<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.20549

                                    FORM 10-Q

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

      For the quarterly period ended March 31, 2002

                                       OR

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

      For the transition period from..........to..........

                        Commission File Number: 000-25328

                         FIRST KEYSTONE FINANCIAL, INC.
         --------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Pennsylvania                               23-2576479
   ---------------------------------               ----------------------
    (State or other jurisdiction                     (I.R.S. Employer
   of incorporation or organization)               Identification Number)

       22 West State Street
        Media, Pennsylvania                               19063
 ---------------------------------------                ----------
 (Address of principal executive office)                (Zip Code)

       Registrant's telephone number, including area code: (610) 565-6210

Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 __

Number of shares of Common Stock outstanding as of May 9, 2002:  2,053,631

Transitional Small Business Disclosure Format  Yes ___ No X
<PAGE>
                         FIRST KEYSTONE FINANCIAL, INC.

                                    Contents

<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                    ----
<S>                                                                                                                 <C>
PART I         FINANCIAL INFORMATION

       Item 1. Financial Statements

               Unaudited Condensed Consolidated Statements of Financial Condition as of
               March 31, 2002 and September 30, 2001 .................................................................1

               Unaudited Condensed Consolidated Statements of Income for the Three
               and Six Months Ended March 31, 2002 and 2001 ......................................................... 2

               Unaudited Condensed Consolidated Statement of Changes in Stockholders'
               Equity for the Six Months Ended March 31, 2002 ........................................................3

               Unaudited Condensed Consolidated Statements of Cash Flows for the Six
               Months Ended March 31, 2002 ...........................................................................4

               Notes to Unaudited Condensed Consolidated Financial Statements ........................................5

       Item 2. Management's Discussion and Analysis of Financial Condition and
               Results of Operations .................................................................................10

       Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................................14

PART II        OTHER INFORMATION

       Item 1. Legal Proceedings .....................................................................................15

       Item 2. Changes in Securities and Use of Proceeds .............................................................15

       Item 3. Defaults Upon Senior Securities .......................................................................15

       Item 4. Submission of Matters to a Vote of Security Holders ...................................................15

       Item 5. Other Information .....................................................................................15

       Item 6. Exhibits and Reports on Form 8-K ......................................................................15

SIGNATURES ...........................................................................................................16
</TABLE>


                                       i
<PAGE>
ITEM 1.FINANCIAL STATEMENTS

FIRST KEYSTONE FINANCIAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                                              March 31  September 30
                                                                                                2002         2001
                                                                                             ---------    ---------
<S>                                                                                          <C>          <C>
ASSETS

Cash and amounts due from depository institutions                                            $   6,614    $   3,753
Interest-bearing deposits with depository institutions                                          14,702       15,378
                                                                                             ---------    ---------
         Total cash and cash equivalents                                                        21,316       19,131
Investment securities available for sale                                                        70,389       62,564
Mortgage-related securities available for sale                                                 103,644      117,608
Loans held for sale                                                                                             225
Mortgage-related securities held to maturity - at amortized cost
       (approximate fair value of $10,650 at March 31, 2002
       and $11,550 at September 30, 2001)                                                       10,638       11,454
Loans receivable (net of allowance for loan losses of $2,168
      at March 31, 2002 and $2,019 at September 30, 2001)                                      266,889      247,664
Accrued interest receivable                                                                      3,271        3,353
Real estate owned                                                                                  361          887
Federal Home Loan Bank stock - at cost                                                           6,321        6,917
Office properties and equipment - net                                                            3,631        3,690
Deferred income taxes                                                                              542
Cash surrender value of life insurance                                                          14,562       14,021
Prepaid expenses and other assets                                                                2,570        1,536
                                                                                             ---------    ---------

TOTAL ASSETS                                                                                 $ 504,134    $ 489,050
                                                                                             =========    =========

LIABILITIES, MINORITY INTEREST IN SUBSIDIARIES AND STOCKHOLDERS' EQUITY

Liabilities:

       Deposits                                                                              $ 321,610    $ 311,601
       Advances from Federal Home Loan Bank                                                    126,153      126,070
       Accrued interest payable                                                                  1,136        1,804
       Advances from borrowers for taxes and insurance                                           2,026          696
       Deferred income taxes                                                                       282
       Accounts payable and accrued expenses                                                     2,002        1,776
                                                                                             ---------    ---------

           Total liabilities                                                                   452,927      442,229
                                                                                             ---------    ---------

Company-obligated mandatorily redeemable preferred securities of subsidiary
       trusts holding solely junior subordinated debentures of the Company                      20,898       16,200

Stockholders' Equity:

       Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
       Common stock, $.01 par value, 20,000,000 shares authorized; issued and outstanding:
         2,053,631 shares at March 31, 2002 and 2,033,707 shares at September 30, 2001              14           14
       Additional paid-in capital                                                               13,499       13,536
       Common stock acquired by stock benefit plans                                             (1,072)      (1,147)
       Treasury stock at cost: 658,925 at March 31, 2002
         and 686,293 at September 30, 2001                                                      (8,334)      (8,583)
       Accumulated other comprehensive income                                                    1,096        2,664
       Retained earnings - partially restricted                                                 25,106       24,137
                                                                                             ---------    ---------
           Total stockholders' equity                                                           30,309       30,621
                                                                                             ---------    ---------
TOTAL LIABILITIES, MINORITY INTEREST IN SUBSIDIARIES AND STOCKHOLDERS' EQUITY                $ 504,134    $ 489,050
                                                                                             =========    =========
</TABLE>

See notes to unaudited condensed consolidated financial statements


                                       1
<PAGE>
FIRST KEYSTONE FINANCIAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                       Three months ended       Six months ended
                                                            March 31                March 31
                                                        2002        2001        2002        2001
                                                      --------    --------    --------    --------
<S>                                                   <C>         <C>         <C>         <C>
INTEREST INCOME:
       Interest on:
           Loans                                      $  4,691    $  4,613    $  9,406    $  9,305
           Mortgage-related securities                   1,660       2,242       3,613       4,355
           Investment securities:
                Taxable                                    612         601       1,203       1,155
                Tax-Exempt                                 272         257         538         525
                Dividends                                  133         148         292         271
           Interest-bearing deposits                        48         131         120         359
                                                      --------    --------    --------    --------
                Total interest income                    7,416       7,992      15,172      15,970
                                                      --------    --------    --------    --------
INTEREST EXPENSE:
       Interest on:
           Deposits                                      2,450       3,252       5,347       6,447
           Federal Home Loan Bank advances               1,704       1,795       3,444       3,792
           Other borrowings                                                                      2
                                                      --------    --------    --------    --------
                Total interest expense                   4,154       5,047       8,791      10,241
                                                      --------    --------    --------    --------

NET INTEREST INCOME                                      3,262       2,945       6,381       5,729

PROVISION FOR LOAN LOSSES                                  135         135         270         270
                                                      --------    --------    --------    --------
NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                                   3,127       2,810       6,111       5,459
                                                      --------    --------    --------    --------

NON-INTEREST INCOME (LOSS):
       Service charges and other fees                      257         235         528         464
       Net gain (loss) on sale of:
           Loans                                             3          34          15          69
           Investment securities                                                   (20)
           Real estate owned                                62                      60          20
       Real estate operations                              (41)        (16)        (62)        (34)
       Increase in cash surrender value                    168         160         338         334
       Other                                                22          25          46          55
                                                      --------    --------    --------    --------
                Total non-interest income                  471         438         905         908
                                                      --------    --------    --------    --------

NON-INTEREST EXPENSE:
       Salaries and employee benefits                    1,102       1,022       2,181       2,032
       Occupancy and equipment expenses                    316         310         627         593
       Professional fees                                   254         164         443         390
       Federal deposit insurance premium                    14          13          29          27
       Data processing                                     115         100         215         201
       Advertising                                         129          82         223         168
       Minority interest in expense of subsidiaries        405         393         812         786
       Other                                               442         433         891         702
                                                      --------    --------    --------    --------
                Total non-interest expense               2,777       2,517       5,421       4,899
                                                      --------    --------    --------    --------

INCOME BEFORE INCOME TAX EXPENSE                           821         731       1,595       1,468
INCOME TAX EXPENSE                                         137         116         257         243
                                                      --------    --------    --------    --------
NET INCOME                                            $    684    $    615    $  1,338    $  1,225
                                                      ========    ========    ========    ========

BASIC EARNINGS PER COMMON SHARE                       $   0.35    $   0.30    $   0.70    $   0.59
                                                      ========    ========    ========    ========
DILUTED EARNINGS PER COMMON SHARE                     $   0.34    $   0.28    $   0.66    $   0.57
                                                      ========    ========    ========    ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.


                                       2
<PAGE>
FIRST KEYSTONE FINANCIAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)

<TABLE>
<CAPTION>

                                                                     Common
                                                                     stock                 Accumulated    Retained
                                                       Additional acquired by                  other      earnings-      Total
                                            Common      paid-in  stock benefit Treasury    comprehensive  partially  stockholders'
                                            stock       capital     plans       stock         income     restricted     equity

BALANCE AT OCTOBER 1, 2001                 $     14    $ 13,536    $ (1,147)   $ (8,583)     $  2,664     $ 24,137     $ 30,621
                                           --------    --------    ---------   ---------     --------     --------     --------
<S>                                        <C>         <C>         <C>         <C>           <C>          <C>          <C>
Net income                                                                                                   1,338        1,338

