiaries
23       Consent of Grant Thornton LLP

99.1     Order to Cease and Desist issued by the Federal Deposit Insurance
         Corporation on July 13, 2001.+++
99.2     Order to Cease and Desist issued by the Commonwealth of Pennsylvania
         Department of Banking on July 9, 2001.+++

99.3     Written Agreement by and between USABancShares.com, Inc. and Federal
         Reserve Bank of Philadelphia executed March 2, 2001.

---------------
*        Incorporated by reference from the Registration Statement on Form SB-2
         of USABancShares.com, as amended, Registration No. 33-92506.

**       Incorporated by reference from the Registration Statement on Form S-4
         of USABancShares.com filed on May 12, 1999.

***      Incorporated by reference from USABancShares.com's Annual Report on
         Form 10-KSB for the fiscal year ended December 31, 1998.

****     Incorporated by reference from the Registration Statement on Form S-4
         of USABancShares.com, Registration No. 333-78348.

*****    Incorporated by reference from the Registration Statement on Form S-8
         of USABancShares.com, Registration No. 333-841351.

+        Incorporated by reference from the Registration Statement on Form SB-2
         of USABancShares.com, Registration No. 333-83041.

++       Incorporated by reference from the Corporation's Current Report on Form
         8-K filed on July 7, 2000.

+++      Incorporated by reference from the Corporation's Current Report on Form
         8-K filed on July 11, 2001.



                                                                              49
<PAGE>

         (B) Reports on Form 8-K

         USABancShares.com, Inc.did not file any reports on Form 8-K during the
fourth quarter of 2000.












                                                                              50
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Second Amendment to Form 10KSB to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Philadelphia, Commonwealth of Pennsylvania on February 20, 2002.

                             USABANCSHARES.COM, INC.

                             By: /s/ Daniel J. Machon, Jr.
                                 -------------------------------------------
                                 Daniel J. Machon, Jr., Chief Financial Officer
                                 (Principal Accounting and Financial Officer)



         In accordance with the Securities Exchange Act of 1934, this Report has
been duly signed below by the following  persons on behalf of the Registrant in
the capacities and on the dates indicated.




February 20, 2002         /s/ George M. Laughlin
                             ---------------------------------------------------
                             George M. Laughlin
                             Chairman of the Board

February 20, 2002         /s/ Clarence L. Rader
                             ---------------------------------------------------
                             Clarence L. Rader
                             Director

February 20, 2002         /s/ Wayne O. Leevy
                             ---------------------------------------------------
                             Wayne O. Leevy
                             Director

February 20, 2002         /s/ George Beach
                             ---------------------------------------------------
                             George Beach
                             Director



                                                                              51
<PAGE>

                       FINANCIAL STATEMENTS AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

                           December 31, 2000 and 1999







                                       F-1


<PAGE>

                                C O N T E N T S

                                                                           Page
                                                                          ------


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ....................    F-3

FINANCIAL STATEMENTS


         CONSOLIDATED BALANCE SHEETS ...................................   F-4

         CONSOLIDATED STATEMENTS OF OPERATIONS .........................   F-5

         CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
         EQUITY AND COMPREHENSIVE LOSS .................................   F-6

         CONSOLIDATED STATEMENTS OF CASH FLOWS .........................   F-7

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ....................   F-8





















                                       F-2
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
USABancShares.com, Inc., and Subsidiaries

         We have audited the accompanying consolidated balance sheets of
USABancShares.com, Inc., and Subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of operations, changes in stockholders'
equity and comprehensive income (loss) and cash flows for each of the two years
in the period ended December 31, 2000. These financial statements are the
responsibility of USABancShares.com, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
USABancShares.com, Inc., and Subsidiaries as of December 31, 2000 and 1999, and
the consolidated results of their operations and their consolidated cash flows
for each of the two years in the period ended December 31, 2000, in conformity
with accounting Principles generally accepted in the United States of America.


/s/ Grant Thornton LLP

Philadelphia, Pennsylvania
March 31, 2001, except for Note T as to which the date is June 25, 2001









                                       F-3
<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (in Thousands)

<TABLE>
<CAPTION>

                                                                                     December 31,              December 31,
                                                                                         2000                      1999
                                                                                ----------------------   -----------------------
<S>                                                                              <C>                       <C>
ASSETS
Cash and due from banks                                                                     $   1,857                 $   3,813
Interest-bearing deposits with banks                                                           10,308                       821
Securities available-for-sale                                                                 121,638                    37,478
Securities held-to-maturity (fair value: 1999 - $55,595)                                            -                    60,337
Federal Home Loan Bank of Pittsburgh (FHLB) stock                                               4,011                     4,011
Loans receivable, net                                                                         179,165                   197,623
Premises and equipment, net                                                                     2,970                     2,851
Accrued interest receivable                                                                     3,427                     2,906
Real estate held for investment                                                                 2,174                        40
Other real estate owned                                                                            40                         -
Goodwill, net                                                                                      46                        70
Deferred income taxes                                                                           3,510                     1,475
Bank owned life insurance                                                                           -                     5,149
Other assets                                                                                    3,812                     6,801
                                                                                            ---------                 ---------

    Total assets                                                                            $ 332,958                 $ 323,335
                                                                                            =========                 =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
    Demand                                                                                  $   5,893                 $   5,168
    NOW                                                                                        39,202                     4,692
    Money Market                                                                                  360                       973
    Savings and Passbook                                                                       22,852                    19,271
    Time                                                                                      213,625                   224,934
                                                                                            ---------                 ---------
     Total deposits                                                                           281,932                   255,038
Borrowed funds:
    Short term borrowings                                                                       2,600                         -
    Long term borrowings                                                                       30,000                    35,000
    Guaranteed preferred beneficial interests in subordinated debt                             10,000                    10,000
Accrued interest payable                                                                        2,208                     4,132
Accrued expenses and other liabilities                                                          1,061                     1,237
                                                                                            ---------                 ---------

    Total liabilities                                                                         327,801                   305,407

STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 5,000,000 authorized shares;
     no shares issued and outstanding                                                               -                         -
Common stock, $1.00 par value; 25,000,000 authorized shares;
    5,507,974 shares issued and outstanding in 2000; 5,423,784 shares
    issued and outstanding in 1999; and 216,460 and 216,460 shares of converted
    and unissued Class B common stock in 2000 and 1999, respectively
    actual 5,724,434 shares issued and outstanding in 2000, as adjusted
    actual 5,640,244 shares issued and outstanding in 1999, as adjusted                         5,724                     5,640
Treasury stock, at cost, 334,514 shares                                                         (597)                        -
Additional paid-in capital                                                                     15,957                    15,368
Accumulated deficit                                                                           (11,043)                   (1,378)
Accumulated other comprehensive loss - unrealized
    depreciation on securities available-for-sale                                              (4,884)                   (1,702)
                                                                                            ---------                 ---------

    Total stockholders' equity                                                                  5,157                    17,928
                                                                                            ---------                 ---------

        Total liabilities and stockholders' equity                                          $ 332,958                 $ 323,335
                                                                                            =========                 =========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                   (Continued)

                                       F-4


<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                      (in Thousands, except per share data)
<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                            ------------------------------------
                                                                  2000               1999
                                                            -----------------  -----------------
<S>                                                           <C>               <C>
Interest income:
    Loans                                                           $ 19,488           $ 14,609
    Investment securities                                              9,501              6,934
    Interest-bearing deposits and other                                1,476                327
                                                                    --------           --------
        Total interest income                                         30,465             21,870

Interest expense:
    Deposits                                                          16,959             10,671
    Borrowed funds                                                     3,085              2,439
                                                                    --------           --------
        Total interest expense                                        20,044             13,110
                                                                    --------           --------
Net interest income                                                   10,421              8,760
Provision for loan losses                                                  -              1,175
                                                                    --------           --------
Net interest income after provision for loan losses                   10,421              7,585

Non-interest income:
    Service fee income                                                   951                183
    (Loss) gain on sales of investment securities                       (312)                31
    Gain on sales of loans receivable                                      -              1,402
    Gain on sale of other real estate                                      -                 64
    Brokerage operations loss                                           (380)              (257)
    Other                                                                411                344
                                                                    --------           --------
        Total non-interest income                                        670              1,767

Non-interest expense:
    Salaries and employee benefits                                     5,067              3,640
    Net occupancy expense                                              1,052                787
    Professional fees                                                  1,291                860
    Office expenses                                                      575                406
    Data processing fees                                               1,709                611
    Advertising expense                                                1,466              3,764
    Online partnerships                                                5,654                 68
    Insurance expense                                                    156                111
    Travel expense                                                       489                366
    Check printing expense                                               324                 31
    Loan servicing expense                                                65                114
    Internet content expense                                             420                237
    Other operating expenses                                           2,488              1,435
                                                                    --------           --------
        Total non-interest expense                                    20,756             12,430
                                                                    --------           --------

Loss before income tax expense (benefit)                              (9,665)            (3,078)
Income tax expense (benefit)                                               -               (588)
                                                                    --------           --------
Net loss                                                            $ (9,665)          $ (2,490)
                                                                    ========           ========

Loss per share - basic (1)                                          $  (1.70)          $  (0.54)
                                                                    ========           ========

Loss per share - diluted (1)                                        $  (1.70)          $  (0.54)
                                                                    ========           ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

(1)   All per share data has been adjusted to reflect all stock dividends and
      stock splits.

                                   (Continued)

                                       F-5

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES
            Consolidated Statement Of Changes In Stockholders' Equity
                             And Comprehensive Loss
                                 (in Thousands)

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                        Additional                           other         Total
                               Common     Treasury       paid-in        Accumulated      comprehensive stockholders'   Comprehensive
                               Stock      Stock          capital     earnings (deficit)  income (loss)     equity           loss
                               -------    --------      ----------   -----------------   ------------- -------------   -------------
<S>                           <C>         <C>           <C>               <C>                <C>         <C>            <C>
Balance, December 31, 1998     $2,116      $ -           $10,683         $  1,112             $(314)      $13,597

Net loss                            -        -                 -           (2,490)                -        (2,490)        $ (2,490)

Other comprehensive loss,
  net of reclassification
  adjustments and taxes             -        -                 -                -            (1,388)       (1,388)          (1,388)
                                                                                                                           -------

Total comprehensive
  loss                                                                                                                    $ (3,878)
                                                                                                                           =======

Secondary offering              1,400        -             6,675                -                 -         8,075

Warrants                            -        -               109                -                 -           109

Exercise of stock options           9        -                16                -                 -            25

100% stock dividend             2,115        -            (2,115)               -                 -             -
                               ------    -----           -------         --------           -------       -------

Balance, December 31, 1999     $5,640      $ -           $15,368         $ (1,378)          $(1,702)      $17,928

Net loss                            -        -                 -           (9,665)                -        (9,665)        $ (9,665)

Other comprehensive gain,
  net of reclassification
  adjustments and taxes             -        -                 -                -            (3,182)       (3,182)          (3,182)
                                                                                                                           -------

Total comprehensive
  loss                                                                                                                    $(12,847)
                                                                                                                           =======

Treasury stock                      -     (597)                -                -                 -          (597)

Warrants                            -        -               248                -                 -           248

Exercise of stock options          84        -               341                -                 -           425
                               ------    -----           -------         --------           -------       -------

Balance, December 31, 2000     $5,724    $(597)          $15,957         $(11,043)          $(4,884)      $ 5,157
                               ======    =====           =======         ========           =======       =======

</TABLE>



The accompanying notes are an integral part of these consolidated financial
statements.



