PRESTIGE FINANCIAL CORP.



                                     [LOGO]




                               1996 ANNUAL REPORT
                                 up with people

<PAGE>

SELECTED FINANCIAL DATA                                 PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


<TABLE>
<CAPTION>
Dollars in thousands, except per share data                                              Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
Summary of Income                                                         1996         1995          1994        1993       1992
                                                                        ------------------------------------------------------------
<S>                                                                       <C>          <C>          <C>         <C>        <C>    
                              Net interest income                         $ 8,471      $ 6,545      $ 4,862     $ 3,949    $ 2,758
                              Provision for loan losses                       516          350          100         451        365
                              Non-interest income                           1,536          700          563         525        188
                              Non-interest expense                          6,222        4,898        4,124       3,276      2,228
                              Provision for income taxes                    1,226          825          491         287        154
                              Extraordinary items                              --           --           --          --        154
                              Cumulative effect of accounting change           --           --           --          63         --
                                                                        ------------------------------------------------------------
                              Net income                                  $ 2,043      $ 1,172      $   710      $  523    $   353
                                                                        ============================================================
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data

                              Investments                                $ 68,874     $ 43,270     $ 22,541    $ 22,733    $18,365
                              Total loans, net                            136,876      112,263       92,534      73,786     57,572
                              Total assets                                229,517      176,382      132,572     109,636     83,247
                              Total deposits                              212,596      163,517      122,439     100,112     74,803
                              Stockholders' equity                       $ 15,710     $ 12,058      $ 9,505     $ 8,951    $ 7,866
                                                                        ============================================================
------------------------------------------------------------------------------------------------------------------------------------
Financial Ratios

                              Return on average assets                       1.01%        0.79%        0.61%       0.55%      0.50%
                              Return on average equity                      14.75%       11.27%        7.72%       6.13%      5.01%
                              Fully diluted earnings per common share       $0.75        $0.47        $0.31       $0.23      $0.18
                              Book value per common share                   $5.90        $4.89        $3.98       $3.73      $3.37
                              Cash dividends per common share               $0.25        $0.10        $0.06       $0.03      $0.03
                              Tier 1 capital ratio                          11.69%        9.91%       10.02%      11.08%     13.70%
                              Total risk-based capital ratio                12.87%       11.10%       11.16%      12.33%     14.85%
                              Allowance for loan losses/total loans          1.15%        1.17%        1.15%       1.41%      1.12%
                              Net charge-offs/average total loans            0.20%        0.10%        0.10%       0.07%      0.02%
                                                                        ============================================================
</TABLE>



--------------------------------------------------------------------------------
Company Characteristics:

Prestige Financial Corp. is a one bank holding company incorporated under the
laws of the State of New Jersey and whose principal business is the operation of
Prestige State Bank--a state-chartered, F.D.I.C. insured financial institution.
Our vision continues to focus on providing top quality service to our clientele
while taking great care that this endeavor contributes to the enhancement of
shareholder value. The Company's overriding strategy for the attainment of this
vision has been to employ the best people, armed with the latest proven
technology, in the most appropriate locations, to service markets and/or lines
of business with which we have a unique familiarity. Prestige Financial Corp.
stock is traded on the NASDAQ National Market under the symbol "PRFN".

--------
page one

<PAGE>

setting
trends


TO SHAREHOLDERS OF PRESTIGE:

     As the year we review in this  report  was an Olympic  year,  it would have
been appropriate to once again highlight our "record results," talk about how we
are  "leading  the  field" and so on.  However,  the theme we chose for the 1996
Annual Report goes beyond the usual replays of Prestige  "going for the gold" or
the  statistical  outcome,  no matter how tempting that is when  considering the
company's performance.  Something more needed to be said about the dynamics of a
winning  team--the  essence  of which is  people  who  constantly  strive to get
better, to do more.

     The  phrase "Up With  People"  puts into a few words the  direction  of our
company and the primary  reason for its  success.  Depending  on which words are
emphasized, UP WITH PEOPLE can describe how well Prestige has done and is doing,
as well as the  importance  the  company  places not only on its staff,  but its
customers as well.

     As the  highlights on the previous  page,  and graphs on these facing pages
indicate,  "Team Prestige" has had another banner year. More striking,  however,
is the repetitive nature of the company's successes.  It is obvious that a trend
has been  set.  Total  assets  at  year-end  1996 were 276% of what they were at
year-end  1992--just  four years  previous!  Net income for the year of 1996 was
well over five times what it was for the year of 1992.  It is that  "ability  to
repeat" feature,  rather than just the "one time explosion," that earns the true
"winning team" reputation.

     Another  mark of a champion is the ability to excel in more than just a few
key elements of the contest. In Olympic basketball competition, a squad that can
handle  the  ball,  shoot  from the  floor  and  rebound  well--but  can't  make
free-throws or play defense--will not enjoy the success of one that is better in
more of those  skills.  We are very proud to be able to play many  positions  so
well and score so highly in the most  widely  recognized  financial  performance
indicators.

     A closely  related  characteristic  of a winning  organization is the speed
with which it attains ever higher performance levels.  Clearly, any upward trend
is better than a flat or downward  tendency,  but a quicker rate of  improvement
will certainly  provide even further  distinction to one who achieves it. Anyone
can set a fast pace early on,  but it takes a strong  extra  effort to  maintain
speed, dodge as many obstacles as possible and--perhaps most  important--"absorb
a blow" when it cannot be avoided.

  [The following table was represented as a bar chart in the printed matter.]

                                       YEAR-END ASSETS
                    Year                (In Millions)
                    ----                -------------
                    1992                    $ 83
                    1993                    $110
                    1994                    $133
                    1995                    $176
                    1996                    $230


  [The following table was represented as a bar chart in the printed matter.]

                                          NET INCOME
                    Year                (In Thousands)
                    ----                -------------
                    1992                   $  353
                    1993                   $  523
                    1994                   $  710
                    1995                   $1,172
                    1996                   $2,043


                                                                        --------
                                                                        page two

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.


maintaining
the pace


     Except   for  the   graph   on  this   page   depicting   year-end   market
capitalization--which  shows the only three full years during which Prestige has
been  traded on  NASDAQ--the  presentations  in this  report  depict  impressive
incremental improvements over several periods.

