EXHIBIT 13

Drovers Bancshares Corporation and Subsidiaries

CONTENTS

|Consolidated Statements of Condition                                                 
|-------------------------------------------------------------------------------------
|Consolidated Statements of Income                                                    
|Consolidated Statements of Comprehensive Income                                      
|Consolidated Statements of Changes in Shareholders' Equity                           
|Consolidated Statements of Cash Flows                                                
|Notes to Consolidated Financial Statements                                           
|Independent Auditors' Report                                                         
|Five Year Summary of Selected Financial Information                                  
|Management's Discussion and Analysis of Financial Condition and Results of Operations
|Supplemental Financial Data                                                          



Drovers Bancshares Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CONDITION

|                                                                                                                             | December 31,
|---------------------------------------------------------------------------------------------------------------------------- | ------------
|(in thousands)                                                                                                               | 2000        
|ASSETS                                                                                                                       |             
|Cash and due from banks                                                                                                      | $15,342     
|Money market investments                                                                                                     | 5,163       
|Investment securities (fair value $232,247 and $213,152)                                                                     | 232,247     
|Loans (net of unearned income of $2,605 and $3,042)                                                                          | 507,897     
|Reserve for loan losses                                                                                                      | -5,371      
|Net loans                                                                                                                    | 502,526     
|Bank premises and equipment                                                                                                  | 19,260      
|Other assets                                                                                                                 | 21,719      
|TOTAL ASSETS                                                                                                                 | $796,257    
|                                                                                                                             |             
|                                                                                                                             |             
|LIABILITIES                                                                                                                  |             
|Deposits:                                                                                                                    |             
|Noninterest-bearing                                                                                                          | $57,611     
|Interest-bearing                                                                                                             | 511,017     
|Total deposits                                                                                                               | 568,628     
|Federal funds purchased and securities sold under agreements to repurchase                                                   | 53,263      
|Other borrowings                                                                                                             | 102,808     
|Corporation-obligated mandatorily redeemable capital securities of subsidiary trust                                          | 7,500       
|Other liabilities                                                                                                            | 8,893       
|TOTAL LIABILITIES                                                                                                            | 741,092     
|                                                                                                                             |             
|SHAREHOLDERS' EQUITY                                                                                                         |             
|Common stock - no par, 15,000,000 shares authorized; issued and outstanding - 5,087,525 shares in 2000 and 4,805,977 in 1999 | 44,818      
|Retained earnings                                                                                                            | 10,495      
|Accumulated other comprehensive income                                                                                       | -148        
|TOTAL SHAREHOLDERS' EQUITY                                                                                                   | 55,165      
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                   | $796,257    



Drovers Bancshares Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

|                                                                           | Years Ended December 31,
|-------------------------------------------------------------------------- | ------------------------
|(in thousands, except per share data)                                      | 2000                    
|INTEREST INCOME                                                            |                         
|Interest and fees on loans                                                 | $42,076                 
|Interest on deposits with banks                                            | 282                     
|Interest and dividends on investment securities:                           |                         
|Taxable investment securities                                              | 11,198                  
|Equity securities                                                          | 1,555                   
|Tax-exempt investment securities                                           | 1,552                   
|Total interest income                                                      | 56,663                  
|INTEREST EXPENSE                                                           |                         
|Interest on deposits                                                       | 23,579                  
|Federal funds purchased and securities sold under agreements to repurchase | 3,111                   
|Interest on borrowed funds                                                 | 6,648                   
|Total interest expense                                                     | 33,338                  
|Net interest income                                                        | 23,325                  
|Provision for loan losses                                                  | 6,379                   
|Net interest income after provision for loan losses                        | 16,946                  
|OTHER INCOME                                                               |                         
|Investment services and trust income                                       | 1,591                   
|Service charges on deposit accounts                                        | 2,079                   
|Securities gains (losses)                                                  | -193                    
|Net gains on loan sales                                                    | 459                     
|Other                                                                      | 1,771                   
|Total other income                                                         | 5,707                   
|OTHER EXPENSES                                                             |                         
|Salaries and employee benefits                                             | 10,011                  
|Occupancy and premises                                                     | 1,485                   
|Furniture and equipment                                                    | 1,618                   
|Pre-merger consummation charges                                            | 1,150                   
|Marketing                                                                  | 643                     
|Supplies                                                                   | 458                     
|Other taxes                                                                | 462                     
|Other                                                                      | 3,936                   
|Total other expenses                                                       | 19,763                  
|Income before income tax expense (benefit)                                 | 2,890                   
|Applicable income tax expense (benefit)                                    | -218                    
|NET INCOME                                                                 | $3,108                  
|                                                                           |                         
|PER SHARE DATA                                                             |                         
|NET INCOME                                                                 | $0.61                   
|NET INCOME, assuming dilution                                              | $0.61                   
|DIVIDENDS                                                                  | $0.51                   



Drovers Bancshares Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

|                                                                      | Years Ended December 31,
|--------------------------------------------------------------------- | ------------------------
|(in thousands)                                                        | 2000                    
|Net income                                                            | $3,108                  
|Other comprehensive income:                                           |                         
|Unrealized gains (losses) on securities arising during period         | 4,324                   
|Reclassification adjustment for (gains) losses included in net income | 194                     
|Other comprehensive income (loss) before taxes                        | 4,518                   
|Income taxes (benefits) related to other comprehensive income (loss)  | 1,536                   
|Other comprehensive income (loss)                                     | 2,982                   
|Comprehensive income                                                  | $6,090                  



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

|                                                                                     |           |         |          | Accumulated  
|------------------------------------------------------------------------------------ | --------- | ------- | -------- | -------------
|                                                                                     |           |         |          | Other        
|                                                                                     |           | Common  | Retained | Comprehensive
|(in thousands, except number of shares)                                              | Shares    | Stock   | Earnings | Income       
|BALANCE, JANUARY 1, 1998                                                             | 2,961,127 | $33,470 | $8,407   | $1,593       
|Net income                                                                           |           |         | 6,810    |              
|Cash dividends                                                                       |           |         | -2,050   |              
|Three-for-two stock split                                                            | 1,482,821 | -17     | 6        |              
|Shares issued                                                                        | 24,513    | 319     |          |              
|Change in unrealized holding gains on securities, net of reclassification adjustment |           |         |          | -345         
|BALANCE, DECEMBER 31, 1998                                                           | 4,468,461 | $33,772 | $13,173  | $1,248       
|Net income                                                                           |           |         | 7,601    |              
|Cash dividends                                                                       |           |         | -2,288   |              
|5% stock dividend issued                                                             | 222,584   | 4,998   | -5,008   |              
|Shares issued                                                                        | 114,932   | 2,082   |          |              
|Change in unrealized holding gains on securities, net of reclassification adjustment |           |         |          | -4,378       
|BALANCE, DECEMBER 31, 1999                                                           | 4,805,977 | $40,852 | $13,478  | $-3,130      
|Net income                                                                           |           |         | 3,108    |              
|Cash dividends                                                                       |           |         | -2,600   |              
|5% stock dividend issued                                                             | 240,227   | 3,484   | -3,491   |              
|Shares issued                                                                        | 41,321    | 482     |          |              
|Change in unrealized holding gains on securities, net of reclassification adjustment |           |         |          | 2,982        
|BALANCE, DECEMBER 31, 2000                                                           | 5,087,525 | $44,818 | $10,495  | $-148        