Other comprehensive loss, net of tax:
    Net unrealized loss on securities                                                          (1,568)                   (1,568)
                                                                                             --------                  --------
Comprehensive loss                                                                                                         (230)
                                                                                                                       --------
ESOP stock committed to be released                                      75                                                  75
Excess of fair value above cost of
    ESOP shares committed to be released                     72                                                              72
Exercise of stock options                                  (109)                    249                                     140
Dividends - $.18 per share                                                                                    (369)        (369)
                                           --------    --------    ---------   ---------     --------     --------     --------
BALANCE AT MARCH  31, 2002                 $     14    $ 13,499    $ (1,072)   $ (8,334)     $  1,096     $ 25,106     $ 30,309
                                           --------    --------    ---------   ---------     --------     --------     --------
</TABLE>

See notes to unaudited condensed consolidated financial statements.


                                       3
<PAGE>
FIRST KEYSTONE FINANCIAL, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                                           Six months ended
                                                                                                March 31
                                                                                            2002        2001
                                                                                          --------    --------
<S>                                                                                       <C>         <C>
OPERATING ACTIVITIES:
Net income                                                                                $  1,338    $  1,225
      Adjustments to reconcile net income to net cash provided by operating activities:
              Provision for depreciation and amortization                                      231         216
              Amortization of premiums and discounts                                            33         (96)
              (Gain) loss on sales of:
                     Loans                                                                     (15)        (69)
                     Investments                                                                20
                     Real estate owned                                                         (60)        (20)
              Provision for loan losses                                                        270         270
              Amortization of stock benefit plans                                              147         115
      Changes in assets and liabilities which provided (used) cash:
              Origination of loans held for sale                                              (195)    (13,107)
              Loans sold in the secondary market                                               420      14,723
              Accrued interest receivable                                                       82         (90)
              Prepaid expenses and other assets                                             (1,575)      5,738
              Accrued interest payable                                                        (668)       (319)
              Accrued expenses                                                                 226         (78)
                                                                                          --------    --------
                     Net cash provided by operating activities                                 254       8,508
                                                                                          --------    --------
INVESTING ACTIVITIES:
      Loans originated                                                                     (86,332)    (22,740)
      Purchases of:
          Investment securities available for sale                                         (12,095)    (15,613)
          Mortgage-related securities available for sale                                    (9,284)    (39,875)
      Redemption (purchase) of FHLB stock                                                      596        (175)
      Proceeds from sales of real estate owned                                                 796         220
      Proceeds from sales of investment securities                                           2,980
      Principal collected on loans                                                          66,754      20,353
      Proceeds from maturities, calls, or repayments of:
          Investment securities available for sale                                             180
          Mortgage-related securities available for sale                                    21,809      10,134
          Mortgage-related securities held to maturity                                         813         811
      Purchase of property and equipment                                                      (172)       (322)
      Net expenditures on real estate acquired through foreclosure and in development           (5)       (159)
                                                                                          --------    --------
                     Net cash used in investing activities                                 (13,960)    (47,366)
                                                                                          --------    --------
FINANCING ACTIVITIES:
      Net increase in deposit accounts                                                      10,009      29,605
      Net increase (decrease) in FHLB advances                                                  83     (14,016)
      Net increase in advances from borrowers for taxes and insurance                        1,330       1,119
      Exercise of stock options                                                                140
      Issuance of preferred trust securities                                                 8,000
      Purchase of preferred trust securities                                                (3,302)
      Purchase of treasury stock                                                                          (269)
      Cash dividend                                                                           (369)       (358)
                                                                                          --------    --------
                     Net cash provided by financing activities                              15,891      16,081
                                                                                          --------    --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                             2,185     (22,777)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                            19,131      40,114
                                                                                          --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $ 21,316    $ 17,337
                                                                                          ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
      Cash payments for interest on deposits and borrowings                               $  9,459    $ 14,510
      Transfers of loans receivable into real estate owned                                     284         549
      Cash payments of income taxes                                                            375
</TABLE>

See notes to unaudited condensed consolidated financial statements.


                                       4
<PAGE>
FIRST KEYSTONE FINANCIAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

1.       BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
         have been prepared in with instructions to Form 10-Q. Accordingly, they
         do not include all of the information and footnotes required by
         accounting principles generally accepted in the United States of
         America for complete statements. However, such information reflects all
         adjustments (consisting solely of normal recurring adjustments) which
         are, in the opinion of management, necessary for a fair statement of
         results for the unaudited interim periods.

         The results of operations of the three and six month periods ended
         March 31, 2002 are not necessarily indicative of the results to be
         expected for the fiscal year ending September 30, 2002 or any other
         period The unaudited condensed consolidated financial statements
         presented herein should be read in conjunction with the audited
         consolidated financial statements and related notes thereto included in
         the Company's Annual Report to Stockholders for the year ended
         September 30, 2001.