     The  fast-rising  net  income  over the time  frame  shown owes much to the
"infrastructure" of high quality people and carefully  placed/appointed  offices
we have created--the  costs of which might have "bowed" a less-prepared  entity.
Confident in our ability to grow market share,  however,  the company made those
commitments to staff and facilities so that customers looking for a bank to call
their own would find all they might want--and more--in Prestige.

     You can see  easily how we  maintained  the pace of bottom  line  growth by
checking the highlights page once again,  where the chart  illustrates that this
was accomplished principally through increases in net interest income--the basic
business of banking.  Non-interest income augmentation was substantial from 1995
to 1996--thanks to gains from SBA and residential  mortgage loan sales--but this
only  partly  offset  the  1995  to  1996  increases  in  non-interest  expenses
attributable to the branch and personnel investments.

     How about our shareholders?  There is ample evidence that this constituency
has always been of special  concern to the board and management of Prestige.  In
addition to the graphs at the right,  take time to focus on the dividends,  book
value and return on equity  information  contained on the highlights page at the
front of this report. And remember that Prestige State Bank--the  company's only
subsidiary--first opened its doors in 1990; so that 1991 was the first full year
of this institution's history!

     Interesting   things  happen  when  a  team  turns  in  several  impressive
performances.  For one, a natural  concern  observers may  hold--that  the quick
start and fast early pace may prove its  undoing--is  effectively  laid to rest.
Directly  on its heels,  though,  comes the  inescapable  scrutiny of the team's
makeup,  of the breadth of its abilities,  in order to determine how long it can
stay on or near the top of its game.

     Just as in team sports there is equality in the  importance  of offense and
defense,  banking  can be thought of as having two evenly  crucial  phases:  the
gathering of deposits (which  contribute most to the entity's  growth);  and the
employment of those funds (most of


  [The following table was represented as a bar chart in the printed matter.]

                                      EARNINGS PER SHARE
                                        (FULLY DILUTED)
                    Year                 (In Dollars)
                    ----                -------------
                    1992                     $0.18
                    1993                     $0.23
                    1994                     $0.31
                    1995                     $0.47
                    1996                     $0.75


  [The following table was represented as a bar chart in the printed matter.]

                                          YEAR-END
                                           MARKET
                                       CAPITALIZATION
                    Year                (In Millions)
                    ----                -------------
                    1994                $11,782,080
                    1995                $27,615,549
                    1996                $37,923,682

                                                                      ----------
                                                                      page three

<PAGE>

TO SHAREHOLDERS OF PRESTIGE:
(continued)


stamina


which go into  "earning  assets" such as loans and  investments).  To get a good
feel for how well  conditioned  an  institution  may be to stay the course,  one
should look into the makeup of its  deposits and its earning  assets,  where the
most telling signs of a commercial bank's staying power can be found.

     Prestige  has moved into third  position in a field of 12 banks in terms of
deposit market share within  Hunterdon  County,  boasting nearly 12% of the $1.3
billion  available.  Prestige lags only the two giants,  Summit and First Union,
which are much older and have many more locations. How? Is it sustainable?

     The  pie  chart  on the  upper  left  indicates  a  balance  among  deposit
categories.  Positive  factors  include the  relatively  low reliance on "jumbo"
(over $100,000)  accounts and an appreciable  contribution  made by non-interest
bearing  checking  accounts.  We believe  that this is a picture of health for a
financial institution, marking it as one that is capturing a loyal clientele who
provide a reliable  stream of core funds upon which to base loan and  investment
strategies.

     As much endurance as the above seems to promise, it is only half the story.
The rest is in the chart on the  lower  left  that  tells of a  Prestige--highly
touted  for its SBA  lending  prowess--which  has  taken  care not to be  overly
committed to one avenue of earning asset allocation.  This bank--which,  for the
second  consecutive  year  topped all  lenders  in New Jersey in Small  Business
Administration  loans--can attribute its stamina to the fact that its assets are
as advantageously diverse as are its sources of funds.

     But what about those dynamics cited earlier that seem to be associated with
a winning team--the elements of a competitive edge that are difficult to explain
though  plain to see?  They seem to come out of an  attitude--that  the  records
SHOULD be broken,  that this team HAS TO be  victorious.  Why else would so many
previously  unbeatable  records  fall during each  Olympiad or, for that matter,
during any season of  professional  sport? It all starts with the belief that IT
CAN BE DONE.  This is the winning  attitude we have  nurtured  and  sustained at
Prestige.

     There will always be an argument  over  whether  success or failure  hinges
more on great coaching or the inborn talent of the  players--so  let's just call
it a draw and say that


  [The following table was represented as a pie chart in the printed matter.]

                              DEPOSIT COMPOSITION

                    Non-Int. Demand               16%
                    Now/Money Mkt.                17%
                    Savings                       18%
                    Money Mkt. CDs                12%
                    $100M+ CDs                     9%
                    Other Time                    28%


  [The following table was represented as a pie chart in the printed matter.]

                           EARNING ASSET DISTRIBUTION

                    RE Loans                      26%
                    US Gov't. Inv.                30%
                    SBA Loans                     17%
                    Consumer Loans                13%
                    FF Sold Other EA               5%
                    Other Comm. Loans              9%

---------
page four

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.


direction


without either there would be little chance of remarkable  success.  At Prestige
Financial Corp.,  our directors began with high  expectations and have not, thus
far,  been  given any  reason to expect  less  than  outstanding  results.  As a
consequence,  the  extra-ordinary  becomes a given for the sprint as well as the
marathon.

     Wanting, demanding the best is not a self-fulfilling wish. It takes work on
everyone's  part to reach lofty goals.  Our  directors  and our  advisory  board
members play a vital role in business  development but, most importantly,  these
coaches  know when to direct and when to simply let their team of  professionals
do the jobs for  which  they  have been so well  prepared.  As the  organization
becomes  ever more  accustomed  to achieving  its goals,  the sense of direction
becomes  instinctive,  but it is during these times that firm  oversight is most
important.  Through  questioning and comparing,  Prestige directors make certain
company  resources  continue  to be  put to  their  highest  and  best  use  for
protection of the depositor and the long term benefit of the shareholder.