Drovers Bancshares Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                               | Years Ended December 31,
|------------------------------------------------------------------------------ | ------------------------
|(in thousands)                                                                 | 2000                    
|CASH FLOWS FROM OPERATING ACTIVITIES:                                          |                         
|Net income                                                                     | $3,108                  
|Adjustments to reconcile net income to net cash from operating activities:     |                         
|Depreciation and amortization                                                  | 1,916                   
|Net (accretion) amortization of investment security (discounts) premiums       | -36                     
|Provision for loan losses                                                      | 6,379                   
|Gain on sale and call of investment securities held-to-maturity                | -1                      
|(Gain) loss on sale of investment securities available-for-sale                | 194                     
|Loss on sale of fixed assets                                                   | 7                       
|Gain on sale of loans                                                          | -459                    
|(Gain) loss on sale of other real estate                                       | 25                      
|Net deferred loan fees                                                         | -173                    
|Equity in losses of real estate ventures                                       | 285                     
|(Increase) decrease in interest/dividends receivable                           | -761                    
|(Increase) decrease in other assets                                            | -1,959                  
|Increase in interest payable                                                   | 1,542                   
|Increase (decrease) in other liabilities                                       | 1,331                   
|Loans originated for sale                                                      | -26,430                 
|Proceeds from sale of loans                                                    | 27,067                  
|Increase in cash surrender value of bank owned life insurance                  | -313                    
|Increase in other noncash items                                                | -52                     
|Net cash provided by operating activities                                      | 11,670                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                          |                         
|Proceeds from sales and maturities of investment securities held-to-maturity   | 1,725                   
|Proceeds from sales and maturities of investment securities available-for-sale | 50,024                  
|Purchases of investment securities available-for-sale                          | -66,698                 
|Purchases of bank owned life insurance                                         | -7,285                  
|Net increase in loans                                                          | -53,033                 
|Capital expenditures                                                           | -4,163                  
|Proceeds from sale of fixed assets                                             | 6                       
|Net purchase of investment in real estate ventures                             | -428                    
|Proceeds from sale of other real estate                                        | 332                     
|Net cash used in investing activities                                          | -79,520                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                          |                         
|Net increase in demand deposits and savings                                    | 31,332                  
|Net increase in certificates of deposit                                        | 32,161                  
|Net increase (decrease) in federal funds purchased and repurchase agreements   | -1,975                  
|Payments made for capital leases                                               | -54                     
|Net increase in other borrowings                                               | 7,678                   
|Proceeds from issuance of common stock                                         | 475                     
|Dividends paid                                                                 | -2,600                  
|Net cash provided by financing activities                                      | 67,017                  
|NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS                             | -833                    
|CASH & CASH EQUIVALENTS AT JANUARY 1,                                          | 21,338                  
|CASH & CASH EQUIVALENTS AT DECEMBER 31,                                        | $20,505                 



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts presented in the tables are in thousands, except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Drovers Bancshares Corporation ("Drovers") is a one bank holding company with a principal subsidiary, The Drovers & Mechanics Bank ("Drovers Bank").  Drovers Bank offers a wide variety of banking and trust services to
individuals and commercial customers.  The accounting and reporting policies followed by Drovers Bancshares Corporation and its subsidiaries conform with generally accepted accounting principles (GAAP) and general practice within the banking industry.

BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of all subsidiaries, including The Drovers & Mechanics Bank, 96 South George Street, Inc., Drovers Realty Company, Drovers Investment Company, Drovers Capital Trust I, Drovers
Settlement Services and Pennbanks Insurance Company.  All significant intercompany accounts and transactions have been eliminated in consolidation.  Income and expenses are recorded on the accrual basis of accounting except for investment services and
trust fees and certain other fees, which are recorded principally on the cash basis.  Fees recorded on the cash basis do not differ materially from the accrual basis.  Production costs of advertising are expensed when advertising begins.  Certain
reclassifications have been made to prior information to conform to current year's presentation.

USE OF ESTIMATES:

In preparing the consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from such estimates.

STATEMENTS OF CASH FLOWS:

For purposes of reporting cash flows, cash and cash equivalents include cash and money market investments.

INVESTMENT SECURITIES:

During the third quarter 2000, we adopted Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." SFAS 133 establishes standards for recording derivative financial instruments on the balance sheet at their fair value.  This statement
requires that the changes in the fair value of derivatives be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as a part of a hedge transaction and, if it is, the type of hedge
transaction.  SFAS 133 allows a one-time transfer of securities between categories when the statement is adopted.  The adoption of SFAS 133 did not have a material effect on Drovers' financial condition or results of operations; however, we did elect to
transfer all of our securities from held-to-maturity to available-for-sale.

As of December 31, 2000, all of our securities are classified as available-for-sale.  Differences between the amortized cost and fair value are considered other comprehensive income or loss and are shown net of deferred taxes in Shareholders' Equity.
We reassess the appropriateness of the security classifications each quarter.  We calculate amortization and accretion using the straight-line method on most of the investments and the effective interest method on the other investments.  The amortization
and accretion recognized on the straight-line method does not differ materially from the interest method.  Security gains and losses are determined using the specific identification method.

LOANS:

Loans are stated at the principal amount outstanding, net of deferred loan fees and costs.  Loan origination and commitment fees and related direct costs are deferred and amortized to income over the term of the respective loan and loan commitment
period as a yield adjustment.  Loans held-for-sale primarily consist of residential mortgages and are carried at the lower of aggregate cost or fair value.  We estimate fair value on an individual loan basis using quoted market prices.  Gains and losses
on residential mortgages sold are included in other income.

Interest on commercial and real estate mortgage loans is accrued and credited to operations based upon the principal amount outstanding.  Interest on consumer loans is recognized on the accrual basis using the actuarial method or simple interest method.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

NONPERFORMING ASSETS:

Nonperforming assets include loans for which the accrual of interest has been discontinued due to a serious weakening of the borrower's financial condition.  In addition, nonperforming assets include other real estate received in foreclosure and
loans modified in troubled debt restructurings.

We generally place loans on a nonaccrual basis when principal or interest is past due 90 days or more and when, in our opinion, full collection of principal or interest is unlikely.  At the time a loan is placed on nonaccrual status, we discontinue
the accrual of interest.  Income on nonaccrual loans is recognized only to the extent of cash received.  When prospects of recovery of the loan principal have significantly diminished, the loan is charged against the reserve for loan losses and any
subsequent recoveries are credited to the reserve account.

The basis in other real estate is carried at the lower of fair market value less costs to liquidate or the carrying value of the related loan at the time of acquisition.

RESERVE FOR LOAN LOSSES:

The reserve for loan losses is based on our evaluation of the loan portfolio and reflects an amount, which, in our opinion, is adequate to absorb losses in the existing portfolio.  Additions are made to the reserve through periodic provisions,
which are charged to expense.  We evaluate the adequacy of our loan loss reserve on a quarterly basis and consider the following in our evaluation:

- loan loss experience,
- changes in the composition and volume of the loan portfolio and
- the impact of economic conditions on the creditworthiness of borrowers.

These and other factors are considered in assessing the overall adequacy of the reserve.  A significant change in the estimate could result in a material change to net income.

Loans are classified as impaired when it is probable that Drovers will be unable to collect all amounts due in accordance with the terms of the loan agreement.  We perform a quarterly review of loan loss reserve adequacy and identify loans as impaired
through various means including the following:

- a formal loan review process,
- past due listings and
- watch lists.

The reserve for credit losses related to impaired loans is calculated either by discounting cash flows using the loan's initial effective interest rate or by determining the fair value of collateral for certain collateral-dependent loans.  Large
groups of smaller-balance homogeneous loans are collectively evaluated for impairment.

LOAN SERVICING RIGHTS:

We allocate the total cost of loans originated or purchased between loans and servicing rights based on the relative fair value of each.  The loan servicing rights are amortized, using the straight-line method, over the period of estimated
servicing income.  For purposes of evaluating and measuring impairment, Drovers stratifies the loan servicing rights based on original term and date of origination and uses quoted market prices to estimate fair value.  We did not have a valuation
allowance associated with the loan servicing rights as of December 31, 2000 or 1999.