2.       INVESTMENT SECURITIES

         The amortized cost and approximate fair value of investment securities
         are as follows:

<TABLE>
<CAPTION>
                                                                        March 31, 2002
                                                                    Gross          Gross
                                                   Amortized      Unrealized     Unrealized    Approximate
                                                     Cost           Gain            Loss        Fair Value
                                                    -------        -------        -------        -------
<S>                                                <C>            <C>            <C>           <C>
Available for Sale:
     U.S. Treasury securities and securities
         of U.S. Government agencies:
             1 to 5 years                           $ 9,973        $   118                       $10,091
             5 to 10 years                            1,852            119        $    32          1,939
     Municipal obligations                           21,712            134            163         21,683
     Corporate bonds                                 17,315            170            824         16,661
     Mutual funds                                     5,009                            31          4,978
     Asset-backed securities                          2,993                                        2,993
     Preferred stocks                                 8,587             20            242          8,365
     Other equity investments                         2,778            901                         3,679
                                                    -------        -------        -------        -------
                Total                               $70,219        $ 1,462        $ 1,292        $70,389
                                                    =======        =======        =======        =======
</TABLE>


                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                               September 30, 2001
                                               ----------------------------------------------------
                                                               Gross          Gross
                                              Amortized      Unrealized    Unrealized     Approximate
                                                Cost           Gain            Loss        Fair Value
                                               -------        -------        -------        -------
<S>                                           <C>            <C>           <C>            <C>
U.S. Treasury securities and securities
     of U.S. Government agencies:
        1 to 5 years                           $ 2,961        $   172                       $ 3,133
        5 to 10 years                            1,843            207                         2,050
Municipal obligations                           21,890            739        $     3         22,626
Corporate bonds                                 14,333            277            523         14,087
Mutual funds                                     5,009              3              8          5,004
Preferred stocks                                 9,474              5            282          9,197
Asset-backed securities                          2,986                            16          2,970
Other equity investments                         2,778            719                         3,497
                                               -------        -------        -------        -------
     Total                                     $61,274        $ 2,122        $   832        $62,564
                                               =======        =======        =======        =======
</TABLE>

3.       MORTGAGE-RELATED SECURITIES

         Mortgage-related securities available for sale and mortgage-related
         securities held to maturity are summarized as follows:

<TABLE>
<CAPTION>
                                                                     March 31, 2002
                                                --------------------------------------------------------
                                                                 Gross           Gross
                                                Amortized      Unrealized      Unrealized      Approximate
                                                  Cost            Gain            Loss         Fair Value
                                                --------        --------        --------        --------
<S>                                             <C>            <C>             <C>             <C>
Available for Sale:
     FHLMC pass-through certificates            $  6,403        $    202        $      2        $  6,603
     FNMA pass-through certificates               11,903             211                          12,114
     GNMA pass-through certificates               40,055             558              17          40,596
     Collateralized mortgage obligations          43,811             527               7          44,331
                                                --------        --------        --------        --------
            Total                               $102,172        $  1,498        $     26        $103,644
                                                ========        ========        ========        ========

Held to Maturity:

     FHLMC pass-through certificates            $  2,002        $     58                        $  2,060
     FNMA pass-through certificates                4,213              33        $     35           4,211
     Collateralized mortgage obligations           4,423                              44           4,379
                                                --------        --------        --------        --------
            Total                               $ 10,638        $     91        $     79        $ 10,650
                                                ========        ========        ========        ========
</TABLE>


                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                                   September 30, 2001
                                                --------------------------------------------------------
                                                                 Gross           Gross
                                               Amortized       Unrealized      Unrealized     Approximate
                                                  Cost           Gain             Loss         Fair Value
                                                --------        --------        --------        --------
<S>                                            <C>             <C>             <C>            <C>
Available for Sale:
     FHLMC  pass-through certificates           $  8,832        $    343                        $  9,175
     FNMA pass-through certificates               14,570             486                          15,056
     GNMA pass-through certificates               42,804           1,103                          43,907
     Collateralized mortgage obligations          48,658             814        $      2          49,470
                                                --------        --------        --------        --------
        Total                                   $114,864        $  2,746        $      2        $117,608
                                                ========        ========        ========        ========

Held to Maturity:
     FHLMC  pass-through certificates           $  2,285        $     68        $      3        $  2,350
     FNMA pass-through certificates                4,684              70              54           4,700
     Collateralized mortgage obligations           4,485              49              34           4,500
                                                --------        --------        --------        --------
        Total                                   $ 11,454        $    187        $     91        $ 11,550
                                                ========        ========        ========        ========
</TABLE>