     Curious,  though,  is the manner in which  people's  roles need to, and do,
adjust within the best performing  teams,  just as coaches may be less demanding
as the situation  dictates.  The poster advice "Lead,  Follow, or Get Out of the
Way!" may sound comical,  until one realizes that at some point it is absolutely
necessary  that  the boss get out of the  way,  that a leader  sometimes  has to
follow,  and so on. It is this  mind-set--the  willingness to do, or allow to be
done,  whatever it takes--that can be the most powerful  direction we have taken
here at Prestige.

     So all  leaders  have had to be  followers  at some point and perhaps it is
that experience that does the most to hone the skills of people in charge.  With
all  that  has been  accomplished  to date at  Prestige,  it  should  not be too
surprising to find an unusual  partnership at the executive level. Here, two men
share the highest  official  authority,  bringing nearly fifty years of combined
experience to bear upon whatever  challenges may arise.  With them, team players
exemplified  by the  officers  shown  on page  seven  have  performed,  and will
continue to perform, at the highest level.

     The people of Prestige  have also played an  important  role in helping the
people of their community, their state, and nearby states to become economically
self-sufficient by


Directors

[PHOTO 1]

[PHOTO 2]

[PHOTO 3]

[PHOTO 4]

[PHOTO 5]

1.   Louis R. DeFalco,
     Chairman (and Vice Chairman--
     Prestige State Bank)

2.   Roland D. Boehm, Sr.,
     Vice Chairman (and Chairman--
     Prestige State Bank)

3.   Gerald A. Lustig

4.   James W. MacDonald

5.   Arthur Stryker, Jr.

                                                                       ---------
                                                                       page five

<PAGE>

TO SHAREHOLDERS OF PRESTIGE:
(continued)


leadership


starting and expanding  businesses through SBA loans. In addition to earning the
Diamond  Award as the top SBA  producer in the state,  Prestige  ranked first in
loans  to  women-owned  businesses  and  minority-owned  businesses.  For  these
accomplishments,   Prestige   was   presented   with  the  Gold   Award  as  the
Administration's  highest  honor  for  overall  achievement.   Meanwhile,   loan
quality--another   Achilles  heel  to  be  watched  closely  in  banks--remained
exceptional as overall past dues at year-end  totaled just $1,329,000 (less than
1%  of  a  $138,468,000  loan  portfolio).  This  number  INCLUDED  $810,000  of
non-performing  loans which when divided by total  assets  rendered an extremely
low ratio of .35 percent.

     Prestige  entered 1997 with a renewed  dedication to be the best we can be.
We will not  relent  in our  quest  to be THE bank  within  our home  county  of
Hunterdon. While assimilating the financial impact of the Beaver Avenue, Clinton
branch,  we intend to open  three more  locations  within the heart of our trade
area: a free standing branch on the main north-south  artery between the hubs of
Flemington and Clinton; our first in-store bank within the same shopping center;
and a second Clinton branch on the western side of that North Hunterdon market.

     We intend to continue as a force  within the SBA arena but expect to make a
greater  impression than in the past with our residential  mortgage  lending and
municipal  financing.  All the  while,  though,  we will not  lose  sight of the
individuals and small companies with whom we have become identified.  We plan to
attain  continually  impressive  returns  on equity as well as assets as we move
boldly UP...with PEOPLE toward the $300 million mark in asset size.

Sincerely,


/s/ Arnold F. Horvath                     /s/ Robert J. Jablonski
---------------------                     -----------------------
Arnold F. Horvath                         Robert J. Jablonski

President                                 Chief Executive Officer


[PHOTO]

Arnold F. Horvath



[PHOTO]

Robert J. Jablonski

--------
page six

<PAGE>

CORPORATE INFORMATION                                   PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


up with people


<TABLE>
<S>                                <C>                             <C>
Board of Directors                 Officers                        Rosemary Dente           
                                                                   Assistant Vice President 
Louis R. DeFalco                   Arnold F. Horvath               Sr. SBA Bus. Development 
Chairman (& Vice Chairman--        President                                                
Prestige State Bank)                                               Joyce A. Winecker        
                                   Robert J. Jablonski             Corporate Secretary      
Roland D. Boehm, Sr.               Chief Executive Officer                                  
Vice Chairman (& Chairman--                                        Carolyn Scalia           
Prestige State Bank)               Greg Schneider                  Assistant Vice President 
                                   Executive Vice President        Auditor                  
Arnold F. Horvath                  Senior Lending Officer                                   
                                                                   Linda E. Burns           
Robert J. Jablonski                Annette M. Dalley               Assistant Vice President 
                                   Sr. Vice President                                       
Gerald A. Lustig                   Human Resources                 JoAnn M. Cronce          
                                   Branch Administration           Assistant Treasurer      
James W. MacDonald                                                 Security Officer         
                                   Lorraine A. Cook                                         
Arthur Stryker, Jr.                Sr. Vice President              Judith Wallace           
                                   Controller                      Assistant Secretary      
Hunterdon                                                                                   
Advisory Board                     Jeffrey D. Mattison             Deborah Fabian           
                                   Sr. Vice President              Assistant Secretary      
Brian Barbiche                     Loan Officer                                             
                                                                   J. Susan Berger          
David Bond                         Joseph D. Ercolino              Assistant Treasurer      
                                   Vice President                                           
Alan Castroll                      Business Development            Maria Fusca              
                                                                   Assistant Treasurer      
Sam Leon                           Thomas M. Lyons                                          
                                   Vice President                  Christine Ploski         
John Little, Jr.                   Financial Corp. Accounting      Assistant Treasurer      
                                                                                            