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

PREMISES AND EQUIPMENT:

Premises and equipment are stated at cost less accumulated depreciation and amortization.  Depreciation is computed on the straight-line method and is charged to operations based on the following range of lives:

- Buildings - 20 to 60 years
- Equipment - 3 to 20 years.
- Leasehold improvements are amortized over the shorter of the lease terms or the estimated useful lives of the improvements.

Maintenance, repairs and minor replacements are expensed as incurred.  Gains and losses on dispositions are reflected in current operations.

INVESTMENT SERVICES AND TRUST ASSETS:

Assets held by our subsidiary in fiduciary or agency capacity for customers are not considered assets of Drovers or its subsidiaries and are not included in the consolidated financial statements.

INCOME TAXES:

Deferred tax assets and liabilities are recognized for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  We measure deferred tax
assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to changes in tax rates is
recognized in income in the period that includes the enactment date.

PER SHARE DATA:

We calculate earnings per common share by dividing net income by the weighted average number of shares of common stock outstanding during each period.  Earnings per common share, assuming dilution, gives effect to all potentially dilutive common
shares outstanding during each period.

NOTE 2 - CASH AND DUE FROM BANKS

Drovers Bank is required to maintain average reserve balances to comply with Federal Reserve Bank guidelines.  Reserve balances are based on outstanding deposits and consist primarily of vault cash.  Average reserves were $5,307,000 during 2000
and $5,424,000 during 1999.

NOTE 3 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

Drovers 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, standby letters of credit and
financial guarantees.  These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial condition.  The amounts of the instruments reflect the extent of involvement
we have in particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and financial guarantees is represented by the amount of those instruments.  We use
the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments.

|                                                   | 2000     | 1999    
|-------------------------------------------------- | -------- | --------
|Commitments to extend credit (legally binding)     | $121,572 | $110,228
|Standby letters of credit and financial guarantees | 19,650   | 9,274   



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 3 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)

Commitments to extend credit are agreements to lend to a customer as long as the conditions established in the contract are not violated.  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.  Drovers evaluates each customer's creditworthiness on a case by case basis.  The
amount of collateral obtained, if deemed necessary for extension of credit, is based on our credit evaluation of the counter party.  The type of collateral held varies but may include accounts receivable; inventory; property; plant and equipment and
income-producing commercial properties.

Standby letters of credit and financial guarantees are conditional commitments issued by Drovers to guarantee the performance of our customers to third parties.  Most guarantees extend for one year.  The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to customers.  We hold collateral supporting those commitments when it is deemed necessary.

NOTE 4 - CONTINGENT LIABILITIES AND RESTRICTIONS ON DIVIDENDS

In the normal course of business, there are various legal proceedings pending against Drovers.  We believe that the aggregate liabilities, if any, arising from such actions would not have a material adverse effect on our consolidated financial
position.

In order to pay dividends to our shareholders, Drovers is dependent on the upstreaming of dividends from Drovers Bank.  Drovers Bank is a Pennsylvania state-chartered bank and must comply with the State's banking code.  Under the code, cash dividends
may be declared and paid only out of accumulated net earnings.  In addition, surplus (additional paid-in capital) cannot be reduced by the payment of a dividend.

NOTE 5 - CONCENTRATION OF CREDIT RISK

We emphasize diversification of credit risk among industries and borrowers.  However, concentrations of credit risk can exist in relation to certain groups.  A group concentration arises when a number of customers have economic characteristics
that could similarly affect their ability to repay obligations due to changes in economic or other conditions.  Drovers grants loans to customers, substantially all of whom are residents of York County, Pennsylvania.

Although Drovers has a diversified loan portfolio, we grant loans to a number of local auto dealers and to their closely-held real estate companies.  Loans to the auto dealers are used mainly to fund new and used car inventories and leasing
receivables.  Loans to their closely-held real estate companies are used primarily to fund land leases to the auto dealers.  We generally retain auto titles or first mortgages as collateral.  Other collateral may be obtained based on the loan purpose or
management's credit evaluation.

The total credit exposure related to loans to auto dealers and their closely-held real estate companies was as follows:

|                      | 2000    | 1999   
|--------------------- | ------- | -------
|Principal balance     | $35,634 | $31,678
|Available credit      | 8,837   | 9,916  
|Total credit exposure | $44,471 | $41,594

NOTE 6 - MONEY MARKET INVESTMENTS AND INVESTMENT SECURITIES

Money market investments are stated at cost, which approximates fair value.  Money market investments as of December 31, 2000 were $5,163,000 and were $767,000 as of December 31, 1999.  All money market investments were in the form of
interest-bearing deposits with other financial institutions.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 6 - MONEY MARKET INVESTMENTS AND INVESTMENT SECURITIES (continued)

The amortized cost and estimated fair value of investment securities classified as available-for-sale as of December 31, 2000 were as follows:

|                                                                                      |           | Gross      | Gross      | Estimated
|------------------------------------------------------------------------------------- | --------- | ---------- | ---------- | ---------
|                                                                                      | Amortized | Unrealized | Unrealized | Fair     
|                                                                                      | Cost      | Gains      | Losses     | Value    
|U.S. Treasury securities and obligations of U.S. government corporations and agencies | $13,469   | $43        | $15        | $13,497  
|Obligations of states and political subdivisions                                      | 19,817    | 267        | 102        | 19,982   
|Corporate obligations                                                                 | 19,027    | -          | 918        | 18,109   
|Mortgage-backed securities and collateralized mortgage obligations                    | 155,920   | 1,182      | 536        | 156,566  
|Total debt securities                                                                 | 208,233   | 1,492      | 1,571      | 208,154  
|Equity securities                                                                     | 24,238    | 232        | 377        | 24,093   
|Total investment securities                                                           | $232,471  | $1,724     | $1,948     | $232,247 

During the third quarter 2000, we adopted Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities".  In conjunction with the adoption of the statement, we reclassified
$18,399,000 of securities from held-to-maturity to available-for-sale.The reclassification resulted in a $204,000 increase to the unrealized gains on investments and a $134,000 increase to accumulated other comprehensive income during the third quarter 2000.

The amortized cost and estimated fair value of debt securities at December 31, 2000, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay
obligations with or without call or prepayment penalties.

|                                                                   | Available-for-Sale
|------------------------------------------------------------------ | ------------------
|                                                                   |                   
|                                                                   | Amortized         
|                                                                   | Cost              
|Due in one year or less                                            | $2,488            
|Due after one year through five years                              | 4,744             
|Due after five years through ten years                             | 14,417            
|Due after ten years                                                | 30,664            
|                                                                   | 52,313            
|Mortgage-backed securities and collateralized mortgage obligations | 155,920           
|Total debt securities                                              | $208,233          



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 6 - MONEY MARKET INVESTMENTS AND INVESTMENT SECURITIES, (continued)

The amortized cost and estimated fair value of investment securities classified as held-to-maturity as of December 31, 1999 were as follows:

|                                                                                      |           | Gross      | Gross      | Estimated
|------------------------------------------------------------------------------------- | --------- | ---------- | ---------- | ---------
|                                                                                      | Amortized | Unrealized | Unrealized | Fair     
|                                                                                      | Cost      | Gains      | Losses     | Value    
|U.S. Treasury securities and obligations of U.S. government corporations and agencies | $1,491    | $10        | $-         | $1,501   
|Obligations of states and political subdivisions                                      | 14,567    | 202        | 22         | 14,747   
|Mortgage-backed securities and collateralized mortgage obligations                    | 5,298     | 42         | 17         | 5,323    
|Total investment securities                                                           | $21,356   | $254       | $39        | $21,571  