                                   (Continued)


                                       F-6
<PAGE>

                  USABANCSHARES.COM, INC. AND SUBSIDIARIES
                 Consolidated Statements of Cash Flows
                             (in Thousands)
<TABLE>
<CAPTION>
                                                                                     Year ended December 31,
                                                                         -----------------------------------------------
                                                                                  2000                    1999
                                                                         -----------------------  ----------------------
<S>                                                                       <C>                         <C>
Cash flows from operating activities:
   Net loss                                                                            $ (9,665)               $ (2,490)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
   Provision for possible loan losses                                                         -                   1,175
   Depreciation and amortization                                                            564                     418
   Decrease (increase) of goodwill                                                           24                      (1)
   Net accretion of discounts on purchased loan portfolios                               (1,636)                   (952)
   Net accretion/amortization of securities discount/premiums                              (551)                   (155)
   Net amortization of warrants                                                             248                       -
   Net losses (gains) on sale of securities                                                 312                     (31)
   Net gains on sale of loan assets                                                           -                  (1,402)
   Net gains on sale of real estate owned                                                     -                     (64)
   Net (increase) decrease in deferred fees                                                 (27)                    266
   Increase in accrued interest receivable                                                 (521)                 (1,273)
   Decrease (increase) in deferred income taxes                                             200                    (902)
   Decrease (increase) in bank owned life insurance                                           -                    (149)
   Increase  in other assets                                                              3,000                  (4,905)
   (Decrease) increase in accrued interest payable                                       (1,924)                  3,733
   Increase in accrued expenses and other liabilities                                      (176)                    (31)
                                                                                       --------                 -------
     Net cash used in operating activities                                              (10,152)                 (6,763)
                                                                                       --------                 -------
Cash flows from investing activities:
   Investment securities available-for-sale:
        Purchases                                                                       (24,333)                (47,484)
        Sales                                                                            14,418                   2,688
        Maturities and principal repayments                                               1,939                   2,307
   Investment securities held-to-maturity:
        Purchases                                                                       (76,021)                (23,262)
        Sales                                                                             1,000                   1,200
        Maturities and principal repayments                                              53,960                  10,880
   Purchases of FHLB Stock                                                                   -                    (488)
   Sale (purchase) of bank owned life insurance                                           5,149                 (5,000)
   (Increase) decrease in interest bearing deposits with banks                           (9,487)                  6,885
   Principal payments on loans                                                           37,305                  63,424
   Originations of loans                                                                (27,591)               (164,291)
   Sale/participation of loans                                                           10,432                   5,382
   Increases in real estate held for investment                                          (2,174)                     -
   (Increase) decrease in other real estate owned                                           (40)                     66
   Purchases of premises and equipment                                                     (683)                 (1,512)
                                                                                       --------                 -------
     Net cash used in investing activities                                              (16,126)               (149,205)
                                                                                       --------                 -------
Cash flows from financing activities:
   Net increase in deposits                                                              26,894                 140,651
   Increase (decrease) in short-term borrowings                                           2,600                    (305)
   Common equity offering proceeds, net                                                       -                   8,075
   Decrease in long-term borrowings                                                      (5,000)                      -
   Exercise of stock options                                                                425                      25
   Increase in treasury stock                                                              (597)                      -
   Proceeds from issuance of trust preferred securities                                       -                  10,000
                                                                                       --------                 -------
     Net cash provided by financing activities                                           24,322                 158,446
                                                                                       --------                 -------
   Net increase in cash and cash equivalents                                             (1,956)                  2,478

   Cash and cash equivalents, beginning of period                                         3,813                   1,335
                                                                                       --------                 -------
   Cash and cash equivalents, end of period                                            $  1,857                 $ 3,813
                                                                                       ========                 =======
   Supplemental disclosure of cash flow information
   Cash paid during the year for
     Interest                                                                          $ 21,968                 $ 9,377
                                                                                       ========                 =======
     Income taxes                                                                      $      -                 $   444
                                                                                       ========                 =======

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                   (Continued)

                                       F-7

<PAGE>
                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

NOTE A - Significant Fourth Quarter Adjustments

    Throughout the year 2000, vBank, a Savings Bank (the "Bank"), a wholly-owned
    subsidiary of USABancShares.com, Inc., (the "Corporation" (or
    "USABancshares.com")) entered into various contracts with a number of
    strategic partners to provide on-line related services. In light of the
    market climate, the Bank began to renegotiate these on-line partnership
    contracts during the year. Due to the renegotiations of these contracts, the
    Bank took a $2.5 million charge to earnings in the fourth quarter 2000.

    As discussed herein, the Corporation and the Bank have determined to
    de-emphasize the Internet initiative and have renegotiated, terminated or
    allowed to expire such strategic relationships. Managements' plan to
    de-emphasize its Internet initiative is centered on a reduction of expenses,
    including capital expenditures, personnel reductions, advertising, and
    strategic contracts that caused payments to be made to the third party
    companies. Beginning in the fourth quarter of 2000, the Corporation expensed
    contracts with strategic partners that were viewed to have no long-term
    value since the programs had been eliminated. The nature of the contracts
    renegotiated related to increasing Internet deposit accounts with incentive
    fees paid to the partners. Partners would promote the Corporation's website
    on computer hardware, communication devices, or their own websites. The
    amount written off represented the remaining un-amortized balance of the
    contracts outstanding at year-end. Future benefits will be the monthly
    reduction in amortization relating to the contracts, which was $141,000.
    Future cash requirements will not be significant since no new contracts have
    been signed or are being considered. The Corporation is not exiting the
    business of generating Internet deposits, but rather simply no longer
    actively promoting or paying for ways to attain such deposits. The
    Corporation's Internet de-emphasis will not effect ongoing Internet
    operations except for the reduction of new deposit accounts opened through
    the Internet.

    During 2000, the Corporation recorded a tax benefit of $558,000 based on
    expected future taxable income in 2001 and future years from an anticipated
    $10,000,000 capital raise and the taxable gain of approximately $2,000,000
    on the sale of a branch. The capital raise was to be used by the Corporation
    to pay off certain debts, with the remaining funds to be invested in various
    interest-earning assets. The Corporation de-emphasized the Internet
    activities during the fourth quarter and reported a segment loss of
    $8,303,000. The Corporation was unable to successfully complete the sale of
    the branch. As a result of these events, the Corporation was unable to raise
    the $10,000,000 of capital. The tax benefit of $558,000 was reversed in the
    fourth quarter of 2000 since it was more likely than not that the tax
    benefit would be realized.

NOTE B - ORGANIZATION

    The Corporation is a registered bank holding company and is subject to
    regulation and supervision by the Board of Governors of the Federal Reserve
    System and the Pennsylvania Department of Banking. USABancShares.com through
    its subsidiaries, vBank, USACredit, Inc. ("USACredit") USARealEstate, Inc.,
    and USA Capital Trust I (the "Trust") provides a full range of banking and
    non-depository services through the Internet on a national basis, as well as
    through retail channels in the Philadelphia market area.

    USABancShares.com was organized in November 1995 to facilitate the
    acquisition of People's Thrift Savings Bank, which changed its name to
    vBank in July 1999.

    vBank is a Pennsylvania chartered stock savings institution which acquires
    deposits and provides loans primarily to commercial businesses or for
    commercial properties. vBank competes with other financial service
    providers, commercial banks, brokerage firms, insurance companies,
    savings banks, and credit unions for such products and services.

    vBank is subject to regulations of certain state and federal agencies and,
    accordingly, is periodically examined by those regulatory authorities. As a
    consequence of the extensive regulation of commercial banking activities,
    vBank's business is particularly susceptible to being affected by state and
    federal legislation and regulations.

    USACredit is a Pennsylvania corporation which owns a minority (20%)
    interest in a Delaware limited liability company in the business of
    purchasing judgements, deficiencies, and charge-offs, and pursuing
    collections on such claims. USACredit also provides on-line leasing
    arrangements for telecommunication, equipment and office products.

                                      F-8

<PAGE>

    USARealEstate, Inc. is a Pennsylvania corporation that acquires and
    manages foreclosed real estate property from vBank for the purpose of
    eventual liquidation of the property.

    The Trust is a Delaware statutory business trust with the exclusive purpose
    of issuing and selling trust securities and using the proceeds from the sale
    of the Trust securities to acquire the Junior Subordinated Debenture's
    issued by the Corporation. The sole asset of the Trust will be the Junior
    Subordinated Debentures.

    In May 2000, in order to dispose of its direct interest in USACapital, Inc.,
    a registered broker-dealer, the Corporation entered into an Asset
    Contribution Agreement with Bondsonline, Inc. resulting in the creation of a
    new entity known as Bondsonline Group, Inc. The Corporation contributed
    $357,974 (which comprised all of the issued and outstanding capital stock of
    USACapital, Inc.) in exchange for 5,472,867 shares, or 49%, of Bondsonline
    Group, Inc.'s common shares outstanding valued at $357,974. The Corporation
    accounted for this investment under the equity method; accordingly, gains or
    losses were recorded as other operating income (expenses). In January 2001,
    Bondsonline Group, Inc. ceased doing business, at which time the Corporation
    wrote down its investment in Bondsonline Group, Inc. to zero. The write-down
    resulted in a loss of $18,000 in 2001. In April 2001, in accordance with
    requirements imposed by the Federal Reserve Bank of Philadelphia, the
    Corporation sold all shares of Bondsonline Group, Inc. for $1,000, which was
    recorded as a gain.

                                   (Continued)

                                       F-9
<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    1. Basis of Financial Statement Presentation

    The accounting and reporting policies of USABancShares.com and its
    subsidiaries conform with generally accepted accounting principles and
    predominant practices within the banking industry. All significant
    inter-company balances and transactions have been eliminated.

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements. These estimates and assumptions also affect reported amounts of
    revenues and expenses during the reporting periods. Actual results could
    differ from those estimates.

    The principal estimate particularly susceptible to significant change in
    the near term relates to the allowance for loan losses. The evaluation of
    the adequacy of the allowance for loan losses includes an analysis of the
    individual loans and overall risk characteristics and size of the different
    loan portfolios, and takes into consideration current economic and market
    conditions, the capability of specific borrowers to pay specific loan
    obligations, and current loan collateral values. However, actual losses on
    specific loans, which also are encompassed in the analysis, may vary from
    estimated losses.

    Statement of Financial Accounting Standards ("SFAS") No. 131 establishes
    standards for the way public business enterprises report information about
    operating segments in annual financial statements and requires that those
    enterprises report selected information about operating segments in
    subsequent interim financial reports issued to shareholders. It also
    establishes standards for related disclosure about products and services,
    geographic areas, and major customers. The statement requires that a public
    business enterprise report financial and descriptive information about its
    reportable operating segments. Operating segments are components of an
    enterprise about which separate financial information is available that is
    evaluated regularly by the chief operating decision-maker in deciding how to
    allocate resources and assess performance. The statement also requires that
    public enterprises report a measure of a segment profit or loss, certain
    specific revenue and expense items and segment assets. It also requires that
    information be reported about revenues derived from the enterprises'
    products or services, or about the countries in which the enterprises earn
    revenues and hold assets, and about major customers, regardless of whether
    that information is used in making operating decisions.

    The Corporation has adopted Statement of SFAS No. 131, Disclosures about
    Segments of an Enterprise and Related Information, which redefines how
    operating segments are determined and requires disclosures of certain
    financial and descriptive information about the Corporation and its
    subsidiaries' operating segments. Management has determined the Corporation
    operates in two business segments, namely, Internet banking and community
    banking.