James T. McPherson                 Thomas Thompson                 Deborah A. Gutschmidt    
                                   Vice President                  Assistant Treasurer      
Somerset                           SBA Loan Officer                                         
Advisory Board                                                     Louise A. Maziarz        
                                   Thomas W. Ort                   Assistant Treasurer      
Edward J. Dougherty, Ed.D.         Vice President                                           
                                   Loan Administration             Amy E. Rabosky           
Gerard C. Pascale                                                  Assistant Treasurer      
                                   Mark C. Dooley                                           
                                   Vice President                  Sandra Stephens          
                                   Mortgage Officer                Assistant Secretary      
                                                                                            
                                   Christopher J. Pribula          Joyce Bietka             
                                   Vice President                  Assistant Secretary      
                                   Operations                                               
                                                                   Jennifer Mock            
                                   Karen M. McKeon                 Assistant Treasurer      
                                   Assistant Vice President        
                                                                   
                                   Stan Hall                       
                                   Assistant Vice President        
</TABLE>

----------
page seven

<PAGE>

CONSOLIDATED STATEMENTS                                 PRESTIGE FINANCIAL CORP.
OF FINANCIAL CONDITION                                            AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                                                              December 31,
------------------------------------------------------------------------------------------------------------------------------------
Assets                                                                                                   1996               1995
                                                                                                     -------------------------------
<S>                                                                                                  <C>                <C>         
                              Cash and due from banks                                                $  9,579,368       $  5,530,778
                              Federal funds sold and short-term investments                             8,950,028         10,525,000
                                                                                                     -------------------------------
                                    Total cash and cash equivalents                                    18,529,396         16,055,778
                                                                                                     -------------------------------
                              Loans held for sale, net                                                 15,013,245         10,240,981
                              Investment securities, net (estimated market value of $68,680,887
                                and $43,466,781 in 1996 and 1995, respectively)                        68,874,149         43,270,135
                              Loans, net                                                              123,454,671        103,346,182
                              Less: Allowance for loan losses                                           1,592,078          1,324,626
                                                                                                     -------------------------------
                              Net loans                                                               121,862,593        102,021,556
                                                                                                     -------------------------------
                              Accrued interest receivable                                               1,537,994            958,365
                              Premises and equipment, net                                               2,490,059          1,930,757
                              Other assets                                                              1,210,011          1,904,158
                                                                                                     -------------------------------
                                    Total assets                                                     $229,517,447       $176,381,730
                                                                                                     ===============================

------------------------------------------------------------------------------------------------------------------------------------
Liabilities and
Stockholders' Equity
                              Liabilities:
                                Deposits:
                                  Non-interest bearing                                               $ 35,318,480       $ 23,793,196
                                  Interest bearing                                                    177,277,801        139,723,690
                                                                                                     -------------------------------
                                    Total deposits                                                    212,596,281        163,516,886
                                Accrued interest payable                                                  308,082            249,013
                                Accrued expenses and other liabilities                                    903,162            557,358
                                                                                                     -------------------------------
                                    Total liabilities                                                 213,807,525        164,323,257
                                                                                                     -------------------------------
                              Stockholders' equity:
                                Common stock, par value $.01; 5,000,000 shares authorized;
                                  2,661,331 shares and 1,972,539 shares issued and outstanding
                                  at December 31, 1996 and 1995, respectively                              26,613             19,725
                                Paid-in capital                                                        13,581,186         11,354,121
                                Retained earnings                                                       2,102,123            684,627
                                                                                                     -------------------------------
                                    Total stockholders' equity                                         15,709,922         12,058,473
                              Commitments and contingencies (note 10)
                                                                                                     -------------------------------
                                    Total liabilities and stockholders' equity                       $229,517,447       $176,381,730
                                                                                                     ===============================
</TABLE>

          See accompanying notes to consolidated financial statements.

----------
page eight


<PAGE>

CONSOLIDATED STATEMENTS                                 PRESTIGE FINANCIAL CORP.
OF INCOME                                                         AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                                                 Years ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                                                         1996              1995              1994
                                                                                      ----------------------------------------------
<S>                                                                                   <C>               <C>               <C>       
                              Interest income:
                                Loans                                                 $11,920,839       $10,048,068       $7,016,118
                                Investment securities
                                  Taxable                                               3,590,295         1,624,625          870,403
                                  Exempt from Federal income tax                          100,244           138,744           45,155
                                Federal funds sold and short-term investments             427,861           443,000          257,094
                                                                                      ----------------------------------------------
                                  Total interest income                                16,039,239        12,254,437        8,188,770
                                                                                      ----------------------------------------------
                              Interest expense:
                                Deposits                                                7,565,484         5,708,330        3,326,690
                                Short-term borrowings                                       2,901               408              633
                                                                                      ----------------------------------------------
                                  Total interest expense                                7,568,385         5,708,738        3,327,323
                                                                                      ----------------------------------------------
                                  Net interest income                                   8,470,854         6,545,699        4,861,447
                              Provision for loan losses                                   515,600           350,000          100,000
                                                                                      ----------------------------------------------
                                  Net interest income after provision for loan losses   7,955,254         6,195,699        4,761,447
                                                                                      ----------------------------------------------
                              Non-interest income:
                                Service charges on deposit accounts                       266,719           153,419          125,224
                                Gain on sale of loans held for sale                     1,180,301           571,837          405,596
                                Loss on sale of securities                                     --           (76,125)              --
                                Other income                                               89,116            51,060           32,414
                                                                                      ----------------------------------------------
                                  Total non-interest income                             1,536,136           700,191          563,234
                                                                                      ----------------------------------------------
                              Non-interest expense:
                                Salaries and employee benefits                          3,149,948         2,257,405        1,797,566
                                Net occupancy expense                                   1,268,291         1,033,182          941,862
                                Data processing                                           308,680           203,002          166,007
                                Federal deposit insurance                                   2,000           139,781          227,534
                                Advertising and business development                      244,382           187,008          178,914
                                Other operating expenses                                1,249,030         1,077,925          812,109
                                                                                      ----------------------------------------------
                                  Total non-interest expense                            6,222,331         4,898,303        4,123,992
                                                                                      ----------------------------------------------
                                  Income before provision for income taxes              3,269,059         1,997,587        1,200,689
                              Provision for income taxes                                1,226,341           825,322          490,803
                                                                                      ----------------------------------------------
                                Net income                                            $ 2,042,718       $ 1,172,265       $  709,886
                                                                                      ==============================================
                              Net income per common share:
                                Primary                                               $       .76       $       .48       $      .31
                                Fully diluted                                         $       .75       $       .47       $      .31
                                                                                      ==============================================

                              Weighted average shares outstanding:
                                Primary                                                 2,701,269         2,293,161        2,157,603
                                Fully diluted                                           2,719,389         2,333,464        2,157,603
                                                                                      ==============================================
</TABLE>


          See accompanying notes to consolidated financial statements.