The amortized cost and estimated fair value of investment securities classified as available-for-sale as of December 31, 1999 were as follows:

|                                                                                      |           | Gross      | Gross      | Estimated
|------------------------------------------------------------------------------------- | --------- | ---------- | ---------- | ---------
|                                                                                      | Amortized | Unrealized | Unrealized | Fair     
|                                                                                      | Cost      | Gains      | Losses     | Value    
|U.S. Treasury securities and obligations of U.S. government corporations and agencies | $16,472   | $1         | $438       | $16,035  
|Obligations of states and political subdivisions                                      | 23,004    | 32         | 846        | 22,190   
|Corporate obligations                                                                 | 16,709    | 3          | 462        | 16,250   
|Mortgage-backed securities and collateralized mortgage obligations                    | 116,105   | 202        | 2,784      | 113,523  
|Total debt securities                                                                 | 172,290   | 238        | 4,530      | 167,998  
|Equity securities                                                                     | 24,035    | 190        | 642        | 23,583   
|Total investment securities                                                           | $196,325  | $428       | $5,172     | $191,581 

During 2000, 1999 and 1998 we sold investment securities classified as available-for-sale.  The proceeds from sales/calls of available-for-sale securities and the gross realized gains/(losses) were as follows:

|                              | 2000    | 1999 | 1998
|----------------------------- | ------- | ---- | ----
|Proceeds from sales/calls     | $28,822 | $367 | $471
|Gross realized gains (losses) | -194    | 141  | 262 

Drovers recognized gains on held-to-maturity investment securities with call options exercised by the issuer.  Realized gains were $1,000 in 2000 and $15,000 in 1999.  There were no realized gains in 1998.

We pledge securities as required or permitted by law to secure certain public and trust deposits and repurchase agreements.  Assets with a carrying value of $112,600,000 were pledged at December 31, 2000 and $104,483,000 were pledged at December 31,
1999.  Of the pledged securities, the amount pledged for repurchase agreements was $45,998,000 for 2000 and $33,385,000 for 1999.  The aggregate book value of debt securities from a single issuer did not exceed 10% of stockholders' equity at December 31,
2000 or 1999.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 7 - LOANS AND RESERVE FOR LOAN LOSSES

Loans were comprised of the following as of December 31:

|                                                                           | 2000     | 1999    
|-------------------------------------------------------------------------- | -------- | --------
|Commercial, financial and industrial loans                                 | $126,275 | $120,041
|Real estate mortgage loans:                                                |          |         
|Real estate construction-related                                           | 30,571   | 18,846  
|Real estate mortgage loans secured by 1 to 4 family residential properties | 149,227  | 140,139 
|Other real estate                                                          | 174,473  | 150,341 
|Total real estate mortgage loans                                           | 354,271  | 309,326 
|Consumer loans:                                                            |          |         
|Monthly payment                                                            | 26,144   | 29,181  
|Other revolving credit                                                     | 887      | 837     
|Total consumer loans                                                       | 27,031   | 30,018  
|Other                                                                      | 320      | 816     
|Total loans                                                                | $507,897 | $460,201

Drovers Bank has granted loans to officers, directors and their associates.  Related party loans are made on substantially the same terms, including rates and collateral, as those prevailing at the time for comparable transactions with unrelated
parties and do not represent more than a normal risk of collection.  The aggregate dollar amounts of the loans were $32,879,000 at December 31, 2000 and $28,872,000 at December 31, 1999.  During 2000, $82,479,000 of new loans were made to related parties
and repayments totaled $78,472,000.

Residential mortgage loans with a book value of $937,000 in 2000 and $882,000 in 1999 were committed for sale and awaiting settlement at year-end.  The cumulative market value exceeded the book value of these loans.  Total loans serviced at year-end
were $101,711,000 in 2000, $108,849,000 in 1999 and $106,647,000 in 1998.

Nonperforming assets are detailed below:

|                                                                            | 2000   | 1999   | 1998  
|--------------------------------------------------------------------------- | ------ | ------ | ------
|Nonaccrual loans                                                            | $2,325 | $5,336 | $1,435
|90 days past due and still accruing                                         | 8      | 33     | 7     
|Restructured loans                                                          | -      | 1,283  | 1,203 
|Non-performing loans                                                        | 2,333  | 6,652  | 2,645 
|Assets acquired by foreclosure or repossession                              | 104    | 85     | 148   
|Non-performing assets                                                       | $2,437 | $6,737 | $2,793
|Non-performing loans as a percentage of total loans, net of unearned income | 0.46%  | 1.45%  | 0.68% 
|Non-performing assets as a percentage of total assets                       | 0.31%  | 0.94%  | 0.47% 

If interest due on all nonaccrual loans had been accrued at the original contract rates, it is estimated that income before taxes would have been greater by $148,000 in 2000, $58,000 in 1999 and $60,000 in 1998.  Nonaccrual loans at December 31, 1999
included $4,185,000 of loans secured by trade receivables.  These loans were purchased at a discount; therefore, no additional interest would have been accrued.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 7 - LOANS AND RESERVE FOR LOAN LOSSES, (continued)

Loans classified as impaired as a result of troubled debt restructurings, which are in compliance with modified terms, recognize interest under the accrual method of accounting.  Interest on all other impaired loans is recognized on the accrual
method of accounting until principal or interest is past due 90 days or more and when collection of full principal or interest is unlikely.  At that time, the loans are placed on nonaccrual status.

The average recorded investment in impaired loans was $2,744,000 in 2000, $2,961,000 in 1999, and $1,672,000 in 1998. We recognized interest income on impaired loans of $34,000 in 2000, $159,000 in 1999, and $123,000 in 1998.  Interest income
recognized on a cash basis would have been $30,000 in 2000, $155,000 in 1999, and $122,000 in 1998.

The carrying value of our investment in impaired loans and the portion of the reserve for loan losses allocated to impaired loans as of December 31, are summarized below:

|                                                    | 2000   | 1999  
|--------------------------------------------------- | ------ | ------
|Impairment calculated based on:                     |        |       
|Present value of expected cash flows                | $1,193 | $4,475
|Fair value of collateral                            | 134    | 993   
|Impaired loans                                      | $1,327 | $5,468
|Reserve for loan losses allocated to impaired loans | $304   | $754  

Non-performing and impaired loans as of December 31, 1999 included a significant corporate relationship secured by trade receivables.  During the second quarter of 2000, continued deterioration in the underlying collateral caused us to charge-off the
balance of the relationship that was not secured by real estate and under contract for sale.

Changes in the reserve for loan losses for the years ended December 31, were as follows:

|                                     | 2000   | 1999   | 1998  
|------------------------------------ | ------ | ------ | ------
|Balance, beginning of year           | $3,908 | $3,912 | $3,304
|Provision for loan losses            | 6,379  | 1,727  | 1,266 
|Loans charged-off:                   |        |        |       
|Commercial, financial and industrial | 4,256  | 1,536  | 521   
|Real estate                          | 589    | 14     | 1     
|Consumer                             | 177    | 311    | 235   
|Total loans charged-off              | 5,022  | 1,861  | 757   
|Recoveries:                          |        |        |       
|Commercial, financial and industrial | 15     | 48     | -     
|Real estate                          | 16     | -      | -     
|Consumer                             | 75     | 82     | 99    
|Total recoveries                     | 106    | 130    | 99    
|Balance, end of year                 | $5,371 | $3,908 | $3,912



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 8 - PREMISES AND EQUIPMENT

Premises and equipment were comprised of the following as of December 31:

|                                          | 2000    | 1999   
|----------------------------------------- | ------- | -------
|Land and land improvements                | $2,472  | $1,464 
|Buildings                                 | 12,037  | 11,799 
|Capitalized leased premises and equipment | -       | 442    
|Furniture and equipment                   | 16,709  | 14,600 
|Construction in process                   | 584     | 271    
|                                          | 31,802  | 28,576 
|Less accumulated depreciation             | 12,542  | 11,786 
|Total bank premises and equipment         | $19,260 | $16,790

Provisions for depreciation charged to operating expenses were $1,680,000 for 2000, $1,553,000 for 1999 and $1,423,000 for 1998.