    2. Investment Securities

    USABancShares.com accounts for its investment securities in accordance with
    SFAS No. 115, Accounting for Certain Investments in Debt and Equity
    Securities. USABancShares.com classifies its securities as available for
    sale.

    Investment securities which are held for indefinite periods of time, which
    management intends to use as part of its asset/liability strategy, or which
    may be sold in response to changes in interest rates, changes in prepayment
    risk, increases in capital requirements or other similar factors, are
    classified as available for sale and are carried at fair value. Differences
    between a security's amortized cost and fair value is charged/credited
    directly to shareholders' equity, net of income taxes. The cost of
    securities sold is determined on a specific identification basis. Gains and
    losses on sales of securities are recognized in the consolidated statements
    of operations upon sale. USABancShares.com had no securities held for
    trading purposes at December 31, 2000 and 1999.

    On December 31, 2000, the Corporation reclassified its entire
    held-to-maturity portfolio to available-for-sale. The reclassification was a
    result of the Corporation's consideration of recent regulatory agreements
    and their impact on the Corporation's ability to hold its held-to-maturity
    portfolio to maturity.

                                   (Continued)

                                      F-10

<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
    Instruments and Hedging Activity" as amended in June, 1999 by SFAS No. 137,
    "Accounting for Derivative Instruments and Hedging Activities - Deferral of
    the Effective Date of FASB Statement No, 133," and in June 2000, by SFAS
    138, "Accounting for Certain Derivative Instruments and Certain Hedging
    Activities," (collectively SFAS 133). SFAS No. 133 establishes accounting
    and reporting standards for derivative instruments, including certain
    derivative instruments imbedded in other contracts, and for hedging
    activities. It requires that an entity recognize all derivatives as either
    assets or liabilities in the statement of financial position and measure
    those instruments at fair value. If certain conditions are met, a derivative
    may be specifically designated as a hedge. The accounting for changes in the
    fair value of derivative (gains and losses) depends on the intended use of
    the derivative and resulting designation.

    On April 1, 1999, USABancShares.com adopted SFAS No. 133, "Accounting for
    Derivative Instruments and Hedging Activities", as amended by SFAS No. 137,
    Based on USABancShares.com's minimal use of derivatives at the current time,
    the adoption of SFAS No. 133, as amended by SFAS No. 137, and SFAS No. 138,
    had no impact on the financial position or results of operations of
    USABancShares.com. Coinciding with the adoption of this standard,
    USABancShares.com transferred $33,400,000 of investment securities from
    available for sale to held to maturity. An unrealized loss of $817,000
    associated with the transferred securities is being accreted back into the
    carrying value of the securities over the estimated remaining life of the
    securities. $26,000 was accreted during 1999. The remaining balance of
    $791,000 was reclassed to available-for-sale on December 31, 2000 in
    connection with the reclass of the entire portfolio held-to-maturity.

    Statements of Financial Accounting Standards No. 119 "Disclosure About
    Derivative Financial Instruments and Fair Value of Financial Instruments"
    ("FAS 119") requires disclosures about financial instruments, which are
    defined as futures, forwards, swap and opinion contracts and other financial
    instruments with similar characteristics. On balance sheet receivables and
    payables are excluded from this definition. The Corporation did not hold any
    derivative financial instruments as defined by SFAS 119 at December 31, 2000
    or 1999.

    3. Loans and Allowance for Possible Loan Losses

    Loans receivable, which management has the intent and ability to hold for
    the foreseeable future or until maturity or payoff, are reported at their
    outstanding principal, adjusted for any charge-offs, the allowance for loan
    losses, and any deferred fees or costs on originated loans. The Bank's
    management maintains the allowance for possible loan losses at a level
    considered adequate to provide for potential loan losses. The allowance is
    increased by provisions charged to expense and reduced by net charge-offs.
    Loans are charged against the allowance for possible loan losses when
    management believes that the collectability of the principal is unlikely.
    The level of the allowance is based on management's evaluation of potential
    losses in the loan portfolio after consideration of appraised collateral
    values, financial condition of the borrowers, and prevailing economic
    conditions. Credit reviews of the loan portfolio, designed to identify
    potential charges to the allowance, are made on a periodic basis during the
    year by senior management.

    Interest on loans is credited to operations primarily based upon the
    principal amount outstanding. When management believes there is sufficient
    doubt as to the ultimate collectability of interest on any loan, the accrual
    of applicable interest is discontinued. Interest income is subsequently
    recognized only to the extent cash payments are received. Net loan
    origination fees and loan discounts on purchased loan pools are deferred and
    amortized over the life of the related loan using the level yield method.
    The net loan origination fees recognized as yield adjustments are reflected
    in total interest income in the consolidated statement of operations. The
    unamortized balance of loan origination net fees is reported in the
    consolidated balance sheet as part of unearned income; the unamortized
    portion of discounts on purchased loans reduces the carrying value of loans
    receivable on the consolidated balance sheet.


                                   (Continued)

                                      F-11

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    USABancShares.com accounts for its impaired loans in accordance with SFAS
    No. 114, Accounting by Creditors for Impairment of a Loan, as amended by
    SFAS No. 118, Accounting by Creditors for Impairment of a Loan - Income
    Recognition and Disclosures. This standard requires that a creditor measure
    impairment based on the present value of expected future cash flows
    discounted at the loan's effective interest rate, except that as a practical
    expedient, a creditor may measure impairment based on a loan's observable
    market price, or the fair value of the collateral if the loan is collateral
    dependent. Regardless of the measurement method, a creditor must measure
    impairment based on the fair value of the collateral when the creditor
    determines that foreclosure is probable.

    4. Accounting for Transfers and Servicing of Financial Assets and
       Extinguishments of Liabilities

    In September 2000, the Corporation adopted SFAS No. 140, "Accounting for
    Transfers and Servicing of Financial Assets and Extinguishments of
    Liabilities," which replaces SFAS No. 125, "Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 140
    revises the standards for accounting for the securitizations and other
    transfers of financial assets and collateral. This new standard also
    requires certain disclosures, but carries over most of the provisions of
    SFAS 125. SFAS 140 is effective for transfers and servicing of financial
    assets and extinguishments of liabilities occurring after March 31, 2001.
    However, for recognition and reclassification of collateral and for
    disclosures relating to securitization transactions and collateral, this
    statement is effective for fiscal years ending after December 15, 2000 with
    earlier application not allowed and is to be applied prospectively. The
    adoption of this statement had no impact on the Corporation's consolidated
    financial statements.


                                      F-12

<PAGE>

    5. Premises and Equipment

    Premises and equipment are stated at cost less accumulated depreciation and
    amortization. Building and leasehold improvements are amortized over the
    term of the leases or estimated useful lives, whichever is shorter.
    Depreciation and amortization are computed on the straight-line method over
    the estimated useful lives of the assets.

    6. Computer Software

    Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
    Software Developed or Obtained for Internal Use", requires the
    capitalization of certain costs incurred in connection with developing or
    obtaining internal use software. In 2000, the Corporation capitalized
    approximately $1.0 million of salary and external specialists costs related
    to developing and writing the code, during the application development
    stage, to launch the interactive internet site. The Internet site is used in
    the to provide banking customers access to all products offered by the
    Corporation. All capitalized amounts were being amortized over 3 years.
    Amortization expense for the year ended December 31, 2000 was $207,000. In
    the fourth quarter of 2000, based upon the results of an examination, the
    Corporation determined that accounting records were insufficient to support
    capitalization under SOP 98-1 and accordingly wrote-off the remaining
    $793,000. The $793,000 was charged to salary and professional fees. The
    entire $793,000 was capitalized during the quarter ended September 30, 2000.
    Had these costs been charged to salary and professional expense, the net
    loss for the three-month and nine-month periods ended September 30, 2000
    would have been $(1,001), and $(4,864), respectively. Basic and diluted
    earnings per share for the three-month and nine-month periods ended
    September 30, 2000 would have been $(0.18) and $(0.85), respectively.


    7. Goodwill

    Goodwill is stated at cost less accumulated amortization, and is being
    amortized on the straight-line method over 15 years. On an ongoing basis,
    management reviews the valuation and amortization of goodwill. As part of
    this review, USABancShares.com estimates the value of and the estimated
    undiscounted future net income expected to be generated by the related
    subsidiaries to determine that no impairment has occurred.

    USABancShares.com accounts for impairment under SFAS No. 121, Accounting for
    the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of.
    This standard provides accounting guidance on when to recognize and how to
    measure impairment losses of long-lived assets and certain identifiable
    intangibles and how to value long-lived assets to be disposed.

    8. Other Real Estate

    Properties acquired by foreclosure are other real estate ("ORE") and are
    recorded at the lower of recorded investment in the related loan or fair
    value based on appraised value at the date actually or constructively
    received less estimated cost to sell. Loan losses arising from the
    acquisition of such properties are charged against the allowance for
    possible loan losses. Subsequent adjustments to the carrying values of ORE
    properties are charged to operating expense.

                                   (Continued)

                                      F-13
<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    9. Income Taxes

         USABancShares.com recognizes deferred tax assets and liabilities for
         the expected future tax consequences of events that have been
         recognized in the financial statements or tax returns. Under this
         method, deferred tax assets and liabilities are determined based on
         their difference between the financial statement carrying amounts and
         the tax basis of assets and liabilities. USABancShares.com files a
         consolidated federal income tax return as the Parent. Federal income
         taxes are calculated as if the subsidiaries filed on a separate return
         basis, and the amount of the current tax calculated is remitted to
         USABancShares.com. If losses are generated on a consolidated basis, any
         benefit associated with the loss is first applied to vBank. The amount
         of the current and deferred taxes payable or refundable is recognized
         as of the date of the financial statements for the changes in deferred
         tax liabilities or assets between years.

   10. Per Share Amounts

         USABancShares.com follows the provisions of SFAS No. 128, Earnings Per
         Share. SFAS No. 128 eliminated primary and fully diluted earnings per
         share and requires presentation of basic and diluted earnings per
         share ("diluted EPS") in conjunction with the disclosure of the
         methodology used in computing such earnings per share. Basic earnings
         per share ("basic EPS") excludes dilution and is computed by dividing
         income available to common shareholders by the weighted average common
         shares outstanding during the period. Diluted earnings per share takes
         into account the potential dilution that could occur if securities or
         other contracts to issue common stock were exercised and converted
         into common stock. All weighted average actual shares or per share
         information in the financial statements have been adjusted
         retroactively for the effect of a stock dividend.

   11.   Stock Repurchase

         During the year 2000, the Bank began to purchase shares of the
         Corporation's common stock for the benefit of some of the Corporation's
         employee benefit plans. As of March 30, 2001, the Bank had purchased an
         aggregate of approximately 670,000 shares of the Corporation's common
         stock. The Bank has recorded the stock as an asset. The stock is
         accounted for as treasury stock by the Corporation, and is reclassified
         in the consolidated financial statements.

   12. Comprehensive Income

         USABancShares.com follows the provisions of SFAS No. 130, Reporting
         Comprehensive Income. This standard establishes new standards for
         reporting comprehensive income which includes net income as well as
         certain other items which result in a change to equity during the
         period.