---------
page nine

<PAGE>

CONSOLIDATED STATEMENTS                                 PRESTIGE FINANCIAL CORP.
OF CHANGES IN                                                     AND SUBSIDIARY
STOCKHOLDERS' EQUITY   


<TABLE>
<CAPTION>
                                                                                        Years ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                                                                                           Total
                                                                     Preferred   Common       Paid-in      Retained    stockholders'
                                                                       stock      stock       capital      earnings       equity
                                                                     ---------------------------------------------------------------
<S>                                                                  <C>         <C>        <C>           <C>           <C>        
                              Balance, December 31, 1993             $ 900,000   $15,692    $ 7,797,102   $  238,147    $ 8,950,941
                              Exercise of options (1,724 shares)            --        17          6,985           --          7,002
                              Common stock cash dividend
                                ($.08 per share)                            --        --             --     (117,736)      (117,736)
                              Preferred stock cash dividend                 --        --             --      (44,746)       (44,746)
                              Net income                                    --        --             --      709,886        709,886
                                                                     ---------------------------------------------------------------
                              Balance, December 31, 1994               900,000    15,709      7,804,087      785,551      9,505,347
                              Exercise of options (26,118 shares)           --       261        116,446           --        116,707
                              Common stock grants (6,800 shares)            --        68         59,432           --         59,500
                              Private placement (176,000 shares)            --     1,760      1,978,240           --      1,980,000
                              Dividend reinvestment and stock
                                purchase plan (34,326 shares)               --       343        426,074           --        426,417
                              Common stock cash dividend
                                ($.125 per share)                           --        --             --     (228,739)      (228,739)
                              10% Common stock dividend
                                (158,351 shares)                            --     1,584        969,842     (971,426)            --
                              Preferred stock cash dividend                 --        --             --      (73,024)       (73,024)
                              Redemption of preferred stock           (900,000)       --             --           --       (900,000)
                              Net income                                    --        --             --    1,172,265      1,172,265
                                                                     ---------------------------------------------------------------
                              Balance, December 31, 1995                    --    19,725     11,354,121      684,627     12,058,473
                              Exercise of warrants (6,600 shares)           --        66         50,952           --         51,018
                              Exercise of options (5,673 shares)            --        57         35,065           --         35,122
                              Common stock grants (7,480 shares)            --        75         59,425           --         59,500
                              Dividend reinvestment and stock
                                purchase plan (161,895 shares)              --     1,619      2,042,741           --      2,044,360
                              401(k) plan (3,029 shares)                    --        30         38,882           --         38,912
                              Five-for-four common stock split
                                (504,115 shares)                            --     5,041             --       (5,041)            --
                              Common stock cash dividend
                                ($.25 per share)                            --        --             --     (620,181)      (620,181)
                              Net income                                    --        --             --    2,042,718      2,042,718
                                                                     ---------------------------------------------------------------
                              Balance, December 31, 1996             $      --   $26,613    $13,581,186   $2,102,123    $15,709,922
                                                                     ===============================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

--------
page ten

<PAGE>

CONSOLIDATED STATEMENTS                                 PRESTIGE FINANCIAL CORP.
OF CASH FLOWS                                                     AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                                                   Years ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                                                              1996           1995          1994
                                                                                          ------------------------------------------
<S>                                                                                       <C>            <C>           <C>         
                              Cash flows from operating activities:
                                Net income                                                $  2,042,718   $  1,172,265  $    709,886
                                Adjustments to reconcile net income to net cash
                                  (used in) provided by operating activities:
                                    Provision for loan losses                                  515,600        350,000       100,000
                                    Depreciation and amortization                              367,961        297,842       277,743
                                    Amortization (accretion) of investment
                                      securities premiums and discounts, net                   479,182       (329,627)     (427,766)
                                    Amortization of organizational costs                        14,137         18,131        38,094
                                    Increase in accrued interest receivable                   (579,629)      (492,072)     (110,520)
                                    Decrease (increase) in other assets                        680,010       (971,344)       (8,022)
                                    Loss on sale of securities                                      --         76,125            --
                                    Gain on sale of loans held for sale                     (1,180,301)      (571,837)     (405,596)
                                    Proceeds from sale of loans held for sale               24,076,664      9,423,281    10,297,844
                                    Loss on sale of other real estate owned                         --         25,000            --
                                    Net increase in loans held for sale                    (27,668,627)   (18,060,531)   (9,922,455)
                                    Increase in accrued interest payable                        59,069        111,960        49,098
                                    Increase in accrued expenses and other liabilities         345,804         67,250         5,085
                                    (Decrease) increase in deferred loan fees and
                                      unearned discounts                                      (273,507)       265,924       788,880
                                    Common stock grants                                         59,500         59,500            --
                                                                                          ------------------------------------------
                                        Net cash (used in) provided by
                                          operating activities                              (1,061,419)    (8,558,133)    1,392,271
                                                                                          ------------------------------------------
                              Cash flows from investing activities:
                                Proceeds from sale of securities available for sale                 --      3,630,250            --
                                Proceeds from maturities of investment securities           32,379,423     15,933,625    13,660,000
                                Principal paydowns on mortgage-backed securities             4,915,156      1,079,558     1,372,633
                                Purchases of investment and mortgage-backed securities     (63,377,775)   (41,119,376)  (14,412,664)
                                Net increase in loans                                      (19,472,380)   (11,510,847)  (19,605,766)
                                Loan participations purchased                                 (610,750)            --            --
                                Capital expenditures                                          (927,263)      (215,615)     (534,966)
                                Proceeds from sale of other real estate owned                       --        350,000            --
                                                                                          ------------------------------------------
                                        Net cash used in investing activities              (47,093,589)   (31,852,405)  (19,520,763)
                                                                                          ------------------------------------------
                              Cash flows from financing activities:
                                Net increase in demand deposits, money market,
                                  NOW accounts and savings accounts                         34,014,121     11,636,393     5,297,335
                                Net increase in certificates of deposit                     15,065,274     29,441,226    17,029,867
                                Proceeds from issuance of common stock, net                  2,169,412      2,523,124         7,002
                                Dividends paid                                                (620,181)      (301,763)     (162,482)
                                Redemption of preferred stock                                       --       (900,000)           --
                                                                                          ------------------------------------------
                                        Net cash provided by financing activities           50,628,626     42,398,980    22,171,722
                                                                                          ------------------------------------------
                                        Increase in cash and cash equivalents                2,473,618      1,988,442     4,043,230
                              Cash and cash equivalents at beginning of year                16,055,778     14,067,336    10,024,106
                                                                                          ------------------------------------------
                              Cash and cash equivalents at end of year                    $ 18,529,396   $ 16,055,778  $ 14,067,336
                                                                                          ==========================================