NOTE 9 - LOAN SERVICING RIGHTS

Changes in loan servicing rights for the years ended December 31, were as follows:

|                            | 2000 | 1999  
|--------------------------- | ---- | ------
|Balance, beginning of year  | $572 | $532  
|Servicing rights recognized | 39   | 229   
|Servicing rights amortized  | 167  | 189   
|Balance, end of year        | $444 | $572  
|Fair value, end of year     | $493 | $1,028

NOTE 10 - INVESTMENT IN REAL ESTATE VENTURES

Drovers is a limited partner in six real estate ventures that own and operate apartment buildings.  The apartments provide low-income housing to qualified families. The investments are accounted for under the equity method of accounting.  The
combined carrying values of the investments at year-end were $6,377,000 in 2000 and $5,554,000 in 1999.

NOTE 11 - BANK OWNED LIFE INSURANCE ("BOLI")

Drovers Bank modified certain benefit plans for specific officers during the second quarter of 2000.  In conjunction with these modifications, Drovers Bank purchased life insurance on certain key officers.  The BOLI had a balance of $7,598,000 at
December 31, 2000, which approximated the cash surrender value.  The BOLI is included in other assets in the consolidated financial statements.

NOTE 12 - TIME DEPOSITS

Time deposits of $100,000 or more aggregated $35,439,000 at December 31, 2000 and $32,084,000 at December 31, 1999.  Interest expense on these time deposits amounted to approximately $2,156,000 in 2000, $1,563,000 in 1999 and $1,390,000 in 1998.
The amount of total time deposit maturities are as follows: $167,651,000 in 2001; $82,057,000 in 2002; $26,722,000 in 2003; $10,466,000 in 2004 and $7,147,000 in 2005.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 13 - OTHER BORROWINGS AND LEASE COMMITMENTS

|                                                          | 2000     | 1999   
|--------------------------------------------------------- | -------- | -------
|Notes payable to FHLB Pittsburgh:                         |          |        
|Due 2000, 6.01%                                           | $-       | $100   
|Due 2000, variable                                        | -        | 4,000  
|Due 2002, 5.52% - 5.60%, convertible quarterly after 1998 | -        | 15,000 
|Due 2002, variable                                        | 10,000   | 10,000 
|Due 2002, 6.03% - 6.75%                                   | 10,000   | -      
|Due 2003, 6.03% - 6.61%                                   | 10,000   | -      
|Due 2003, 6.40%                                           | 400      | 400    
|Due 2003, 5.13%, convertible quarterly after 2000         | -        | 8,000  
|Due 2004, variable                                        | 5,000    | 5,000  
|Due 2005, 5.24% - 6.40%, convertible quarterly after 2001 | 10,000   | 5,000  
|Due 2005, 5.98%, amortizing                               | 5,000    | -      
|Due 2006, 5.71%, convertible quarterly after 2000         | -        | 5,000  
|Due 2008, 5.15%, convertible in 2005                      | 5,000    | 5,000  
|Due 2009, 5.52%, convertible quarterly after 2000         | -        | 5,000  
|Due 2009, 5.94% - 6.04%, convertible quarterly after 2002 | 10,000   | 10,000 
|Due 2009, 4.93% - 5.94%, convertible quarterly after 2004 | 12,000   | 12,000 
|Due 2010, 5.99%, convertible quarterly after 2001         | 5,000    | -      
|Due 2010, 6.73%, convertible in 2005                      | 10,000   | -      
|Due 2014, 5.60%, convertible quarterly after 2004         | 5,000    | 5,000  
|Due 2015, 3.75%, amortizing                               | 357      | 365    
|Due 2016, 4.00%, amortizing                               | 640      | 652    
|Note payable to First Union:                              |          |        
|Due 2003, 6.53%                                           | 4,411    | 4,614  
|                                                          | 102,808  | 95,131 
|Capital lease obligations                                 | -        | 106    
|                                                          | $102,808 | $95,237

The Federal Home Loan Bank of Pittsburgh (FHLB) notes payable are secured by FHLB stock, deposits held by the FHLB and other mortgage collateral.  The fair value of the FHLB stock was $12,086,000 as of December 31, 2000 and 1999. The interest rates on
the variable notes reprice quarterly or more frequently and are based on LIBOR or prime.  The convertible borrowings have an option for the FHLB to convert the rate to a floating rate after expiration of the fixed period.  The subsequent floating rate is
subject to quarterly adjustments until maturity.  These borrowings include a put option if the FHLB elects to convert the debt to a variable interest rate.  Drovers also maintains a credit line with the FHLB secured by the same collateral. The unused
credit line totaled $99,256,000 at December 31, 2000.  The First Union note payable is secured by a mortgage on the 96 South George Street office building.  The note is payable in monthly installments based on a twenty-year amortization. The amounts of
notes payable maturing are as follows: $1,121,000 in 2001; $21,192,000 in 2002; $15,379,000 in 2003; $6,080,000 in 2004; $11,146,000 in 2005 and $47,890,000 thereafter.

At December 31, 2000 and 1999, Drovers was obligated under noncancellable leases for premises and equipment.  The terms include various renewal options and provide for rental increases based upon predetermined factors.  The Hellam land lease contains
a purchase option.  The rental expense under such leases amounted to $471,000 in 2000, $447,000 in 1999 and $390,000 in 1998.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 13 - OTHER BORROWINGS AND LEASE COMMITMENTS (continued)

Future minimum rental payments under noncancellable operating leases with terms of one year or more at December 31, 2000 were:

|                                     | Operating
|------------------------------------ | ---------
|                                     | Leases   
|2001                                 | $513     
|2002                                 | 509      
|2003                                 | 499      
|2004                                 | 435      
|2005                                 | 388      
|Thereafter                           | 1,462    
|Total future minimum rental payments | $3,806   

NOTE 14 - CAPITAL SECURITIES OF SUBSIDIARY TRUST

On September 17, 1999, Drovers set up Drovers Capital Trust I (the "Trust"), a Delaware business trust, in which Drovers owns all of the common equity. The Trust issued $7,500,000 of 9.25% preferred securities to investors in conjunction
with Drovers issuing $7,735,000 of junior subordinated deferrable interest debentures to the Trust.  The debentures are the sole asset of the Trust.  The terms of the junior subordinated deferrable interest debentures are the same as the terms on the
preferred securities.  Our obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the Trust's obligations under the preferred securities.  The preferred securities are redeemable by
us on or after September 30, 2004, or earlier if the deduction of related interest for federal income taxes is prohibited, treatment as Tier 1 capital is no longer permitted, or certain other contingencies arise.  The preferred securities must be redeemed
upon maturity of the debentures on September 30, 2027.

NOTE 15 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

We estimate fair value amounts by using available market information and appropriate valuation methodologies.  However, considerable judgment is required to interpret market data to develop the estimates of fair value.  Accordingly, the estimates
presented herein are not necessarily indicative of the amounts we could realize in a current market exchange.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The information presented is based on pertinent information available to us as of December 31, 2000 and 1999.  Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been
comprehensively revalued since that time and current estimated fair value of these financial instruments may have changed significantly.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 15 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

|                                                                                    | 2000     | 1999     
|----------------------------------------------------------------------------------- | -------- | ---------
|                                                                                    |          | Estimated
|                                                                                    | Carrying | Fair     
|                                                                                    | Amount   | Value    
|FINANCIAL ASSETS:                                                                   |          |          
|Cash and short-term investments                                                     | $20,505  | $20,505  
|Investment securities                                                               | 232,247  | 232,247  
|Net loans                                                                           | 502,526  | 509,561  
|Interest receivable                                                                 | 4,149    | 4,149    
|FINANCIAL LIABILITIES:                                                              |          |          
|Demand and savings deposits                                                         | 270,768  | 270,768  
|Time deposits                                                                       | 297,860  | 300,325  
|Federal funds purchased and securities sold under agreement to repurchase           | 53,263   | 53,263   
|Notes payable                                                                       | 102,808  | 103,951  
|Corporation-obligated mandatorily redeemable capital securities of subsidiary trust | 7,500    | 7,443    
|Interest payable                                                                    | 5,896    | 5,896    