                                   (Continued)

                                      F-14

<PAGE>



                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    The income tax effects allocated to comprehensive income (loss) is as
    follows, for the year indicated:

(in Thousands)

<TABLE>
<CAPTION>


                                                               December 31, 2000                         December 31, 1999
                                                  ----------------------------------------     -------------------------------------

                                                     Before tax       Tax         Net of       Before tax       Tax         Net of
                                                       amount       benefit     tax amount       amount       benefit     tax amount
                                                  -------------- ------------- ------------    -----------  -----------   ----------
<S>                                                <C>            <C>            <C>           <C>            <C>           <C>
Unrealized holding gains (losses)
     arising during period                             $(5,508)      $2,135      $(3,373)       $(2,244)       $875        $(1,369)
Less reclassification adjustment for (losses)
     gains realized in net income                          312         (121)         191             31         (12)            19
                                                       -------       ------       ------        -------        ----        -------
Other comprehensive income (loss), net                 $(5,196)      $2,014      $(3,182)       $(2,275)       $887        $(1,388)
                                                       =======       ======       ======        =======        ====        =======

</TABLE>


    13.  Cash and Cash Equivalents

         Cash and cash equivalents include cash on hand and amounts due from
         banks.

    14.  Advertising Costs

         USABancShares.com expenses advertising costs as incurred.

    15.  Restrictions on Cash and Due from Banks

         As of December 31, 2000, USABancShares.com did not maintain reserves
         (in the form of deposits with the Federal Home Loan Bank ("FHLB")).

    16.  Bank Owned Life Insurance

         During 1999, the Corporation entered into an investment of bank owned
         life insurance ("BOLI"). BOLI involves the purchasing of life insurance
         by the Corporation on a chosen group of employees. The Corporation is
         the owner and beneficiary of the policies. This pool of insurance, due
         to tax advantages to the Bank, was profitable to the Corporation. This
         profitability is used to offset a portion of future benefit cost
         increases. Bank deposits fund BOLI and the earnings from BOLI are
         recognized as other income. In 2000, the Corporation surrendered its
         BOLI and the Corporation incurred no surrender fees or any other
         charges on this transaction.

    17. Contingencies

         In October 1999, a former employee of the Corporation filed a claim for
         certain commissions under an employment agreement with the Corporation.
         In 2000, the Corporation recorded $648,000 of compensation expense
         related to these commissions based upon a March 29, 2001 arbitration
         agreement.

         In December 2000, a company (plaintiff) with which the Corporation has
         entered into an online partnership filed a complaint for breach of
         contract against the Company with the American Arbitration Association.
         In January 2001, the Corporation filed a counterclaim denying that
         plaintiff is entitled to relief. The Corporation believes that it has
         valid defenses and counterclaims against the plaintiff.

         The Corporation is subject to various legal proceedings and claims that
         arise in the ordinary course of business. In the opinion of
         management, the amount of any ultimate liability with respect to those
         actions will not materially affect the Corporation's consolidated
         financial position or results of operations.

    18.  Certain reclassifications have been made to the 1999 financial
         statements to conform with the 2000 presentation.





                                   (Continued)

                                      F-15

<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE D - PRIVATE PLACEMENT

         On February 18, 1998, USABancShares.com issued 769,231 shares of its
         common shares in conjunction with a private placement offering (the
         "offering"). Total cash received was $7.1 million, net of offering
         costs of $390,000.

         In connection with the offering, the Corporation granted warrants
         convertible for a period of five years into 3.25% of the Corporation's
         common stock on the date of conversion. The number of warrants issued
         are adjusted for stock splits, stock dividends and the issuance of
         additional shares so as to maintain the holders' ownership of the fully
         diluted common stock at 3.25% for a period of three years from the
         closing date, February 18, 1998. Subsequent to the offering, an
         additional 133,456 warrants were issued to maintain the holders' 3.25%
         ownership. The exercise price for all warrants was $2.89, 105% of the
         price per share paid in the offering after giving effect for all stock
         dividends and stock splits. At December 31, 2000 and 1999, 186,044
         warrants were outstanding. The Corporation accounts for the warrants in
         accordance with SFAS No. 123.


NOTE E - TRUST PREFERRED

         On March 9, 1999, USABancShares.com issued $10,000,000 principal amount
         of 9.50% junior subordinated deferrable interest debentures due March
         5, 2029 (the "debentures") to the Trust in which USABancShares.com
         owns all the common equity. The debentures are the sole asset of the
         Trust. The Trust issued $10,000,000 of Trust preferred securities to
         investors. USABancShares.com's obligations under the debentures and
         related documents, taken together, constitute a full and unconditional
         guarantee by USABancShares.com of the Trust's obligations under the
         Trust preferred securities. The Trust preferred securities are callable
         by USABancShares.com on or after March 15, 2009, or earlier under
         certain circumstances. The Trust preferred securities must be redeemed
         upon maturity of the debentures in 2029.

NOTE F - SECONDARY OFFERING

         On September 30, 1999, USABancShares.com issued 1,400,000 common
         shares in a secondary public offering. USABancShares.com issued these
         share at $6.75, with net proceeds of $8.1 million, subsequent to
         offering costs of $1.4 million.











                                   (Continued)

                                      F-16

<PAGE>



                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE G - INVESTMENT SECURITIES

    The amortized cost, gross unrealized gains and losses and fair market value
    of USABancShares.com's investment securities available-for-sale and held-to-
    maturity are as follows:


<TABLE>
<CAPTION>
  (in Thousands)

                                                            December 31, 2000
                                     ------------------------------------------------------------------
                                                           Gross           Gross
                                       Amortized        Unrealized      Unrealized           Fair
                                          Cost             Gains          Losses            Value
                                     ---------------   --------------  --------------   ---------------
<S>                                   <C>                <C>              <C>             <C>
Available-for-Sale
U.S. Government and agency
         securities                        $ 37,956            $  70         $  (113)         $ 37,913
Mortgage-backed securities                   22,056              164            (283)           21,937
Corporate securities                         27,576               79          (3,015)           24,640
Trust preferred securities                   38,064               25          (4,951)           33,138
Municipal securities                          3,175               20              (3)            3,192
Other securities                                815                3               -               818
                                           --------            -----         -------          --------

Total Available-for-Sale                   $129,642            $ 361         $(8,365)         $121,638
                                           ========            =====         =======          ========

</TABLE>

(in Thousands)
<TABLE>
<CAPTION>

                                                              December 31, 1999
                                     ------------------------------------------------------------------
                                                           Gross           Gross
                                       Amortized        Unrealized      Unrealized           Fair
                                          Cost             Gains          Losses            Value
                                     ---------------   --------------  --------------   ---------------
<S>                                    <C>               <C>              <C>           <C>
Available-for-Sale
U.S. Government and agency
         securities                         $ 1,399            $   -         $   (51)         $  1,348
Mortgage-backed securities                    9,101                -            (457)            8,644
Corporate securities                         19,326                6            (311)           19,021
Trust preferred securities                    7,588                -            (608)            6,980
Other securities                              2,058                2            (575)            1,485
                                           --------            -----         -------          --------

Total Available-for-Sale                   $ 39,472            $   8         $(2,002)         $ 37,478
                                          =========            =====         =======          ========

Held-to-Maturity
U.S. Government and agency
         securities                        $  5,694            $   -         $  (262)          $ 5,432
Mortgage-backed securities                    6,514                8            (152)            6,370
Municipal securities                         16,079                -          (1,355)           14,724
Trust preferred securities                   29,676              139          (3,595)           26,220
Other securities                              3,170                -            (321)            2,849
                                           --------            -----         -------          --------

Total Held-to-Maturity                     $ 61,133            $ 147         $(5,685)         $ 55,595
                                          =========            =====         =======          ========
</TABLE>

    In April 1999 in conjunction with the adoption of SFAS No. 133, the Bank
    reclassified $33.4 million of securities from available-for-sale to
    held-to-maturity. Due to the reclassification, the Bank recorded $817,000 as
    an unrealized loss. This loss was being accreted back over the remaining
    maturities of the securities transferred. At December 31, 2000, the
    remaining unrealized loss was zero, due to our reclassifying our entire
    held-to-maturity portfolio to available-for-sale. At December 31, 1999 the
    remaining unrealized loss was $796,000.

    The Federal Home Loan Bank ("FHLB") stock has an amortized cost of $4.0
    million at December 31, 2000 and December 31, 1999. The fair value of the
    FHLB stock is $4.0 million at December 31, 2000 and December 31, 1999.


                                   (Continued)

                                      F-17

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE G - INVESTMENT SECURITIES - Continued

    The amortized cost and fair market value of investment securities, by
    contractual maturity, as of December 31, 2000, are shown below.

<TABLE>
<CAPTION>
(in Thousands)                                         Available-for-Sale
                                          --------------------------------------------
                                                                           Weighted
                                          Amortized      Approximate       Average
                                             Cost         Fair Value        Yield
                                          ---------      -----------       ---------
<S>                                          <C>              <C>               <C>
Due within one year                        $ 23,791        $ 23,652           5.71%
Due after one year through five years        12,798          11,514           9.73
Due after five years through ten years       14,076          12,652           8.45
Due after ten years                          56,106          51,065           8.64
Mortgage-backed securities                   22,056          21,937           7.19
Equity Securities                               815             818              -
                                           --------        --------
                                           $129,642        $121,638
                                           ========        ========
</TABLE>


    Expected maturities will differ from contractual maturities because
    borrowers have the right to call or prepay obligations with or without call
    or prepayment penalties. In 2000 and 1999, USABancShares.com sold securities
    which were classified as held-to-maturity due to unforeseen circumstances
    that could not have been anticipated.

    Proceeds on the sale of investment securities classified as held-to-maturity
    were $1.0 million in 2000 and $1.2 million in 1999. Proceeds on the sale of
    investment securities classified as available-for-sale were $14.4 million in
    2000 and $2.7 million in 1999. Gross gains of $99,000 and gross losses of
    $411,000 were realized on 2000 sales. Gross gains of $76,000 and gross
    losses of $45,000 were realized on 1999 sales.

    At December 31, 2000 and 1999 none of our securities were pledged to secure
    public funds or for any other purposes as required by applicable laws and
    regulations. Securities with a carrying value of $52.1 million and $7.0
    million at December 31, 2000 and 1999, respectively, were pledged to the
    Federal Home Loan Bank of Pittsburgh as collateral for the Bank's
    borrowings.

    On December 31, 2000, the Corporation reclassified $81,447,000 of
    held-to-maturity investment securities to available-for-sale. The
    reclassification resulted in a decrease in the carrying value of the
    securities of approximately $6,500,000. The reclassification also resulted
    in an increase in the accumulated other comprehensive loss of approximately
    $3,965,000, and an increase in deferred income taxes of approximately
    $2,535,000.

NOTE H - LOANS RECEIVABLE

    Loans outstanding by classification are as follows:
<TABLE>
<CAPTION>
                                                              December 31,                     December 31,
                                                    -------------------------------   -------------------------------
(in Thousands)                                           2000                 %            1999                %
                                                    -------------------------------   -------------------------------

<S>                                                     <C>               <C>             <C>              <C>
Real Estate
  1 - 4 family residential properties                    $  12,900             7.1%       $  31,729             15.9%
  Commercial real estate                                   135,152            74.4          143,428             71.7
  Multifamily residential properties                         9,952             5.5            7,726              3.9
Construction                                                 8,821             4.9            9,467              4.7
Commercial and industrial                                   12,645             7.0            4,688              2.3
Consumer                                                     2,025             1.1            2,967              1.5
                                                         ---------           -----        ---------            -----

    Total loans, net of discount                         $ 181,495           100.0%       $ 200,005            100.0%
                                                         =========          ======        =========            =====

    Deferred loan fees                                        (240)                            (267)
    Allowance for loan losses                               (2,090)                          (2,115)
                                                         ---------                        ---------

    Net loans                                            $ 179,165                        $ 197,623
                                                        ==========                        =========

</TABLE>

                                   (Continued)

                                      F-18

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE H - LOANS RECEIVABLE - Continued

    At December 31, 2000 and 1999, loans outstanding to certain officers and
    directors of vBank and their affiliated interests amounted to $2.0 million
    and $4.9 million, respectively. An analysis of activity in loans to related
    parties at December 31, 2000 and 1999, resulted in new loans of $1.7 million
    and $2.8 million respectively, and reductions of $4.6 million and $400,000
    respectively, representing payments.