                              Supplemental disclosures:
                                Cash paid for interest                                    $  7,509,316   $  5,596,778  $  3,278,225
                                Cash paid for income taxes                                   1,251,008        800,078       607,982
                                Loans transferred to other real estate owned                        --        375,000            --
                                Investment securities transferred to securities
                                available for sale                                                  --      3,706,375            --
                                                                                          ==========================================
</TABLE>

          See accompanying notes to consolidated financial statements.

-----------
page eleven

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994


--------------------------------------------------------------------------------
(1)  Summary of Significant
     Accounting Policies

Business

     Policies Prestige Financial Corp. provides a full range of banking services
to individual and corporate customers through its subsidiary, Prestige State
Bank (the Bank), with branches located in Hunterdon and Somerset counties, New
Jersey. The Bank is subject to competition from other financial institutions.
The Bank is subject to the regulations of certain Federal and state agencies,
and undergoes periodic examinations by those regulatory authorities.


Basis of Consolidated Financial Statement Presentation

     The consolidated financial statements of Prestige Financial Corp. and
Subsidiary (the Corp.) have been prepared in conformity with generally accepted
accounting principles and reporting practices applied in the banking industry.
The consolidated financial statements include the accounts of Prestige Financial
Corp. and its wholly-owned subsidiary, Prestige State Bank. All significant
intercompany accounts and transactions have been eliminated in consolidation. In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as contingent assets and liabilities, as of the dates of
the consolidated statements of financial condition and revenues and expenses for
the years then ended. Actual results could differ significantly from those
estimates and assumptions.

     Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan losses.
In connection with the determination of the allowance for loan losses,
management generally obtains independent appraisals for significant properties.


Cash and Cash Equivalents

     Cash and cash equivalents, for purposes of the consolidated statements of
cash flows, consist of cash on hand and in banks, Federal funds sold, and
short-term investments with a maturity of three months or less.


Investment Securities

     Investment Securities are carried at cost, adjusted for amortization of
premiums and accretion of discounts over the estimated lives of the securities
using a method which approximates the level-yield method. Investment Securities
are carried at amortized cost because it is management's intention, and the
Corp. has the ability, to hold them to maturity. Management determines the
appropriate classification of securities at the time of purchase. If management
has the intent and the Corp. has the ability at the time of purchase to hold
securities until maturity, they are classified as Investment Securities and
carried at amortized historical cost.

     Securities to be held for indefinite periods of time and not intended to be
held to maturity are classified as Available for Sale and carried at estimated
fair value. Unrealized holding gains and losses are excluded from earnings and
reported net of taxes as a separate component of stockholders' equity.
Securities Available for Sale include securities that management intends to use
as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, resultant changes in prepayment risk, and
other factors related to interest rate risk and resultant prepayment risk.

     Gains or losses on the sale of securities are based on identifiable
certificate cost and are accounted for on a trade date basis.


Loans

     Loans are stated at the principal amount outstanding, net of deferred loan
origination fees, costs and unearned discounts, and the allowance for loan
losses. Loans held for sale are carried at the lower of aggregate cost or market
value. Interest on loans is accrued and credited to income as earned. Loan
origination fees and certain direct loan origination costs are deferred and
amortized, using the level yield method, into interest income over the estimated
life of the loan as an adjustment to the loan's yield.

     A loan is considered impaired when, based on current information and
events, it is probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Impaired loans are
measured based on the present value of expected future cash flows, or, as a
practical expedient, at the loan's observable market price, or the fair value of
the underlying collateral if the loan is collateral dependent. Conforming
residential mortgage loans, home equity and second mortgage loans, and consumer
loans are excluded from the definition of impaired loans as they are
characterized as smaller balance, homogeneous loans and therefore are
collectively evaluated for impairment.

     The accrual of income on loans, including impaired loans, is generally
discontinued when a loan becomes more than 90 days delinquent and is not
considered well secured and in the process of collection or when certain factors
indicate reasonable doubt as to the ability of the borrower to meet contractual
principal and/or interest obligations. Loans on which the accrual of income has
been discontinued are designated

-----------
page twelve

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


as nonaccrual loans. All previously accrued interest is reversed and income is
recognized subsequently only in the period received, provided the remaining
principal balance is deemed collectible. A nonaccrual loan is not returned to an
accrual status until principal and interest payments are brought current and
factors indicating doubtful collection no longer exist.


Allowance for Loan Losses

     The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans. The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, industry
experience, collateral value and current economic conditions that may affect the
borrower's ability to pay. Management believes that the allowance for loan
losses is adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Corp.'s
allowance for loan losses. Such agencies may require the Corp. to recognize
additions to the allowance based on their judgments of information available to
them at the time of their examination.