The following methods and assumptions were used to estimate fair value for each class of financial instrument:

- For short-term instruments, the carrying amount was used as a reasonable estimate of fair value.
- The fair value of investment securities was based on quoted market prices, dealer quotes and prices obtained from independent pricing services.
- For floating rate loans, which experienced no significant change in credit risk and for deposits and borrowings with floating interest rates, we presumed that estimated fair values approximated the carrying amount.
- The fair value of fixed rate loans and time deposits was estimated based on present values using applicable risk-adjusted spreads to the Federal Home Loan Bank of Pittsburgh rates to approximate current rates offered for loans and deposits of similar
maturities.  We believe that the risk factor embedded in the currently offered rates results in a fair valuation of the loan portfolio.  The primary risks are credit risk and prepayment risk.
- For convertible borrowings, the fair value was provided by an independent source and based on the likelihood the instrument would be converted on its next possible conversion date given the current rates offered by the Federal Home Loan Bank of
Pittsburgh.
- The fair value of fixed rate borrowings and the capital securities was estimated based on present values using currently offered rates for similar instruments.

There was no material difference between the notional amount and the estimated fair value of off-balance sheet items, which totaled $141,222,000 at December 31, 2000.  Off-balance sheet items are primarily comprised of unfunded loan commitments, which
are generally priced at market at the time of funding.

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 16 - INCOME TAXES

Total income tax expense (benefit) for the years ended December 31, was allocated as follows:

|                                                     | 2000   | 1999   | 1998  
|---------------------------------------------------- | ------ | ------ | ------
|Income from continuing operations                    | $-218  | $1,546 | $1,356
|Shareholders' equity, for other comprehensive income | 1,536  | -2,255 | -177  
|Total income tax expense (benefit)                   | $1,318 | $-709  | $1,179

Income tax expense (benefit) attributable to other comprehensive income consists of the following at December 31:

|                                                                        | 2000   | 1999    | 1998 
|----------------------------------------------------------------------- | ------ | ------- | -----
|Unrealized gains (losses) on securities arising during the period       | $1,470 | $-2,207 | $-88 
|Reclassification adjustment for (gains) losses included in net   income | 66     | -48     | -89  
|Income tax expense (benefit) related to other comprehensive income      | $1,536 | $-2,255 | $-177

Income tax expense (benefit) attributable to income from continuing operations consists of the following at December 31:

|                             | 2000   | 1999   | 1998  
|---------------------------- | ------ | ------ | ------
|Currently payable            | $1,140 | $1,686 | $1,447
|Deferred expense (benefit)   | -1,358 | -140   | -91   
|Income tax expense (benefit) | $-218  | $1,546 | $1,356

For the years ended December 31, the income tax expense (benefit) attributable to income from continuing operations differed from the tax expense computed by applying the Federal statutory rate to pretax earnings.  The reasons for the differences were
as follows:

|                                                              | 2000   | 1999   | 1998  
|------------------------------------------------------------- | ------ | ------ | ------
|Income before income tax expense (benefit)                    | $2,890 | $9,147 | $8,166
|Tax at federal income tax rate                                | $982   | $3,110 | $2,776
|Differences resulting from:                                   |        |        |       
|Effect of tax-exempt income                                   | -502   | -474   | -391  
|Historic and low income tax credits                           | -664   | -817   | -808  
|Effect of dividend income                                     | -370   | -294   | -246  
|Increase in cash surrender value of bank owned life insurance | -118   | -      | -     
|Preconsumation merger expenses                                | 391    | -      | -     
|Other items, net                                              | 63     | 21     | 25    
|Applicable income tax expense (benefit)                       | $-218  | $1,546 | $1,356





Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 16 - INCOME TAXES, (continued)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are presented below:

|                                                           | 2000   | 1999  
|---------------------------------------------------------- | ------ | ------
|Deferred tax assets:                                       |        |       
|Reserve for loan losses                                    | $1,715 | $1,026
|Pension                                                    | 306    | 159   
|Unrealized holding losses on available-for-sale securities | 76     | 1,612 
|Alternative minimum tax credit carryforward                | 765    | 170   
|Other                                                      | 101    | 83    
|Total gross deferred tax assets                            | 2,963  | 3,050 
|Deferred tax liabilities:                                  |        |       
|Bank premises and equipment                                | 345    | 385   
|Net loan costs                                             | 280    | 240   
|Mortgage servicing rights                                  | 151    | 194   
|Other                                                      | 15     | 15    
|Total gross deferred tax liabilities                       | 791    | 834   
|Net deferred tax assets (liabilities)                      | $2,172 | $2,216

Federal income taxes (benefits) on security gains (losses) were $-66,000 in 2000, $62,000 in 1999 and $89,000 in 1998.

We believe the deferred tax assets are realizable since we have had a long history of strong earnings and a carryback potential exceeding the deferred tax asset.  We are not aware of any evidence that would preclude us from ultimately realizing these
assets.

NOTE 17 - NET INCOME PER SHARE

Per share information is computed based on the weighted average number of shares of stock outstanding during each year, giving retroactive effect to a 5% stock dividend issued in 2000 and in 1999 and a three-for-two stock split in 1998.  Net
income per share and net income per share, assuming dilution, were calculated as follows:

|                                              | 2000   | 1999   | 1998  
|--------------------------------------------- | ------ | ------ | ------
|Net income                                    | $3,108 | $7,601 | $6,810
|Average shares outstanding                    | 5,060  | 4,939  | 4,912 
|Effect of dilutive securities                 | 36     | 54     | 74    
|Average shares outstanding, assuming dilution | 5,096  | 4,993  | 4,986 
|Net income per share                          | $0.61  | $1.54  | $1.39 
|Net income per share, assuming dilution       | $0.61  | $1.52  | $1.37 

NOTE 18 - COMMON STOCK

Drovers issued the following stock dividends:

|             | 2000    | 1999   
|------------ | ------- | -------
|Percentage   | 5%      | 5%     
|Record date  | 5-05-00 | 5-07-99
|Payable date | 5-26-00 | 5-28-99



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 19 - CASH FLOW DISCLOSURES

Drovers paid interest of $31,077,000 in 2000, $23,479,000 in 1999 and $21,211,000 in 1998.  We paid income taxes of $805,000 in 2000, $1,850,000 in 1999 and $1,670,000 in 1998.  Transfers from loans to other real estate as a result of foreclosure
were $377,000 in 2000, $318,000 in 1999 and $277,000 in 1998.  We recognized a $37,000 reduction in income taxes paid as a result of  a disqualifying disposition in 1998 of stock acquired by the exercise of incentive stock options.  We did not recognize a
similar reduction in 1999 or 2000.

NOTE 20 - RETIREMENT PLAN

Drovers has a noncontributory pension plan covering all eligible employees. The plan provides retirement benefits, which are a function of both the years of service and the highest level of compensation during any consecutive five-year period of
the last ten years before retirement.  It is our policy to fund the plan sufficiently to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act, plus such additional amounts as we determine to be appropriate from
time to time.  Pension expense was $250,000 in 2000, $192,000 in 1999 and $161,000 in 1998.Drovers also has nonqualified supplemental retirement plans covering existing and former executives, which are unfunded.  The amount included in other liabilities on these plans was $1,503,000 at December 31, 2000 and $978,000 at December 31, 1999.