    An analysis of the allowance for possible loan losses is as follows:



(in Thousands)
                                         Twelve months          Twelve months
                                      ended December 31,      ended December 31,
                                             2000                    1999
                                      ------------------     -------------------
Balance at beginning of period                $ 2,115                $ 1,051
   Provision for loan losses                        -                  1,175
   Charge-offs                                    (26)                  (141)
   Recoveries                                       1                     30
                                              -------                -------
Balance at end of period                      $ 2,090                $ 2,115
                                              =======                =======


    Included in loans receivable are non-accrual loans of $260,000 and $1.3
    million at December 31, 2000 and 1999, respectively. Interest income that
    would have been recorded in the financial statements had the non-accrual
    loans been performing in accordance with their terms would have been $9,000
    and $91,000 in 2000 and 1999, respectively.

NOTE I - PREMISES AND EQUIPMENT

    Premises and equipment consist of the following:

<TABLE>
<CAPTION>

                                                                                              At December 31,
                                                                                         -------------------------
(in Thousands)                                                   useful lives                2000           1999
                                                               -----------------         ----------      ---------
<S>                                                                  <C>                   <C>              <C>
Building                                                             31.5 years            $  754           $  754
Premises and improvements                                         5 to 20 years             1,262            1,246
Furniture and equipment                                            5 to 7 years             2,052            1,504
                                                                                           ------           ------
                                                                                            4,068            3,504

   Less accumulated depreciation and amortization                                          (1,098)            (653)
                                                                                           ------           ------

                                                                                          $ 2,970          $ 2,851
                                                                                          =======          =======

</TABLE>


     Depreciation and amortization charged to operations was $564,000 and
     $418,000 for the years ended December 31, 2000 and 1999, respectively. In
     February 2000 the Bank purchased a building for $1.6 million to be used as
     an administrative/servicing facility. Due to our focus shifting to
     community banking the Bank has decided to place this building as real
     estate held for investment.


                                   (Continued)

                                      F-19



<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE J - DEPOSITS

    The aggregate amount of jumbo certificates of deposit, each with a minimum
    denomination of $100,000, was approximately $101.5 million and $149.4
    million at December 31, 2000 and 1999, respectively.

    At December 31, 2000, the schedule of maturities of certificates of deposit
    is as follows:

                                   (in thousands)
                               2001    $ 94,201
                               2002      39,135
                               2003      34,966
                               2004      11,853
                               2005      32,970
                         Thereafter         500
                                      ---------
                                      $ 213,625
                                      =========

NOTE K - BORROWINGS

    At December 31, 2000, vBank had four callable fixed-rate advances
    outstanding with the FHLB. The callable advances mature within four to ten
    years with call options ranging from 12 months to 51 months. The interest
    rates on the callable advances range from 4.84% to 6.67% with a weighted
    average interest rate of 6.07% at December 31, 2000.

    The following table sets forth certain information regarding vBank's FHLB
    advances, at or for the period ended December 31:

                                                           2000         1999
                                                           ----         ----
    (in thousands)

    Balance outstanding, December 31                     $30,000      $35,000
    Average balance outstanding during year               32,750       32,018
    Weighted average interest rate for the period          5.96%        5.31%
    Maximum outstanding balance at any month end          43,000       35,000

    vBank had approximately $45.1 million in borrowing capacity under a
    collateralized line of credit with the FHLB, of which $30.0 million had been
    drawn at December 31, 2000. In March 2000, the Corporation obtained a $2.6
    million loan from a local financial institution. This loan has a floating
    rate based on Wall Street Journal Prime.

NOTE L - STOCKHOLDERS' EQUITY

   In connection with the formation of USABancShares.com, the former President &

                                   (Continued)

                                      F-20


<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE L - STOCKHOLDERS' EQUITY - Continued

      CEO, purchased 10,000 shares, par value $.01, of Class B Common Stock for
      $500. These shares mandatorily convert into ten percent of the then issued
      shares of Common Stock on January 1, 2001. As a result of the mandatory
      conversion provision, the Class B Common Stock is deemed converted for
      financial statement purposes.

      On August 17, 1998, USABancShares.com paid a 33% stock dividend on its
      common stock to stockholders of record as of August 3, 1998.

      On June 15, 1999, USABancShares.com paid a 100% stock dividend on its
      common stock to stockholders of record as of June 1, 1999.

NOTE M - EMPLOYEE BENEFIT PLANS

      On October 1, 1999, USABancShares.com began a defined contribution 401(k)
      plan (the "Plan") covering eligible employees. Participants may contribute
      up to 15% of their salary to a maximum of $10,500. USABancShares.com will
      match fifty percent of contributions up to six percent of eligible
      compensation per year. Contributions for the year ended December 31, 2000
      were $147,000. USABancShares.com's previous 401(k) plan was terminated in
      January 1999, and all funds were distributed to employees.

      The Corporation maintained during 2000 an Employee Stock Purchase Plan
      ("ESPP"), to allow eligible employees to periodically acquire shares of
      USAB common stock through payroll deductions. For the year ended December
      31, 2000 a total of 11,264 shares were purchased by employees from the
      Plan. Employees could purchase Corporation stock through the ESPP twice
      per year on April 1st, and October 1st. The ESPP allowed employees to
      purchase Corporation stock at a 15% discount from the lower closing price
      of the Corporation stock as of March 31st or September 30th. The 15%
      discount to the employees is accounted for as a salary and employee
      benefits expense. The amount of salary and employee benefits expense
      related to the ESPP for the year ended December 31, 2000 was $7,000.

NOTE N - INCOME TAXES

    The components of income tax (benefit) are as follows:



                                                    At December 31,
                                               -----------------------
(in Thousands)                                 2000            1999
                                               ----            ----

Federal
     Current                                 $    -           $(582)
     Deferred                                     -              (6)
     Benefit applied to reduce goodwill           -               -
                                             ------           -----
                                                  -            (588)
State
     Current                                      -               -
     Benefit applied to reduce goodwill           -               -
                                             ------           -----
                                                  -               -
                                             ------          ------

Income tax (benefit)                         $    -          $(588)
                                             ======          ======

                                   (Continued)

                                      F-21

<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE N - INCOME TAXES - Continued

    The reconciliation of the tax computed at the statutory federal rate was as
    follows:


                                                            At December 31,
                                                        ------------------------
(in Thousands)                                           1999            1999
                                                         ----            ----

Tax benefit at statutory rate                          $(3,297)        $ (1,098)
Decrease in taxes resulting from tax-exempt
   income                                                  (46)            (111)
Nondeductible expenses, including goodwill and
   meals and entertainment                                  33               21
Increase in valuation allowance                          3,140              493
Other, net                                                 170              107
                                                       -------        ---------
Income tax benefit                                     $    -         $   (588)
                                                       =======        =========

    Deferred income taxes are provided for the temporary difference between the
    financial reporting basis and the tax basis of USABancShares.com's assets
    and liabilities. Cumulative temporary differences are as follows at
    December 31,:


(in Thousands)                                               2000          1999
                                                           ------          ----

Deferred tax assets
   Allowance for possible loan losses                      $  662       $   664
   Deferred compensation                                       18            21
   Unrealized losses on securities available-for-sale       3,124         1,088
   Federal net operating losses                             3,035             -
   State net operating losses                                  66           170
   Accrued expenses                                           187             -
   Valuation allowance                                     (3,633)         (493)
   Other                                                       51            25
                                                           ------       -------

Net deferred tax asset                                     $3,510       $ 1,475
                                                           ======       =======

    A valuation allowance has been recorded for deferred tax assets that
    USABancShares.com believes will more likely than not expire before the
    benefit can be realized. The Corporation has Federal net operating losses
    that will expire in 2020 and state net operating losses that will begin to
    expire in 2008.

                                   (Continued)

                                      F-22
<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE O - EARNINGS PER SHARE

    The following table illustrates the reconciliation of the basic and diluted
    EPS computations.



                                                         Year ended December 31,
                                                           ---------------------
(in Thousands, except per share data)
                                                             2000          1999
                                                             ----          ----
Basic EPS Computation:
    Numerator - Net loss                                   $ (9,665)   $ (2,490)
    Denominator - Weighted average shares outstanding         5,677       4,591
                                                           --------    --------
Basic loss per share (1)                                   $  (1.70)   $  (0.54)
                                                           ========    ========

Diluted EPS Computation:
    Numerator - Net loss                                   $ (9,665)   $ (2,490)
    Denominator - Weighted average shares outstanding         5,677       4,591
    Effect of dilutive securities                                 -           -
                                                           --------    --------
Diluted loss per share (1)                                 $  (1.70)   $  (0.54)
                                                           ========    ========

(1)   All per share data has been adjusted to reflect all stock dividends and
      stock splits.

      Options to purchase 798,702 shares of common stock at a range of $2.83 to
      $11.56 per share were outstanding at December 31, 2000. Warrants to
      purchases 316,044 shares of common stock at a range of $2.89 to $12.00 per
      share were outstanding at December 31, 2000. Options to purchases 705,356
      shares of common stock at a range of $2.83 to $6.00 per share were
      outstanding at December 31, 1999. Warrants to purchases 316,044 shares of
      common stock at a range of $2.89 to $12.00 per share were outstanding at
      December 31, 1999. These options and warrants were not included in the
      computation of diluted earnings per share due to the net operating losses
      incurred by the Corporation for the years ended December 31, 2000 and
      1999.

NOTE P - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
         CREDIT RISK

      vBank is a party to financial instruments with off-balance sheet risk in
      the normal course of business to meet the financing needs of its
      customers. These financial instruments include commitments to extend
      credit and standby letters of credit. Such financial instruments are
      recorded in the financial statements when they become payable. Those
      instruments involve, to varying degrees, elements of credit and interest
      rate risks in excess of the amount recognized in the consolidated balance
      sheets. The contract or notational amounts of those instruments reflect
      the extent of involvement vBank has in particular classes of financial
      instruments.

      vBank's exposure to credit loss in the event of nonperformance by the
      other party to the financial instrument for commitments to extend credit
      and standby letters of credit is represented by the contractual or
      notational amount of those instruments. vBank uses the same credit
      policies in making commitments and conditional obligations as it does for
      on-balance sheet instruments.


                                   (Continued)

                                      F-23

<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE P - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
         CREDIT RISK - Continued

    Unless noted otherwise, vBank does not require collateral or other security
    to support financial instruments with credit risk. The approximate contract
    amounts are as follows:

<TABLE>
<CAPTION>
                                                                                           At December 31,
                                                                                           ---------------
                                                                                       2000              1999
                                                                                       ----              ----
     (in Thousands)
<S>                                                                                   <C>                <C>
       Financial instruments whose contract amounts represent credit risk
       Commitments to extend credit                                                   $6,372           $4,333
       Standby letters of credit and financial guarantees written                        504              404
</TABLE>

    Commitments to extend credit are agreements to lend to a customer as long as
    there is no violation of any condition established in the contract.
    Commitments generally have fixed expiration dates or other termination
    clauses and may require payment of a fee. Since many of the commitments are
    expected to expire without being drawn upon, the total commitment amounts do
    not necessarily represent future cash requirements. vBank evaluates each
    customer's creditworthiness on a case-by-case basis. The amount of
    collateral obtained, if deemed necessary by vBank upon extension of credit,
    is based on management's credit evaluation and approval by the loan
    committee or the full board of directors.