Loan Sales

     The Bank originates Small Business Administration (SBA) guaranteed loans
which have maturities of up to 25 years. The loans are guaranteed up to 90% by
the Federal government. From time to time, the Corp. may sell the guaranteed
portion of such loans and retain the unguaranteed portion as well as the rights
to service the loans. Gains recorded on sales are calculated on the basis of a
pro rata allocation of the carrying value of the loan, which approximates a fair
value pro rata allocation considering premiums, servicing fees and costs to
service.


Premises and Equipment

     Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets or leases. Leasehold improvements are depreciated
using the straight-line method over the shorter of the lease term or the
estimated useful lives of the improvements. Repair and maintenance items are
expensed and improvements are capitalized.


Stock-based Employee Compensation

     Compensation expense under the Corp.'s fixed stock option plans and
restricted stock plans is measured by the excess, if any, of the market price of
the underlying stock over the exercise price. Compensation expense is measured
at grant date and recognized ratably over the vesting period.


Income Taxes

     Income taxes are accounted for under the asset and liability method. Under
the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
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 of a change in tax rates is
recognized in income in the period that includes the enactment date.


Net Income Per Share

     Net income per share is calculated as net income less preferred stock
dividends, if any, divided by weighted average shares outstanding (as adjusted
for the assumed exercise of dilutive common stock equivalents, using the
treasury stock method). Preferred stock dividends totaled $73,024 in 1995 and
$44,746 in 1994. All outstanding preferred stock was redeemed in 1995. All
weighted average shares outstanding reflect the five-for-four stock split
effective on April 19, 1996 and the 10% common stock dividend effective on March
31, 1995.


Reclassifications

     Certain amounts relating to 1995 and 1994 have been reclassified to conform
with the 1996 presentation.

--------------------------------------------------------------------------------
(2)  Cash and Due
     from Banks

The Corp.'s banking subsidiary is required to maintain reserve balances with the
Federal Reserve Bank.Such balances amounted to $1,190,000 and $672,000 at
December 31, 1996 and 1995, respectively.

-------------
page thirteen

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(continued)


--------------------------------------------------------------------------------
(3)  Investment
     Securities, Net

The amortized cost, gross unrealized gains and losses and estimated market
values of Investment Securities at December 31, 1996 and 1995 are summarized as
follows:

<TABLE>
<CAPTION>
                                                                   Gross       Gross        Estimated
                                                   Amortized    Unrealized  Unrealized       Market
1996                                                 Cost          Gains      Losses          Value
------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>         <C>          <C>        
U.S. Government and Federal agencies              $36,226,852     $ 58,934    $255,060     $36,030,726
Other securities                                    4,216,489        5,263          --       4,221,752
Mortgage-backed securities                         28,430,808      146,901     149,300      28,428,409
                                                  ----------------------------------------------------
  Total investment securities                     $68,874,149     $211,098    $404,360     $68,680,887
                                                  ====================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                   Gross       Gross         Estimated
                                                   Amortized    Unrealized  Unrealized        Market
1995                                                 Cost          Gains      Losses           Value
------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>         <C>          <C>        
U.S. Government and Federal agencies              $21,459,029     $ 27,262    $ 21,940     $21,464,351
Other securities                                    2,070,149       11,820          --       2,081,969
Mortgage-backed securities                         19,740,957      180,965       1,461      19,920,461
                                                  ----------------------------------------------------
  Total Investment Securities                     $43,270,135     $220,047    $ 23,401     $43,466,781
                                                  ====================================================
</TABLE>


     There were no sales of investment securities during 1996. In December 1995,
pursuant to the provisions of Special Report No. 155-B, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities--Questions and Answers" issued by the Financial Accounting
Standards Board, the Corp. made a one time transfer of Investment Securities
with an amortized cost of $3,706,375 and an unrealized loss of $76,125 to
Securities Available for Sale. These securities were sold in 1995 resulting in
gross realized losses of $76,125 with no realized gains. There were no sales of
investment securities during 1994.

     At December 31, 1996, securities having a book value of approximately
$9,501,000 were pledged to secure certain public fund deposits and for other
purposes required by law.

     The amortized cost and estimated market values of investment debt
securities at December 31, 1996 are shown by contractual maturity in the table
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call obligations. The contractual maturities of
mortgage-backed securities and SBA guaranteed loan pool certificates generally
exceed 10 years; however, the effective lives are expected to be less due to
anticipated prepayments.

                                                                       Estimated
                                                      Amortized         Market
                                                         Cost           Value
                                                     ---------------------------
Due in one year or less                              $ 8,192,909     $ 8,191,542
Due after one year through five years                 12,873,848      12,848,553
Due after five years through ten years                   110,000         110,000
Due after ten years                                      175,000         175,000
Mortgage-backed securities                            28,430,808      28,428,409
SBA guaranteed loan pool certificates                 19,091,584      18,927,383
                                                     ---------------------------
  Total                                              $68,874,149     $68,680,887
                                                     ===========================


--------------------------------------------------------------------------------
(4)  Loans

A summary of loans at December 31, 1996 and 1995 is as follows:

                                                       1996             1995
                                                  ------------------------------
Real estate mortgages:
  Residential                                     $  9,964,053      $  8,000,710
  Construction and land development                  7,950,569         5,019,345
  Commercial                                        37,909,538        31,234,186
Commercial loans                                    55,758,733        43,366,734
Home equity and second mortgages                     7,069,592         5,308,610
Consumer                                            22,524,000        23,639,654
                                                  ------------------------------
                                                   141,176,485       116,569,239

Less:
  Allowance for loan losses                          1,592,078         1,324,626
  Deferred loan fees and discounts                   2,708,569         2,982,076
  Loans held for sale                               15,013,245        10,240,981
                                                  ------------------------------
  Net loans                                       $121,862,593      $102,021,556
                                                  ==============================

-------------
page fourteen

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


     Loans in the amount of $454,135 and $10,823 were on a nonaccrual status and
considered impaired at December 31, 1996 and 1995, respectively. If these loans
had continued to realize interest in accordance with their contractual terms,
approximately $37,000 and $1,000 of interest income would have been realized in
1996 and 1995, respectively. No specific reserves were required for impaired
loans at December 31, 1996 or 1995. The average recorded investments in impaired
loans during 1996 and 1995 were approximately $330,000 and $280,000,
respectively. Loans which were past due 90 days or more and still accruing
totalled $355,865 and $11,177 at December 31, 1996 and 1995, respectively.