The following table sets forth the plan's funded status and amounts recognized in the Drover's consolidated financial statements at December 31:

|                                          | 2000    | 1999   
|----------------------------------------- | ------- | -------
|Change in benefit obligation:             |         |        
|Benefit obligation at  January 1,         | $-3,694 | $-3,503
|Service cost                              | -360    | -292   
|Interest cost                             | -258    | -245   
|Benefits paid                             | 211     | 555    
|Actuarial loss                            | -189    | -209   
|Benefit obligation at December 31,        | $-4,290 | $-3,694
|Change in plan assets:                    |         |        
|Fair value of plan assets at January 1,   | $3,977  | $3,705 
|Employer contributions                    | 311     | 325    
|Actual return on assets                   | 472     | 502    
|Benefits paid                             | -211    | -555   
|Fair value of plan assets at December 31, | $4,549  | $3,977 
|Funded status                             | $259    | $283   
|Unrecognized net transition asset         | -102    | -115   
|Unrecognized prior service cost           | 7       | 8      
|Unrecognized net gain                     | 97      | 23     
|Prepaid pension cost                      | $261    | $199   

Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 20 - RETIREMENT PLAN, (continued)

The net periodic benefit cost included the following:

|                                     | 2000 | 1999 | 1998
|------------------------------------ | ---- | ---- | ----
|Service cost                         | $360 | $292 | $257
|Interest cost                        | 258  | 245  | 219 
|Expected return on plan assets       | -356 | -333 | -303
|Amortization of net transition asset | -13  | -13  | -13 
|Amortization of prior service cost   | 1    | 1    | 1   
|Net periodic benefit cost            | $250 | $192 | $161

The following weighted average assumptions were used for the plan:

|                                        | 2000 | 1999 | 1998
|--------------------------------------- | ---- | ---- | ----
|Discount rate                           | 7.0% | 7.0% | 7.0%
|Rate of increase in salary levels       | 4.0% | 4.0% | 4.0%
|Long-term rate of return on plan assets | 9.0% | 9.0% | 9.0%

Plan assets are invested in mutual funds, which consist of corporate and U.S. government bonds and domestic and foreign equity securities.

Drovers has a 401(k) Salary Deferral Plan.  This plan covers all eligible employees who elect to contribute to the plan.   An eligible employee is anyone over the age of 21 who has completed one year of service.  Our contribution equals 50% of the
employee's contribution up to a maximum of 6% of annual salary.   The annual expense included in salaries and employee benefits amounted to $149,000 in 2000, $123,000 in 1999 and $112,000 in 1998.

NOTE 21 - STOCK OPTION PLANS

Drovers has an incentive stock option plan, a non-employee directors plan and an employee stock purchase plan.  A committee of the Board of Directors administers the incentive stock option plan and the non-employee directors plan.  Under the
incentive stock option plan, the committee, at its discretion, grants options to eligible key employees.  The option price is the fair value of shares on the day granted.  No options may be exercised after ten years.  The options vest as follows: 50% on
day of grant; 50% one year following grant date.  Under the current incentive stock option plan, 289,897 options have been authorized and not yet granted.  The non-employee directors plan allows non-employee directors to elect to take stock options in
lieu of directors' fees and to receive option grants if certain performance targets are achieved.  The option price is the fair value of shares on the day granted.  Options are immediately vested and must be exercised within ten years.  Under the
non-employee directors plan, 111,126 options have been authorized and not yet granted.  The following shares and average option prices have been adjusted for subsequent stock splits and dividends:

|                            | 2000    | 1999     | 1998   
|--------------------------- | ------- | -------- | -------
|                            | Stock   | Exercise | Stock  
|                            | Options | Price    | Options
|Balance at January 1,       | 179     | $15.17   | 145    
|Granted                     | 97      | 16.88    | 45     
|Exercised                   | 16      | 8.85     | 9      
|Forfeited                   | 3       | 15.76    | 2      
|Balance at December 31,     | 257     | $16.19   | 179    
|Exercisable at December 31, | 231     | $16.09   | 158    



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 21 - STOCK OPTION PLANS, (continued)

The following options were outstanding at December 31, 2000:

|Range of        | Options     | Exercise | Remaining | Options    
|--------------- | ----------- | -------- | --------- | -----------
|Exercise Prices | Outstanding | Price    | Life      | Exercisable
|$ 9.01 - $12.00 | 62          | $10.61   | 4.8 years | 62         
|$12.01 - $15.00 | 35          | 12.97    | 6.5       | 35         
|$15.01 - $18.00 | 92          | 16.96    | 9.1       | 66         
|$18.01 - $21.00 | 3           | 19.63    | 9.5       | 3          
|$21.01 - $24.00 | 65          | 22.01    | 7.8       | 65         
|                | 257         | $16.19   | 7.4 years | 231        

The weighted average grant-date fair value of options granted was $4.68 in 2000, $5.28 in 1999 and $9.98 in 1998.  We use the Black-Scholes Option Pricing Model to calculate the grant-date fair value.  The following significant assumptions were used:

|                        | 2000      | 1999      | 1998     
|----------------------- | --------- | --------- | ---------
|Risk free interest rate | 6.6%      | 5.0%      | 5.6%     
|Expected life           | 7.7 years | 6.2 years | 8.2 years
|Expected volatility     | 20.4%     | 19.1%     | 15.4%    
|Expected dividends      | 2.9%      | 2.0%      | 1.6%     

The employee stock purchase plan allows eligible employees to purchase Drovers stock at 85% of the lesser of the fair value of the stock on the date of grant or on the date of exercise.  Shares purchased under the terms of the plan were 6,000 in 2000,
5,000 in 1999 and 4,000 in 1998.  As of December 31, 2000, 243,000 options have been reserved for future issuances under the plan.

Drovers applies APB Opinion 25 and related interpretations in accounting for its plans.  Accordingly, no compensation cost has been recognized.  Had compensation cost been determined consistent with the method of SFAS No. 123, "Accounting for
Stock-Based Compensation," our net income and earnings per share would have been reduced to the pro forma amounts indicated below:

|                                      |             | 2000   | 1999   | 1998  
|------------------------------------- | ----------- | ------ | ------ | ------
|Net Income                            | As reported | $3,108 | $7,601 | $6,810
|                                      | Pro forma   | $2,789 | $7,436 | $6,630
|Earnings per share                    | As reported | $0.61  | $1.54  | $1.39 
|                                      | Pro forma   | $0.55  | $1.51  | $1.35 
|Earnings per share, assuming dilution | As reported | $0.61  | $1.52  | $1.37 
|                                      | Pro forma   | $0.55  | $1.49  | $1.33 

NOTE 22 - BUSINESS SEGMENTS

Drovers conducts business in the Banking industry and offers a wide variety of banking and trust services to individuals and commercial customers.  As of December 31, 2000 and 1999, we did not use discreet financial information on any segments
that meet the reporting requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information".  All revenues for the years ended December 31, 2000, 1999, and 1998 were derived
from sources within the United States and no revenues from a single customer amounted to 10% or more of our annual revenues.