4.       LOANS RECEIVABLE

<TABLE>
<CAPTION>
                                              March 31       September 30
                                               2002               2001
                                             ---------         ---------
<S>                                          <C>             <C>
Real estate loans:
      Single-family                          $ 172,014         $ 160,289
      Construction and land                     27,277            29,117
      Multi-family and commercial               48,889            43,472
      Home equity and lines of credit           25,753            25,847
Consumer loans                                   1,109             1,125
Commercial loans                                 6,210             8,158
                                             ---------         ---------
      Total loans                              281,252           268,008
Loans in process                               (11,328)          (17,016)
Allowance for loan losses                       (2,168)           (2,181)
Deferred loan fees                                (867)           (1,147)
                                             ---------         ---------
Loans receivable - net                       $ 266,889         $ 247,664
                                             =========         =========
</TABLE>

The following is an analysis of the allowance for loan losses:

<TABLE>
<CAPTION>
                                        Six Months Ended
                                            March 31
                                    -----------------------
                                     2002             2001
                                    -------         -------
<S>                                 <C>             <C>
Balance beginning of period         $ 2,181         $ 2,019
Provisions charged to income            270             270
Charge-offs                            (288)           (139)
Recovery                                  5               1
                                    -------         -------
          Total                     $ 2,168         $ 2,151
                                    =======         =======
</TABLE>


                                       7
<PAGE>
         At March 31, 2002 and September 30, 2001, non-performing loans (which
         consist of loans in excess of 90 days delinquent) amounted to
         approximately $4,091 and $2,302, respectively.

         Assets classified as substandard (which includes real estate owned)
         amounted to $4.8 million and $3.5 million at March 31, 2002 and
         September 30, 2001, respectively. The increase in classified assets was
         due to the classification of three loans to borrowers whose financial
         results have weakened increasing the possibility that they will be
         unable to comply with the terms of their loan agreements. The Company
         is aggressively pursuing the repayment of the amounts borrowed and will
         continue monitoring to the adequacy of the collateral. Although
         management believes the Bank's reserves are adequate at March 31, 2002,
         recovery of the carrying value of the loans are dependent to a great
         extent on economic, operating and other conditions that are beyond the
         control of the Company.

5.       DEPOSITS

         Deposits consist of the following major classifications:

<TABLE>
<CAPTION>
                                        March 31                  September 30
                                         2002                         2001
                               -----------------------       -----------------------
                                Amount          Percent       Amount          Percent
                               --------          -----       --------          -----
<S>                            <C>              <C>          <C>              <C>
Non-interest bearing           $  7,469            2.3%      $  5,698            1.8%
NOW                              52,063           16.2         45,161           14.5
Passbook                         41,038           12.8         37,806           12.1
Money market demand              48,287           15.0         40,781           13.1
Certificates of deposit         172,753           53.7        182,155           58.5
                               --------          -----       --------          -----
      Total                    $321,610          100.0%      $311,601          100.0%
                               ========          =====       ========          =====
</TABLE>

6.       EARNINGS PER SHARE

         Basic net income per share is based upon the weighted average number of
         common shares outstanding, while diluted net income per share is based
         upon the weighted average number of common shares outstanding and
         common share equivalents that would arise from the exercise of dilutive
         securities. All dilutive shares consist of options which the exercise
         price of the options is lower than the market price for the dates
         presented.

         The calculated basic and diluted earnings per share ("EPS") is as
         follows:

<TABLE>
<CAPTION>
                                             For the Three Months Ended           For the Six Months Ended
                                                      March 31,                          March 31,
                                            ----------------------------        ----------------------------
                                              2002               2001              2002              2001
                                            ----------        ----------        ----------        ----------
<S>                                         <C>               <C>               <C>               <C>
Numerator                                   $      684        $      615        $    1,338        $    1,225
Denominators:
   Basic shares outstanding                  1,927,878         2,080,246         1,918,475         2,084,155
   Effect of dilutive securities               112,538            78,473           106,221            72,890
                                            ----------        ----------        ----------        ----------
   Diluted shares outstanding                2,040,416         2,158,719         2,024,696         2,157,045
                                            ==========        ==========        ==========        ==========
EPS:
   Basic                                    $     0.35        $     0.30        $     0.70        $     0.59
   Diluted                                  $     0.34        $     0.28        $     0.66        $     0.57
</TABLE>


                                       8
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Certain information in this quarterly statement may constitute forward-looking
information that involves risks and uncertainties that could cause actual
results to differ materially from those estimated. Persons are cautioned that
such forward-looking statements are not guarantees of future performance and are
subject to various factors which could cause actual results to differ materially
from those estimated. These factors include changes in general economic and
market conditions and the development of an interest rate environment that
adversely affects the interest rate spread or other income from the Company's
investments and operations.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2002 AND SEPTEMBER 30, 2001

Total assets of the Company increased $15.1 million, or 3.1%, from $489.1
million at September 30, 2001 to $504.1 million at March 31, 2002. The growth
was due mainly to increases in loans receivable of $19.2 million, or 7.8%, and
investment securities available for sale of $7.8 million, or 12.5%, partially
offset by a decrease in mortgage-related securities of $14.0 million, or 11.9%.
The asset growth was primarily funded by increased deposits and the reinvestment
of cash flows from mortgage-related securities.