    Standby letters of credit are conditional commitments issued by vBank to
    guarantee the performance of a customer to a third party. Those guarantees
    are primarily issued to support public and private borrowing arrangements,
    including commercial paper, bond financing, and similar transactions. The
    credit risk involved in issuing letters of credit is essentially the same as
    that involved in extending loan facilities to customers.

    vBank's originated loan portfolio primarily consists of loans secured by
    real estate in the greater Delaware Valley region. vBank's acquired loan
    portfolio consists of individual loans and loan pools throughout the
    domestic United States purchased at sales conducted by governmental agencies
    and large financial institutions. vBank, as with any lending institution, is
    subject to the risk that real estate values in the primary lending area will
    deteriorate, thereby potentially impairing collateral values in the primary
    lending area. However, management believes that real estate values are
    presently stable in its primary lending area and that loan loss allowances
    have been provided in amounts commensurate with its current perception of
    the foregoing risks of the portfolio.

NOTE Q - COMMITMENTS AND CONTINGENCIES

    1. Leases

    USABancShares.com has entered into operating lease arrangements for branch
    facilities. USABancShares.com is responsible for pro-rata operating expense
    escalations.


                                   (Continued)

                                      F-24


<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE Q - COMMITMENTS AND CONTINGENCIES - Continued

    As of December 31, 2000, future approximate minimum rental payments are as
    follows, (in Thousands):

       2001                                                       $132
       2002                                                        139
       2003                                                        143
       2004                                                        145
       2005                                                        145
       Thereafter                                                  285
                                                                ------

                                                                $  989
                                                                ======

    The above amount represents minimum rentals not adjusted for possible future
    increases due to escalation provisions and assumes that all option periods
    will be exercised by vBank or USABancShares.com. Rent expense for the years
    ended December 31, 2000 and 1999, amounted to $190,000 and $109,000,
    respectively.

    2. Employee Agreements

    USABancShares.com has an employment agreements with our executives that
    provides severance pay benefits if there is a change in control of
    USABancShares.com. The agreements will continue in effect on a year-to-year
    basis until terminated or not renewed by USABancShares.com. Upon a change in
    control, vBank and USABancShares.com shall continue to pay the key
    executives' salary per the agreements and certain benefits for the agreed
    upon time periods. The maximum contingent liability under the agreements at
    December 31, 2000 was approximately $280,000.

    In connection with the private placement offering USABancShares.com and the
    former President and Chief Executive Officer have entered into an agreement
    whereby USABancShares.com has the option to pay $150,000 per year for each
    of the three years beginning in 1998 in exchange for the President agreeing
    to waive any future exercise of the non-dilutive feature of the Class B
    common stock. If USABancShares.com does not make the optional payment on
    January 2nd of each year, the President will be entitled to implement the
    anti-dilutive feature for 10% of any shares of common stock issued during
    the year of non-payment. USABancShares.com has paid Mr. Tepper $150,000 in
    1998, 1999 and 2000.

    On February 23, 2001, the Corporation and the Bank entered into an agreement
    with Kenneth Tepper, the Corporation's Chief Executive Officer, pursuant to
    which Mr. Tepper resigned from his positions as Chief Executive Officer and
    member of the boards of directors of the Corporation and the Bank. The
    agreement has been filed as an exhibit to this Form 10-KSB. Mr. Tepper
    received a lump-sum payment in connection with his resignation. Craig J.
    Scher, the President of the Bank, was appointed by the boards of directors
    of the Corporation and the Bank to the additional position of Chief
    Executive Officer, effective as of such date, subject to the receipt of
    requisite regulatory approvals.


NOTE R - FAIR VALUE OF FINANCIAL INSTRUMENTS

    SFAS No. 107 requires disclosure of the estimated fair value of an entity's
    assets and liabilities considered to be financial instruments. For


                                   (Continued)

                                      F-25


<PAGE>



                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE R - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued


    USABancShares.com, as for most financial institutions, the majority of its
    assets and liabilities are considered financial instruments as defined in
    SFAS No. 107. However, many such instruments lack an available trading
    market, as characterized by a willing buyer and seller engaging in an
    exchange transaction. Also, it is USABancShares.com's general practice and
    intent to hold its financial instruments to maturity and not to engage in
    trading or sales activities, except for certain loses. Therefore,
    USABancShares.com had to use significant estimations and present value
    calculations to prepare this disclosure.

    Changes in the assumptions or methodologies used to estimate fair values may
    materially affect the estimated amounts. Also, management is concerned that
    there may not be reasonable comparability between institutions due to the
    wide range of permitted assumptions and methodologies in the absence of
    active markets. This lack of uniformity gives rise to a high degree of
    subjectivity in estimating financial instrument fair values.

    Estimated fair values have been determined by USABancShares.com using the
    best available data and an estimation methodology suitable for each category
    of financial instruments. The estimation methodologies used and recorded
    book balances at December 31, 2000 and 1999, are outlined below.

    For cash and cash equivalents, including cash and due from banks and
    interest bearing deposits with banks, the recorded book values approximate
    fair values. The estimated fair values of investment securities, including
    FHLB stock, are based on quoted market prices of comparable instruments if
    quoted market prices are not available.

    The net loan portfolio at December 31, 2000 and 1999, has been valued using
    a present value discounted cash flow where market prices were not available.
    The discount rate used in these calculations is the estimated current market
    rate adjusted for credit risk. The carrying value of accrued interest
    approximates fair value.

    The estimated fair values of demand deposits (i.e., interest-bearing and
    non-interest-bearing checking accounts, savings, and certain types of money
    market accounts) are, by definition, equal to the amount payable on demand
    at the reporting date (i.e., their carrying amounts). The fair values of
    certificates of deposit are estimated using a discounted cash flow
    calculation that applies interest rates currently being offered to a
    schedule of aggregated expected monthly time deposit maturities. The
    carrying amount of accrued interest payable approximates its fair value.


                                   (Continued)

                                      F-26

<PAGE>




                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE R - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

    The fair value of borrowings with stated maturities has been estimated using
    present value cash flow, discounted at a rate approximating current market
    for similar borrowing arrangements.

    There was no material difference between the notational amount and the
    estimated fair value of off-balance-sheet items, which totaled approximately
    $6.4 million and $4.7 million at December 31, 2000 and 1999, respectively,
    which are primarily comprised of unfunded loan commitments, due to such
    instruments are generally priced at market at the time of funding

                                     2000                         1999
                        -----------------------------    -----------------------
                         Carrying         Estimated      Carrying     Estimated
(in Thousands)            amount         fair value       amount      fair value
                        ---------------  ------------    ----------  -----------

Investment securities      $ 121,638      $ 121,638     $101,826       $ 96,288
Loans receivable             181,495        182,331      205,268        206,214
Deposits                     281,932        280,831      255,038        253,724

NOTE S - STOCK OPTION PLAN

    The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, which
    contains a fair value method for valuing stock-based compensation that
    entities may use, which measures compensation cost at the grant date based
    on the fair value of the award. Compensation is then recognized over the
    service period, which is usually the vesting period. Alternatively, the
    standard permits entities to continue accounting for employee stock options
    and similar equity instruments under Accounting Principal Bulletin ("APB")
    Opinion No. 25, Accounting for Stock Issued to Employees. Entities that
    continue to account for stock options using APB Opinion No. 25 are required
    to make pro forma disclosures of net income and earnings per share, as if
    the fair value- based method of accounting defined in SFAS No. 123 had been
    applied. USABancShares.com has determined it will follow APB Opinion No. 25.

    USABancShares.com has a Stock Option Plan (the "Option Plan") for the
    benefit of officers, employees and Directors of USABancShares.com. The
    Option Plan was designed to attract and retain qualified personnel in key
    positions, provide employees with a proprietary interest in
    USABancShares.com as an incentive to contribute to the success of
    USABancShares.com, and reward employees for outstanding performance and the
    attainment of targeted goals. The Option Plan was also designed to retain
    qualified directors for USABancShares.com, and will provide for the grant of
    non-qualified stock options and incentive options intended to comply with
    the requirements of Section 422 of the Internal Revenue Code of 1986, as
    amended.

    The Option Plan is administered and interpreted by a Committee of the Board
    of Directors, and unless terminated earlier, will be in effect for a period
    of ten years from the Effective Date. A total of 512,000 shares remained
    reserved for future issuance under the Option Plan. The options, which have
    a term of between 4 and 10 years when issued, vest either immediately or
    over a period specified by USABancShares.com's compensation committee. The
    exercise price of each option is equal to or above the market value on the
    date of grant.

                                   (Continued)

                                      F-27

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE S - STOCK OPTION PLAN - Continued

    Accordingly, no compensation costs have been recognized for the Option Plan.
    Had compensation costs for the Option Plan been determined based on the fair
    value of options at the grant dates consistent with the method of SFAS No.
    123, Accounting for Stock-Based Compensation, USABancShares.com's results of
    operations and per share amounts would have been reduced to the pro forma
    amounts indicated below:


                                               For the year ended December 31,
                                            ------------------------------------
(in Thousands, except per share data)              2000                   1999
                                                   ----                   ----

Net (loss) income
   As reported                                  $ (9,665)               $(2,490)
   Proforma                                       (9,944)                (2,835)

Basic (loss) earnings per share
   As reported                                     (1.70)                 (0.54)
   Proforma                                        (1.75)                 (0.62)

Diluted (loss) earnings per share
   As reported                                     (1.70)                 (0.54)
   Proforma                                        (1.75)                 (0.62)


    These pro forma amounts may not be representative of future disclosures
    because they do not take into effect the pro forma compensation expense
    related to grants before 1995.

    A summary of the status of USABancShares.com fixed stock option plans as of
    December 31, 2000, and changes for each of the years in the two-year period
    then ended was as follows:


<TABLE>
<CAPTION>
                                                       2000                              1999
                                               ----------------------          ------------------------

                                                             Weighted                        Weighted
                                                              average                        average
                                              Number         exercise         Number         exercise
                                                of           price per          of          price per
                                              shares           share          shares          share
                                              ------           -----          ------          -----


<S>                                         <C>               <C>            <C>             <C>
Outstanding at beginning of year            1,021,400         $ 4.07         876,000         $ 3.60
Options granted                                17,500           3.14         245,600           6.47
Options exercised                             (84,190)          5.05         (26,600)          2.83
Options forfeited                            (156,008)          6.05         (73,600)          5.31
                                            ---------                      ---------


Outstanding at end of year                    798,702         $ 3.50       1,021,400         $ 4.07

Options exercisable at year end               685,152                        745,000
                                              =======                      =========

Weighted average fair value of
options granted during year                                   $ 2.84                         $ 3.69
</TABLE>



                                   (Continued)

                                      F-28


<PAGE>

                          USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE S - STOCK OPTION PLAN - Continued

    The fair value of each option grant is estimated on the date of grant using
    the Black-Scholes option-pricing model with the following weighted average
    assumptions used for grants in 2000 and 1999: no dividend yield for all
    years; expected volatility of 96% and 52%, risk-free interest rate of 5.85%
    and 5.65%, and an expected life of ten years for all options.