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 23 - PARENT CORPORATION FINANCIAL STATEMENTS

|                                                                                    | December 31,
|----------------------------------------------------------------------------------- | ------------
|STATEMENTS OF CONDITION                                                             | 2000        
|ASSETS                                                                              |             
|Cash                                                                                | $175        
|Investments in and advances to  banking subsidiary                                  | 60,805      
|Investments in and advances to non-banking subsidiaries                             | 1,263       
|Other assets                                                                        | 2,227       
|TOTAL ASSETS                                                                        | $64,470     
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                |             
|Other liabilties                                                                    | $1,570      
|Corporation-obligated mandatorily redeemable capital securities of subsidiary trust | 7,735       
|Total shareholders' equity                                                          | 55,165      
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                          | $64,470     



|                                                          | Years Ended December 31,
|--------------------------------------------------------- | ------------------------
|STATEMENTS OF INCOME                                      | 2000                    
|INCOME                                                    |                         
|Dividends from subsidiaries                               | $3,271                  
|Other income                                              | 97                      
|Total income                                              | 3,368                   
|OPERATING EXPENSES                                        |                         
|Interest expense on capital securities                    | 715                     
|Pre-merger consummation charges                           | 1,150                   
|Other                                                     | 276                     
|Total operating expenses                                  | 2,141                   
|Income before income taxes                                | 1,227                   
|Applicable income taxes (benefit)                         | -323                    
|                                                          |                         
|Income before undistributed earnings of subsidiaries      | 1,550                   
|Undistributed earnings of banking subsidiary              | 1,520                   
|Undistributed earnings (loss) of non-banking subsidiaries | 38                      
|NET INCOME                                                | $3,108                  



Drovers Bancshares Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)

NOTE 23 - PARENT CORPORATION FINANCIAL STATEMENTS, (continued)

|                                                                        | Years Ended December 31,
|----------------------------------------------------------------------- | ------------------------
|STATEMENTS OF CASH FLOWS                                                | 2000                    
|CASH FLOWS FROM OPERATING ACTIVITIES:                                   |                         
|Net income                                                              | $3,108                  
|Undistributed net earnings of subsidiaries                              | -1,558                  
|Gain on sale of investment securities available-for-sale                | -                       
|(Increase) decrease in other items                                      | 836                     
|Net cash provided by operating activities                               | 2,386                   
|CASH FLOWS FROM INVESTING ACTIVITIES:                                   |                         
|Investments in and advances to subsidiaries                             | -407                    
|Purchases of investment securities available-for-sale                   | -227                    
|Proceeds from sales of investment securities available-for-sale         | 14                      
|Net cash used in investing activities                                   | -620                    
|CASH FLOWS FROM FINANCING ACTIVITIES:                                   |                         
|Proceeds from (repayments of) borrowings and advances from subsidiaries | 432                     
|Issuance of stock                                                       | 475                     
|Dividends paid                                                          | -2,600                  
|Net cash provided by (used in) used in financing activities             | -1,693                  
|NET INCREASE (DECREASE) IN CASH                                         | 73                      
|CASH AT JANUARY 1,                                                      | 102                     
|CASH AT DECEMBER 31,                                                    | $175                    

NOTE 24 - PENDING MERGER

On December 27, 2000, Drovers entered into a merger agreement with Fulton Financial Corporation ("Fulton"), pursuant to which Drovers will be merged with Fulton, with Fulton as the surviving corporation.  The merger agreement was approved by
Drovers' Board of Directors on December 27, 2000.  Under the merger agreement, The Drovers & Mechanics Bank, the sole bank

subsidiary of Drovers, will be merged into Fulton Bank, a bank subsidiary of Fulton.  The merger agreement was included as an exhibit to Drovers' Form 8-K filed with the SEC on January 3, 2001.

In the merger, each of the approximately 5,100,000 shares of Drovers' common stock will be exchanged for 1.24 shares of Fulton's common stock, and cash in lieu of fractional shares.  In addition, each of the Drovers options will be converted into
options to buy Fulton stock.  The merger is subject to approval by bank regulatory authorities and Drovers' shareholders.  The merger is expected to be completed in the third quarter of 2001 and will be accounted for as a pooling of interests.

Concurrently with the execution of the merger agreement, Drovers issued a warrant to purchase up to 1,250,000 shares of common stock at an exercise price of $19.75 per share.  Certain conditions must be met for Fulton to sell, assign, transfer or
exercise the warrant.  These conditions are outlined in the warrant agreement that was included as an exhibit to Drovers' Form 8-K filed with the SEC on January 3, 2001.

As required by the merger agreement, Drovers' Board of Directors suspended the Drovers Bancshares Corporation Stockholder Dividend Reinvestment and Stock Purchase Plan.

Drovers Bancshares Corporation and Subsidiaries

Independent Auditors' Report



Board of Directors and Shareholders

Drovers Bancshares Corporation



We have audited the accompanying consolidated statements of condition of Drovers Bancshares Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000.  These financial statements are the responsibility of the Corporation's management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards.  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 our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Drovers Bancshares Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years ended December 31, 2000, in conformity with generally accepted accounting principles.





Stambaugh . Ness, P.C.

York, Pennsylvania

January 12, 2001



Drovers Bancshares Corporation and Subsidiaries

FIVE YEAR SUMMARY OF SELECTED FINANCIAL INFORMATION

(dollar amounts in thousands, except per share data)

|                                                    | 2000      | 1999      | 1998      | 1997      | 1996     
|--------------------------------------------------- | --------- | --------- | --------- | --------- | ---------
|BALANCE SHEET DATA AT DECEMBER 31,                  |           |           |           |           |          
|Assets                                              | $796,257  | $720,108  | $597,793  | $524,892  | $446,713 
|Investment securities                               | 232,247   | 212,937   | 161,619   | 179,299   | 128,082  
|Net loans                                           | 502,526   | 456,293   | 386,197   | 310,369   | 279,987  
|Deposits                                            | 568,628   | 505,134   | 457,672   | 402,086   | 360,204  
|Shareholders' equity                                | 55,165    | 51,200    | 48,193    | 43,470    | 38,092   
|                                                    |           |           |           |           |          
|Total average assets                                | 751,997   | 645,334   | 559,172   | 491,237   | 404,621  
|Total average shareholders' equity                  | 52,837    | 50,158    | 46,350    | 40,556    | 36,429   
|                                                    |           |           |           |           |          
|INCOME DATA                                         |           |           |           |           |          
|Interest income                                     | $56,663   | $46,562   | $40,991   | $36,267   | $30,055  
|Interest expense                                    | 33,338    | 24,286    | 21,736    | 19,254    | 14,791   
|Net interest income                                 | 23,325    | 22,276    | 19,255    | 17,013    | 15,264   
|Provision for loan losses                           | 6,379     | 1,727     | 1,266     | 386       | 645      
|Net interest income after provision for loan losses | 16,946    | 20,549    | 17,989    | 16,627    | 14,619   
|Other income                                        | 5,707     | 5,349     | 5,408     | 3,953     | 3,364    
|Other expenses                                      | 19,763    | 16,751    | 15,231    | 13,234    | 12,050   
|Income tax expense (benefit)                        | -218      | 1,546     | 1,356     | 1,715     | 1,084    
|Net income                                          | 3,108     | 7,601     | 6,810     | 5,631     | 4,849    
|Dividends paid                                      | 2,600     | 2,288     | 2,050     | 1,707     | 1,606    
|                                                    |           |           |           |           |          
|RATIOS                                              |           |           |           |           |          
|Return on average assets                            | 0.41%     | 1.18%     | 1.22%     | 1.15%     | 1.20%    
|Return on average equity                            | 5.88%     | 15.15%    | 14.69%    | 13.88%    | 13.31%   
|Equity to assets (average)                          | 7.03%     | 7.77%     | 8.29%     | 8.26%     | 9.00%    
|Net loans to deposits (year-end)                    | 88.38%    | 90.33%    | 84.38%    | 77.19%    | 77.73%   
|Dividend payout                                     | 83.66%    | 30.10%    | 30.10%    | 30.31%    | 33.12%   
|                                                    |           |           |           |           |          
|PER SHARE DATA*                                     |           |           |           |           |          
|Net income                                          | $0.61     | $1.54     | $1.39     | $1.15     | $0.99    
|Net income, assuming dilution                       | 0.61      | 1.52      | 1.37      | 1.14      | 0.99     
|Cash dividends                                      | 0.51      | 0.46      | 0.42      | 0.35      | 0.33     
|Book value (year-end)                               | 10.84     | 10.15     | 9.78      | 8.88      | 7.81     
|Weighted average number of shares outstanding       | 5,059,616 | 4,938,547 | 4,912,062 | 4,880,365 | 4,874,041
|Stock dividends and stock splits paid               | 5%        | 5%        | 50%       | 5%        | 25%      

* Per share figures are based on weighted average shares outstanding for the respective years as restated after giving effect to stock dividends.