Deposits increased $10.0 million, or 3.2%, from $311.6 million at September 30,
2001 to $321.6 million at March 31, 2002. The increase resulted from increases
of $19.4 million, or 15.0%, in core deposits (which consist of passbook, money
market, NOW and non-interest-bearing accounts) partially offset by a $9.4
million, or 5.2%, decrease in certificates of deposit. The increase in core
deposits reflects the Bank's continued emphasis on developing corporate deposit
relationships.

On November 28, 2001, First Keystone Capital Trust II, a trust formed under
Delaware law, that is a subsidiary of the Company, issued $8.0 million of pooled
trust preferred securities at a variable interest rate based on LIBOR plus a
margin. The interest is cumulative and payable semi-annually in arrears. The
Company has the option, subject to required regulatory approval, to prepay the
securities beginning December 8, 2006. On November 15, 2001, the Company
purchased $3.5 million of the existing 9.7% fixed rate trust preferred
securities that were issued in August 1997. The purchase is shown net of the
"Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company" in the
consolidated statement of financial condition.

Stockholders' equity decreased $312,000 due to a decrease in the accumulated
comprehensive income of $1.6 million to $1.1 million and to dividends paid
partially offset by net income.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31,
2002 AND 2001

Net Income.

Net income was $684,000, or $.34 per diluted share, for the three months ended
March 31, 2002 as compared to $615,000, or $.28 per diluted share, for the same
period in 2001. Net income for the six months ended March 31, 2002 was $1.3
million, or $.66 per diluted share, as compared to $1.2 million, or $.57 per
diluted share, for the same period in 2001. The $69,000, or 11.2%, increase in
net income for the three months ended March 31, 2002 was due to a $317,000
increase in net interest income partially offset by a $260,000 increase in
non-interest expense. The $113,000, or 9.2%, increase in net income for the six
months ended March 31, 2002 compared to the same period in 2001 was primarily
due to $651,000 increase in net interest income partially offset by a $522,000
increase in non-interest expense.


                                       9
<PAGE>
Net Interest Income.

Net interest income increased $317,000, or 10.8%, to $3.3 million and $651,000,
or 11.4%, to $6.4 million for the three and six months ended March 31, 2002,
respectively. Such increases were primarily due to $893,000, or 17.7%, and $1.4
million, or 14.2%, decreases in interest expense for the three and six months
ended March 31, 2002, respectively, which were partially offset by $576,000, or
7.2%, and $789,000, or 4.9%, decreases in interest income during such periods.
The average balance of interest-earning assets increased $29.4 million and $36.5
million for the three and six months ended March 31, 2002, respectively, as
compared to the same periods in 2001. Calculated on a fully taxable equivalent
basis, the weighted average yield earned on interest-earning assets for the
three and six months ended March 31, 2002 decreased 94 basis points to 6.38%
compared to the 2001 period. In addition, net interest expense was affected by
an increase in the average balance of interest-bearing liabilities of $26.5
million and $32.3 million for the three and six months ended March 31, 2002,
respectively, as compared to the same periods in 2001. For the three months
ended March 31, 2002, the weighted average rate paid on such liabilities
decreased 110 basis points to 3.75% from 4.85% for the same period in the prior
fiscal year and 102 basis points to 3.96% for the six months ended March 31,
2001 as compared to 4.98% for the six months ended March 31, 2001. Due to the
declining interest rate environment during 2001 and into the first quarter of
2002, the rates paid on interest-bearing liabilities, consisting of deposits and
borrowings, adjusted at a faster pace than the Company's interest-earning
assets, consisting primarily of loans and investment securities. The interest
rate spread and net interest margin, on a fully tax equivalent basis, increased
to 2.62% and 2.86%, respectively, for the three months ended March 31, 2002 as
compared to 2.46% and 2.75%, respectively, for the same period in 2001. The
interest rate spread and net interest margin, on a fully taxable equivalent
basis, were 2.55% and 2.79%, respectively, for the six months ended March 31,
2002 as compared to 2.45% and 2.73%, respectively, for the same period in 2001.

Provision for Loan Losses.

Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Company, the amount of the Company's classified assets, the status of past due
principal and interest payments, general economic conditions, particularly as
they relate to the Company's primary market area, and other factors related to
the collectibility of the Company's loan and loans held for sale portfolios. For
the three and six months ended March 31, 2002, the provision for loan losses
remain unchanged at $135,000 and $270,000, respectively compared for the same
period in 2001. At March 31, 2002, non-performing assets totaled $4.5 million,
or .88% of total assets, as compared to $3.2 million at September 30, 2001.