    The following table summarizes information about stock options outstanding
    at December 31, 2000:

<TABLE>
<CAPTION>
                                                     Options outstanding                   Options  exercisable
                                       ----------------------------------------------   --------------------------
                                                          Weighted
                                           Number          average           Weighted       Number        Weighted
                                       outstanding at     remaining          average    exercisable at     average
       Range of exercise                December 31,     contractual         exercise    December 31,     exercise
             prices                         2000         life (years)          price         2000          price
       -----------------               --------------    ------------        --------   --------------   ----------

<S>                                       <C>             <C>                   <C>         <C>             <C>
       $ 2.83 to $ 3.76                   676,902         4.92 years            $3.01       661,902         $3.00
       $ 4.00 to $ 6.00                    73,300         8.16 years             5.93        18,300          5.19
       $ 6.63                              48,500         9.33 years             6.63         4,950          6.63
</TABLE>


NOTE T - REGULATORY CAPITAL REQUIREMENTS

    The Corporation and the Bank are subject to various regulatory capital
    requirements administered by the federal banking agencies. Failure to meet
    minimum capital requirements can initiate certain mandatory and possibly
    additional discretionary actions by regulators that, if undertaken, could
    have a direct material effect on the Corporation's and Bank's financial
    statements.

    Under capital adequacy guidelines and the regulatory framework for prompt
    corrective action, the Corporation and the Bank must meet specific capital
    guidelines that involve quantitative measures of their assets, liabilities
    and certain off-balance-sheet items as calculated under regulatory
    accounting practices. The capital amounts and classification are also
    subject to qualitative judgments by the regulators about components, risk
    weightings, and other factors. Prompt corrective action provisions are not
    applicable to bank holding companies.

    Quantitative measures established by regulation to ensure capital adequacy
    require the Corporation and the Bank to maintain minimum amounts and ratios
    (set forth in the following table) 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 December 31, 2000 and 1999, that the Corporation failed to meet all
    capital adequacy requirements to which they are subject and the Bank met all
    capital adequacy requirements to which they are subject.

    As of December 31, 2000, the FDIC specifically categorized the Bank as
    adequately capitalized under the regulatory framework for prompt corrective
    action. To be categorized as adequately capitalized, an institution must
    maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage
    ratios as set forth in the following tables. Significant conditions and
    events have occurred since the notification that management believes has
    changed the Bank's category. See discussion of such conditions and events in
    Note W.

    The Corporation's and the Bank's actual capital amounts and ratios as of
    December 31, 2000 and 1999 are also presented in the table below.


                                   (Continued)

                                      F-29


<PAGE>
                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE T - REGULATORY CAPITAL REQUIREMENTS - Continued

         Certain Consequences of Failure to Comply with Regulatory Capital
Requirements. A bank's failure to maintain capital at or above the minimum
capital requirements may be deemed an unsafe and unsound practice and may
subject the insured savings bank to enforcement actions and other proceedings.
Any bank not in compliance with all of its capital requirements is required to
submit a capital plan that addresses the bank's need for additional capital and
meets certain additional requirements. While the capital plan is being reviewed,
the bank must certify among other things, that it will not, without the
approval of its appropriate Regional Director, grow beyond net interest credited
or make capial distributions. If a bank's capital plan is not approved, the bank
will become subject to additional growth and other restrictions. In addition, a
bank's regulator through a capital directive or otherwise may, restrict the
ability of a bank not in compliance with the capital requirements to pay
dividends and compensation and may require such a bank to take one or more of
certain corrective actions, including, without limitation; (i) increasing its
capital to specified levels, (ii) reducing the rate of interest that may be paid
on savings accounts, (iii) limiting receipts or deposits to those made to
existing accounts, (iv) ceasing issuance of new accounts of any or all classes
or categories except in exchange for existing accounts, (v) ceasing or limiting
the purchase of loans or the making of other specified investments, and (vi)
limiting operational expenditures to specified levels.

         The FDIC may take any of certain additional supervisory actions against
an undercapitalized institution if the agency determines that such actions are
necessary to resolve the problems of the institution at the least possible
long-term cost to the deposit insurance fund. These supervisory actions include:
(i) requiring the institution to raise additional capital or be required by
another institution or holding company if certain grounds exist, (ii)
restricting transactions between the institution and its affiliates, (iii)
restricting interest rates paid by the institution on deposits, (iv) restricting
the institution's asset growth or requiring the institution to reduce its
assets, (v) requiring replacement of senior executive officers and directors,
(vi) requiring the institution to alter or terminate any activity deemed to pose
excessive risk to the institution, (vii) prohibiting capital distributions by
bank holding companies without prior approval, (viii) requiring the institution
to divest certain subsidiaries, or requiring the institution's holding company
to divest the institution or certain affiliates of the institution, and (ix)
taking any other supervisory action that the agency believes would better carry
out the purposes of the prompt corrective action regulations.

         Under a regulatory interpretation supplied in a letter from the Federal
Reserve Bank of Philadelphia dated June 25, 2001, the Corporation was advised
that the trust preferred securities it has issued are not Tier 1 eligible until
the Corporation has applied the entire interest reserve established for use in
making interest payments to the trust holders.

    USABancShares.com actual capital amounts and ratios are presented in the
    following table:

                                                               For Capital
(in Thousands)                                              Adequacy Purposes
As of December 31, 2000:        Amount        Ratio       Amount        Ratio
------------------------        ------        -----       ------        -----
Total Capital
 (to Risk Weighted Assets)      $19,990       7.5%       $21,442         8.0%
Tier I Capital
 (to Risk Weighted Assets)        9,995       3.7         10,721         4.0
Tier I Capital
 (to Average Assets)              9,995       3.0         13,493         4.0

As of December 31, 1999:
------------------------
Total Capital
 (to Risk Weighted Assets)      $31,331       11.2%      $22,473         8.0%
Tier I Capital
 (to Risk Weighted Assets)       25,645        9.1        11,237         4.0
Tier I Capital
 (to Average Assets)             25,645        7.8        13,124         4.0

    vBank's actual capital amounts and ratios are presented in the following
    table.
<TABLE>
<CAPTION>

                                                                                                             To be well
                                                                                                         Capitalized under
                                                                                  For Capital            Prompt Corrective
(in Thousands)                                                                 Adequacy Purposes         Action Provisions
As of December 31, 2000:                      Amount            Ratio         Amount        Ratio       Amount      Ratio
------------------------                      ------            -----         ------        -----       ------      -----
<S>                                                 <C>                 <C>          <C>           <C>        <C>            <C>
  Total Capital
    (to Risk Weighted Assets)                 $22,340             8.3%        $21,427        8.0%      $26,783       10.0%
  Tier I Capital
    (to Risk Weighted Assets)                  20,250             7.6          10,713        4.0        16,070        6.0
  Tier I Capital
    (to Average Assets)                        20,250             6.0          13,573        4.0        16,966        5.0

As of December 31, 1999:
------------------------
  Total Capital
    (to Risk Weighted Assets)                 $28,266            10.1%        $22,460        8.0%      $28,075       10.0%
  Tier I Capital
    (to Risk Weighted Assets)                  26,151             9.3          11,230        4.0        16,845        6.0
  Tier I Capital
    (to Average Assets)                        26,151             7.9          13,171        4.0        16,464        5.0

</TABLE>


                                   (Continued)
                                      F-30
<PAGE>
                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

NOTE T - REGULATORY CAPITAL REQUIREMENTS - Continued

    Institutions classified as undercapitalized that fail to submit a timely,
    acceptable capital restoration plan or fail to implement such a plan are
    subject to the same supervisory actions as significantly undercapitalized
    institutions. Significantly undercapitalized institutions are subject to the
    mandatory provisions applicable to undercapitalized institutions. The
    regulation also makes mandatory for significantly undercapitalized
    institutions certain of the supervisory actions that are discretionary for
    institutions classified as undercapitalized, creates a presumption in favor
    of certain discretionary supervisory actions, and subjects significantly
    undercapitalized institutions to additional restrictions, including a
    prohibition on paying bonuses or raises to senior executive officers without
    the prior written approval of the appropriate federal bank regulatory
    agency. In addition, significantly undercapitalized institutions may be
    subjected to certain of the restrictions applicable to critically
    undercapitalized institutions.

    The regulation requires that an institution be played into conservatorship
    or receivership within 90 days after it becomes critically undercapitalized,
    unless the regulators determine that other accion would better achieve the
    purpose of the prompt corrective action provisions. Any such determination
    must be renewed every 90 days. A depository institution also must be placed
    into receivership if the institution continues to be critically
    undercapitalized on average during the fourth quarter after the institution
    initially became critically undercapitalized, unless the institution's
    federal bank regulatory agency, with concurrence of the FDIC, makes certain
    positive determinations with respect to the institution.

    Conservatorship/Receivership. In addition to the grounds discussed under
    "--Proper Corrective Action" the FDIC may appoint a conservator or receiver
    for a bank if any one or more of a number of circumstances exist, including,
    without limitation, the following: (i) the institution's assets are less
    than its obligations to creditors and others, (ii) a substantial dissipation
    of assets or earnings due to any violation or law or any unsafe or unsound
    practice, (iii) an unsafe or unsound condition to transact business, (iv) a
    willful violation of a final cease-and-desist order, (v) the consealment of
    the institution's books, papers, records or assets or refusal to submit such
    items for inspection to any examiner or lawful agent of the appropriate
    federal banking agency or state bank or savings association supervisor, (vi)
    the institution is likely to be unable to pay its obligations or meet its
    depositors' demands in the normal course of business, (vii) the institution
    has incurred, or is likely to incur, losses that will deplete all or
    substantially all of its capital, and there is no reasonable prospect for
    the institution to become adequately capitalized without federal assistance,
    (viii) any violation of law or unsafe or unsound practice that it likely to
    cause insolvency or substantial dissipation of assets or earnings weaken the
    institution's condition, or otherwise seriously prejudice the interests of
    the Institution's depositors or the federal deposit insurance fund, (ix) the
    institution is undercapitalized and the institution has no reasonable
    prospect of becoming adequately capitalized, fails to become adequately
    capitalized when required to do so, fails to submit a timely and acceptable
    capital restoration plan, or materially fails to implement an accepted
    capital restoration plan, (x) the institution is critically undercapitalized
    or otherwise has substantially insufficient capital, or (xi) the institution
    is found guilty of certain criminal offensess related to money laundering.

    Enforcement Powers. The FDIC has substantial enforcement authority,
    including authority to bring various enforcement actions against a bank and
    any of its "institution-affiliated parties" (a term defined to include,
    among other persons, directors, officers, employees, controlling
    stockholders, agents and stockholders who participate in the conduct of the
    affairs of the institution). The enforcement authority includes, without
    limitation: (i) the ability to terminate a banks' deposit insurance, (ii)
    institute cease-and-desist proceedings, (iii) bring suspension, removal,
    prohibition and criminal proceedings against institution-affiliated parties
    and (iv) assess substantial civil money penalties. As part of a
    cease-and-desist order, the agencies may require a bank or an
    institution-affiliated party to take affirmative action to correct
    conditions resulting from that party's actions, including to make
    restitution or provide reimbursement, indemnification or guarantee against
    loans, restrict the growth of the institution; and rescind agreements and
    contracts.

    State Banking statutes restrict the amount of dividends paid on capital
    stock. Accordingly, no dividends shall be paid by a Bank on its capital
    stock unless, following the payment of such dividends, the capital stock of
    the Bank will be unimpaired, and (1) the Bank will have surplus of not less
    than 50% of its capital, or, if not (2) the payment of such dividend will
    not reduce the surplus of the Bank.