The Company's coverage ratio, which is the ratio of the allowance for loan
losses to non-performing assets, was 48.7% and 68.4% at March 31, 2001 and
September 30, 2001, respectively. The coverage ratio was adversely affected by
the placement of three commercial real estate loans totaling $2.4 million during
the second quarter of fiscal 2002. The Bank owns a 25% participation interest in
two loans totaling $1.9 million which consist of loans secured by an 18-hole
golf course and golf house, located in Avondale, Pennsylvania. The golf facility
is fully operational and continues to generate revenues. The other participating
loan of $495,000, which represents a 25% participating interest, is secured by a
partially completed storage facility in Clifton Heights, Pennsylvania. The lead
lender is in the process of foreclosing on the loans. Based on recent appraisals
and other factors, management presently believes the Company has provided
appropriate reserves for these properties. However, there can be no assurances
that additions to such reserves will not be necessary in future periods.

Management will continue to review its loan portfolio to determine the extent,
if any, to which additional loss provisions may be deemed necessary. There can
be no assurance that the allowance for loan losses will be adequate to cover
losses which may in fact be realized in the future and that additional
provisions for losses will not be required.


                                       10
<PAGE>
Non-interest Income.

Non-interest income increased $33,000, or 7.5%, to $471,000 for the three months
ended March 31, 2002 as compared to the same period in 2001. The increase for
the three months ended March 31, 2002 was primarily due to a 62,000, or 100%,
increase in the net gain on sale of real estate owned and $22,000, or 9.4%,
increase in service charges and other fees, partially offset by a decline in the
net gain on sale of loans and losses on real estate operations. For the six
months ended March 31, 2002, non-interest income decreased $3,000 or .3% to
$905,000 as compared to the same period in the prior year. The slight decrease
during the six months ended March 31, 2002 was primarily a result of declines in
the net gain on sale of loans and investment securities and increased expenses
related to real estate operations offset by increases in service charges and
other fees and gain on sales of real estate owned.

Management believes the expense of real estate operations related to the
nonperforming commercial real estate loans as discussed above will significantly
increase in the upcoming quarters in connection to the operation of the golf
facility. Because the operation is seasonal and highly dependent on weather,
public usage and the general economy, estimates of such expenses would be highly
speculative at this time.

Non-interest Expense.

Non-interest expense increased $260,000, or 10.3%, during the three months ended
March 31, 2002 as compared to the same period in 2001. Increases of $80,000,
$90,000, and $47,000 were incurred in compensation and employee benefits,
professional fees, and advertising, respectively. For the six months ended March
31, 2002, non-interest expense increased $522,000, or 10.7%, primarily due to
increases of $149,000 and $189,000 in compensation and employee benefits and
other non-interest expenses, respectively. The increase in salary and employee
benefits during the 2002 periods reflected normal salary and benefit expense
increases as well as additional costs associated with branch expansion. The
increase in other non-interest expense was primarily due to increases in bank
service charges, supplies and cash losses.

Income Tax Expense.

Income tax expense increased $21,000 to $137,000 and $14,000 to $257,000 for the
three and six months ended March 31, 2002, respectively. The increases were the
result of increases in income before income taxes as compared to the same
periods in 2001.

Critical Accounting Policies.

In management's opinion, the most critical accounting policy impacting the
Company's financial statements is the evaluation of the allowance for loan
losses. Management carefully monitors the credit quality of the loan portfolio
and makes estimates about the amount of credit losses that have been incurred at
each financial statement date. Management evaluates the fair value of collateral
supporting the impaired loans using independent appraisals and other measures of
fair value. This process involves subjective judgments and assumptions and is
subject to change based on factors that may be outside the control of the
Company.


                                       11
<PAGE>
Liquidity and Capital Resources.

The Company's liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities. The Company's primary
sources of funds are deposits, amortization, prepayment and maturities of
outstanding loans and mortgage-related securities, sales of loans, maturities of
investment securities and other short-term investments, borrowing and funds
provided from operations. While scheduled payments from the amortization of
loans and mortgage-related securities and maturing investment securities and
short-term investments are relatively predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions and competition. In addition, the Company invests excess
funds in overnight deposits and other short-term interest-earning assets which
provide liquidity to meet lending requirements. The Company has been able to
generate sufficient cash through its deposits as well as borrowings to satisfy
its funding commitments. At March 31, 2002, the Company had short-term
borrowings (due within one year or currently callable by the Federal Home Loan
Bank of Pittsburgh ("FHLB"), outstanding of $81.0 million, all of which
consisted of advances from the FHLB.

Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits. On a longer term basis, the Company maintains a
strategy of investing in various lending products, mortgage-related securities
and investment securities. The Company uses its sources of funds primarily to
meet its ongoing commitments, to pay maturing certificates of deposit and
savings withdrawals, fund loan commitments At March 31, 2002, the total approved
loan commitments outstanding amounted to $26.9 million, not including loans in
process. At the same date, commitments under unused lines of credit amounted to
$21.3 million. Certificates of deposit scheduled to mature in one year or less
at March 31, 2002 totaled $108.6 million. Based upon its historical experience,
management believes that a significant portion of maturing deposits will remain
with the Company.

The Company has not used, and has no intention to use, any significant
off-balance sheet financing arrangements for liquidity purposes. The Company's
financial instruments with off-balance sheet risk are limited to its obligations
to fund loans to customers pursuant to existing commitments. In addition, the
Company has not had, and has no intention to have, any significant transactions,
arrangements or other relationships with any unconsolidated, limited purpose
entities that could materially affect its liquidity or capital resources. The
Company has not, and does not intend to, trade in commodity contracts.

As of March 31, 2002, the Bank had regulatory capital which was in excess of
applicable limits. The Bank is required under applicable federal banking
regulations to maintain tangible capital equal to at least 1.5% of its adjusted
total assets, core capital equal to at least 4.0% of its adjusted total assets
and total capital to at least 8.0% of its risk-weighted assets. At March 31,
2002, the Bank had tangible capital and core capital equal to 7.9% of adjusted
total assets and total capital equal to 16.8% of risk-weighted assets.


                                       12
<PAGE>
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company's asset and liability management policies, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" in the Company's Annual Report on Form 10-K for the year ended
September 30, 2001.

The Company utilizes reports prepared by the OTS to measure interest rate risk.
Using data from the Bank's quarterly thrift financial reports, the OTS models
the net portfolio value ("NPV") of the Bank over a variety of interest rate
scenarios. The NPV is defined as the present value of expected cash flows from
existing assets less the present value of expected cash flows from existing
liabilities plus the present value of net expected cash inflows from existing
off- balance sheet contracts. The model assumes instantaneous, parallel shifts
in the U.S. Treasury Securities yield curve of 100 to 300 basis points, either
up or down, and in 100 basis point increments.

The interest rate risk analysis used by the OTS include an "Exposure Measure" or
"Post-Shock" NPV ratio and a "Sensitivity Measure". The "Post-Shock" NPV ratio
is the net present value as a percentage of assets over the various yield curve
shifts. A low "Post-Shock" NPV ratio indicates greater exposure to interest rate
risk and can result from a low initial NPV ratio or high sensitivity to changes
in interest rates. The "Sensitivity Measure" is the decline in the NPV ratio, in
basis points, caused by a 2% increase or decrease in rates, whichever produces a
larger decline. The following table sets forth the Bank's NPV as of March 31,
2002.

<TABLE>
<CAPTION>
                                   Net Portfolio Value

 Changes in
  Rates in                        Dollar          Percentage   Net Portfolio Value    Change in
Basis Points      Amount          Change            Change       As a % of Assets   Percentage (1)
------------      ------          ------            ------       ----------------   --------------
                                   (dollars in thousands)
<S>              <C>             <C>              <C>          <C>                  <C>
     300         $ 23,222        $(29,334)          (55.81)%            4.89%          (52.11)%

     200           33,329         (19,228)          (36.59)             6.83           (33.10)

     100           43,418          (9,138)          (17.39)             8.66           (15.18)

       0           52,557                                                               10.21

    (100)          55,461           2,904             5.53             10.60             3.82
</TABLE>

(1)      Based on the portfolio value of the Bank's assets in the base case
         scenario

As of March 31, 2002, the Company's NPV was $52.6 million or 10.21% of the
market value of assets. Following a 200 basis point increase in interest rates,
the Company's "post shock" NPV was $19.2 million or 6.83% of the market value of
assets. The change in the NPV ratio or the Company's sensitivity measure was
(3.37)%.


                                       13
<PAGE>
                                    PART II

Item 1.  Legal Proceedings

         The Company is involved in routine legal proceedings occurring in the
         ordinary course of business which, in the aggregate, are believed by
         management to be immaterial to the financial condition of the Company.

Item 2.  Changes in Securities and Use of Proceeds

         Not applicable

Item 3.  Defaults Upon Senior Securities

         Not applicable

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

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         None


                                       14
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                       FIRST KEYSTONE FINANCIAL, INC.

Date:   May 15, 2002                   By: /s/ Donald S. Guthrie
                                           ---------------------
                                       Donald S. Guthrie
                                       President and Chief Executive Officer

Date:   May 15, 2002                   By: /s/ Thomas M. Kelly
                                           -------------------
                                       Thomas M. Kelly
                                       Executive Vice-President and Chief
                                       Financial Officer


                                       15