    Additionally, banking regulations limit the amount of investment, loans,
    extensions of credit and advances that vBank can make to USABancShares.com
    at any time to 10% and in the aggregate 20% of the Bank's capital stock and
    surplus. These regulations also require that any such investment, loan,
    extension of credit or advance be secured by securities having a market
    value in excess of the amounts thereof. At December 31, 2000, vBank had a
    loan to USABancShares.com, in aggregate, of $450,000, or 1.7% of vBank's
    capital stock and surplus.

NOTE U - SEGMENT REPORTING

    SFAS No. 131 redefines how operating segments are determined and requires
    disclosures of certain financial and descriptive information about
    USABancShares.com and its subsidiaries operating segments. Management has
    determined USABancShares.com operates in two business segments, namely,
    Internet banking and community banking.

                                  (Continued)

                                      F-31

<PAGE>


    The following chart highlights the segments USABancShares.com, Inc. operates
    under:

                                                 December 31, 2000
                                  ----------------------------------------------
                                                                    Consolidated
(in Thousands)                    USABancShares.com     Others         Totals
                                  -----------------     ------      ------------
Revenue from external
customers                                 321             349             670

Interest revenue                            -          30,465          30,465

Interest expense                        3,241          16,803          20,044
                                      -------         -------         -------
Net interest revenue                   (3,241)         13,662          10,421

Provision for loan losses                   -               -               -

Depreciation                              268             296             564

Online Partnerships                     5,654               -           5,654

Advertising                             1,244             222           1,466

Check Printing Fees                       252              72             324

Segment (loss) profit                 (12,872)          3,207          (9,665)

Total deposits                         79,032         202,900         281,932

Total assets                            2,132         334,319         336,451


                                                 December 31, 1999
                                  ----------------------------------------------
                                                                    Consolidated
(in Thousands)                    USABancShares.com     Others         Totals
                                  -----------------     ------      ------------
Revenue from external
customers                                   -           1,514           1,514

Interest revenue                            -          22,123          22,123

Interest expense                          335          12,775          13,110
                                      -------         -------         -------
Net interest revenue                     (335)          9,348           8,760

Provision for loan losses                   -           1,175           1,175

Depreciation                               14             439             453

Online Partnerships                        51               -              51

Advertising                             3,600             232           3,832

Check Printing Fees                        27               3              30

Segment (loss) profit                  (5,292)          2,802          (2,490)

Total deposits                         29,542         225,496         255,038

Total assets                            3,021         320,314         323,335



    USABancShares.com is vBank's on-line banking segment. USABancShares.com is a
    fully operational website to serve online banking customers.
    USABancShares.com launched in August 1999. 1999 and 2000 were years that
    USABancShares.com invested in infrastructure (computer systems and customer
    service technology, as well as human resources), and marketing/branding
    campaigns to brand itself and develop strategic alliances. USABancShares.com
    offers a variety of banking products: deposit products (checking, savings
    and certificates of deposit accounts) and credit cards through third party
    vendors.

    The "Others" columns includes the Bank's traditional operations, described
    below, and USA Capital Trust I. The Bank's traditional operations contain
    the traditional brick and mortar operations, including four retail branch
    locations, a commercial banking operations and servicing department. The
    Corporation's assets are primarily comprised of its investments in its
    subsidiaries. The other operating subsidiary contains complimentary services
    to the Bank, but are immaterial to the overall financial operations of the
    Corporation.

    USABancShares.com uses accrual accounting methods, with such segment being
    either accounted for as a separate department on the Bank's general ledger.
    No allocations have been applied to the segments. Direct expenses have been
    accounted for by the segment.


                                   (Continued)

                                      F-32

<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE V - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY

    Condensed financial information for USABancShares.com, Inc., (parent company
    only) follows:


                         BALANCE SHEETS
                                                            December 31,
                                                  ------------------------------
(in Thousands)                                        2000                1999
                                                  ------------        ----------
ASSETS
Cash and due from banks                               $ 20                 $ 7
Securities available-for sale                        2,540               3,300
Investment in subsidiaries                          15,530              25,419
Other assets                                           937               1,938
                                                  --------            --------
  Total assets                                    $ 19,027            $ 30,664
                                                  ========            ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Other borrowed money                            $ 13,050            $ 10,850
  Other liabilities                                    820               1,886
                                                  --------            --------
Total liabilities                                   13,870              12,736
Stockholders' equity                                 5,157              17,928
                                                  --------            --------
  Total liabilities and stockholders' equity      $ 19,027            $ 30,664
                                                  ========            ========


                                   (Continued)

                                      F-33


<PAGE>


                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999


NOTE V - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY - Continued




                      STATEMENTS OF OPERATIONS
                                                       For the year ended
                                                           December 31,
                                                    --------------------------
                                                      2000              1999
                                                    -------           --------
(in Thousands)
INCOME
  Interest income                                   $   144             $ 217
  Other income                                         (398)               49
                                                    -------           -------
     Total income                                      (254)              266
EXPENSES
  Compensation                                          162               150
  Interest                                            1,218               857
  Other                                               1,144               221
                                                    -------           -------
     Total expenses                                   2,524             1,228
Loss before undistributed earnings
     of subsidiaries                                 (2,778)             (962)
Provision for income taxes                               16                 -
                                                    -------           -------
Loss before undistributed earnings
     of subsidiaries                                 (2,794)             (962)
Undistributed (losses) of subsidiaries               (6,871)           (1,528)
                                                    -------           -------
     Net loss                                       $(9,665)          $(2,490)
                                                    =======           =======

                                   (Continued)

                                      F-34
<PAGE>

                    USABANCSHARES.COM, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2000 and 1999

   NOTE V - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY - Continued



                             STATEMENT OF CASH FLOWS

                                                        For the year ended
                                                               December 31,
                                                        ------------------------
                                                            2000           1999
                                                        --------       --------
(in Thousands)
Cash flows from operating activities
Net (loss) income                                       $ (9,665)      $ (2,490)
Adjustments to reconcile net income to net cash
  (used in) operating activities
  Undistributed loss (earnings) from subsidiaries          6,871          1,528
  (Gain) loss on sale of investments                         227            (16)
  Net change in assets and liabilities                      (288)           267
                                                        --------       --------
  Net cash used in operating activities                   (2,855)          (711)
Cash flows from investing activities
  Capital distribution to subsidiaries                    (1,100)       (14,332)
  Principal repayments securities available for sale         130             98
  Sales of investment securities available for sale        1,267          1,367
  Purchase of investment securities available for sale         -         (3,431)
                                                        --------       --------

  Net cash used in investing activities                      297        (16,298)
                                                        --------       --------

Cash flows from financing activities
  Net increase (decrease) in borrowings                    2,200         (1,107)
  Common equity offering proceeds, net                         -          8,075
  Trust preferred proceeds                                     -         10,000
  Exercise of stock options                                  371             25
  Proceeds from issuance of common stock                       -              -
                                                        --------       --------
Net cash provided by financing activities                  2,571         16,993
                                                        --------       --------
Net decrease in cash                                          13            (16)
Cash at beginning of year                                      7             23
                                                        --------       --------
Cash at end of year                                     $     20       $      7
                                                        ========       ========
Supplemental disclosure of cash flow information
  Cash paid during the year for interest                $  1,205       $    857
                                                        ========       ========
  Cash paid during the year for income taxes            $      -       $      -
                                                        ========       ========

NOTE W - SUBSEQUENT EVENTS (UNAUDITED)

    Based upon the results of an examination conducted by the Federal Deposit
    Insurance Corporation (FDIC), the Bank was issued a Memorandum of
    Understanding (Memorandum). Provisions of this Memorandum require the Bank
    to, among other things, adhere to the following: (1) adopt and implement a
    comprehensive three-year strategic plan; (2) adopt and implement a formal
    written capital plan; (3) systematically reduce our levels of
    "sub-investment quality securities" as defined in the Memorandum; (4)
    develop a formal written earnings plan; (5) adopt and implement a systematic
    plan to reduce the Bank's "non-core funding dependence ratio" as defined in
    the Memorandum; (6) adopt and implement formal internal review procedures
    for all electronic banking activities. The Bank has maintained constant
    contact with the FDIC and has notified them of the progress in adhering to
    all compliance items of the Memorandum.

                                   (Continued)

                                      F-35
<PAGE>

NOTE W - SUBSEQUENT EVENTS (UNAUDITED) - Continued

    1. Regulatory Agreements

    In March 2001, as a result of a regulatory examination completed by the
    Federal Reserve Bank, USABancShares.com entered into the Written Agreement
    with the Board of Governors of the Federal Reserve System. Pursuant to the
    terms of the Written Agreement, the Corporation agreed that it would not,
    among other actions, make or pay dividends, make or pay distributions on
    debt instruments, redeem debt or equity instruments, or incur indebtedness
    or engage in capital raising efforts, without the prior written approval of
    the Division of Banking Supervision and Regulation of the Board of Governors
    of the Federal Reserve System. The Corporation also agreed to submit for the
    approval of the Reserve Bank, within various designated time periods, a
    written statement of operating expenses, a plan to maintain sufficient
    capital at the Bank and for the consolidated organization, a report on
    capital raising efforts, a written policy and procedure for inter-corporate
    fees or payments assessed by Bank, the Corporation of any of the non bank
    subsidiaries, a strategy for the Corporation for the remainder of year 2001
    and, on a forward going basis, the directors of the Corporation and the Bank
    must submit certified progress reports to the Reserve Bank. The Corporation
    also agreed to rectify any noncompliance with banking regulations.

    The Corporation also entered into an Order to Cease and Desist with the
    Federal Deposit Insurance Corporation dated July 13, 2001 (the "FDIC Order")
    and a Cease and Desist Order with the State of Pennsylvania Department
    of Banking Bureau of Supervision dated July 9, 2001 (the "Pennsylvania
    Order").

    Pursuant to the terms of the FDIC Order, the Corporation, the Bank, and all
    of the affiliated entities agreed to cease and desist from certain unsafe or
    unsound banking practices and violations. These violations involved
    operating with inadequate capital, poor quality investments and having
    inadequate internal control and management operations. The Penn Order covers
    - substantially the same matters as the FDIC Order.

    USABancshares.com management has begun to address all matters outlined in
    the regulatory agreements and expects to work diligently to comply with
    their terms and conditions within the required timelines. Failure to comply
    could result in additional regulatory supervision and/or actions.

    2. Customer Defalcation

    The Corporation is taking legal action against a long standing customer of
    the Bank who caused the Corporation to suffer a defalcation from a
    check-kiting scheme. The defalcation discovery occurred when the customer's
    deposited items were returned. The Corporation is actively pursuing the
    recovery of this item; however, the entire amount of approximately $3
    million was charged against earnings in the three month period ended June
    30, 2001.

                                   (Continued)

                                      F-36
<PAGE>

NOTE W - SUBSEQUENT EVENTS (UNAUDITED) - Continued

    3. Clearing Accounts

    During the March 2001 quarter, the Corporation identified approximately
    $760,000 of clearing account items, primarily related to returned deposits
    on depositor accounts. The Corporation is actively pursuing the recovery of
    these items against existing customer accounts, however, the entire amount
    was charged against earnings in the three month period ended March 31,
    2001. The Corporation has tightened internal controls as a result of this
    incident and does not anticipate a recurrence.











































                                      F-37