     At December 31, 1996 and 1995, loans to directors, executive officers and
their affiliated interests amounted to $2,568,098 and $1,993,028, respectively,
which were current as to principal and interest. During 1996, new extensions of
credit to directors, executive officers and their affiliated interests totalled
$1,235,488 and repayments by such persons were $660,418.

     An analysis of the allowance for loan losses for the years ended December
31, 1996, 1995 and 1994 is as follows:

                                          1996           1995           1994
                                      ------------------------------------------
Balance at beginning of year          $ 1,324,626    $ 1,077,026    $ 1,057,612
Provision charged to operations           515,600        350,000        100,000
Loans charged off, net                   (248,148)      (102,400)       (80,586)
                                      -----------------------------------------
Balance at end of year                $ 1,592,078    $ 1,324,626    $ 1,077,026
                                      ==========================================


--------------------------------------------------------------------------------
(5)  Accrued Interest
     Receivable

A summary of accrued interest receivable at December 31, 1996 and 1995 is as
follows:

                                                        1996             1995
                                                     ---------------------------
Loans                                                $  689,347       $  599,044
Investment securities and other
  interest-earning assets                               848,647          359,321
                                                     ---------------------------
                                                     $1,537,994       $  958,365
                                                     ===========================


--------------------------------------------------------------------------------
(6)  Premises and
     Equipment

Premises and equipment consists of the following at December 31, 1996 and 1995:

                                                    1996                1995
                                                --------------------------------
Premises and improvements                       $ 2,067,628         $ 1,506,514
Furniture and equipment                           1,841,310           1,425,844
                                                --------------------------------
  Total                                           3,908,938           2,986,358
Accumulated depreciation                         (1,418,879)         (1,055,601)
                                                --------------------------------
                                                $ 2,490,059         $ 1,930,757
                                                ================================


--------------------------------------------------------------------------------
(7)  Deposits

A summary of deposit balances at December 31, 1996 and 1995 is as follows:

                                                     1996                1995
                                                --------------------------------
Regular checking                                $ 35,318,480        $ 23,793,196
NOW accounts                                      14,121,069           9,203,591
Money market accounts                             20,362,771          16,362,792
Regular savings accounts                          38,390,093          24,818,713
Certificates of deposit:
  $100,000 and over                               21,462,600          17,205,277
  Less than $100,000                              82,941,268          72,133,317
                                                --------------------------------
                                                $212,596,281        $163,516,886
                                                ================================


     Certificates of deposit with remaining terms exceeding one year are
scheduled to mature as follows:

1998                                                                 $11,602,000
1999                                                                   5,018,000
2000                                                                   5,647,000
2001                                                                     446,000
Thereafter                                                           $        --

------------
page fifteen

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(continued)


     Interest expense includes interest on certificates of deposit greater than
$100,000 of $1,059,333, $1,047,725 and $610,487 for the years ended December 31,
1996, 1995 and 1994, respectively.


--------------------------------------------------------------------------------
(8)  Income Taxe

Total income tax expense in the consolidated statements of income is summarized
as follows:

                                          Current       Deferred        Total
                                       -----------------------------------------
Year ended December 31, 1996:
  U.S. Federal                         $ 1,127,066    $  (147,563)   $   979,503
  State and local                          286,894        (40,056)       246,838
                                       -----------------------------------------
                                       $ 1,413,960    $  (187,619)   $ 1,226,341
                                       =========================================
Year ended December 31, 1995:
  U.S. Federal                         $   628,806    $      (387)   $   628,419
  State and local                          196,974            (71)       196,903
                                       -----------------------------------------
                                       $   825,780    $      (458)   $   825,322
                                       =========================================
Year ended December 31, 1994:
  U.S. Federal                         $   344,644    $    24,110    $   368,754
  State and local                          117,416          4,633        122,049
                                       -----------------------------------------
                                       $   462,060    $    28,743    $   490,803
                                       =========================================


     A reconciliation of "expected" income tax expense at December 31, 1996,
1995 and 1994, computed at the Federal statutory rate, to reported income tax
expense is as follows:

<TABLE>
<CAPTION>
                                                    1996           1995           1994
                                                -----------------------------------------
<S>                                             <C>            <C>            <C>        
Provision computed at statutory tax rate        $ 1,111,480    $   679,180    $   408,234
State and local taxes, net of Federal benefit       162,913        129,956         80,552
Tax exempt interest income                          (42,837)       (57,568)       (28,225)
Change in valuation allowance                        (7,554)          --            1,497
Other, net                                            2,339         73,754         28,745
                                                -----------------------------------------
                                                $ 1,226,341    $   825,322    $   490,803
                                                =========================================
</TABLE>


     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are as follows:

                                                          1996           1995
                                                       ------------------------
Deferred tax assets:
  Deferred fee income                                  $  17,917      $  24,527
  Non-qualified stock options                             54,352           --
  Allowance for loan losses                              585,034        494,110
  Other                                                   23,621         21,244
                                                       ------------------------
    Total gross deferred tax assets                      680,924        539,881
Valuation allowance                                         --           (7,554)
                                                       ------------------------
    Deferred tax assets, net                             680,924        523,327
                                                       ------------------------
Deferred tax liabilities:
  Differences in depreciation methods                     62,296         84,022
  Other                                                     --           17,296
                                                       ------------------------
    Total gross deferred tax liabilities                  62,296        101,318
                                                       ------------------------
    Net deferred tax asset                             $ 618,628      $ 431,009
                                                       ========================


     Except for the effects of the reversal of net deductible temporary
differences, the Corp. is not currently aware of any factors which would cause
any significant differences between taxable income and pretax book income in
future years. However, there can be no assurances that there will be no
significant differences in the future between taxable income and pretax book
income if circumstances change (such as, for example, changes in tax laws or the
Corp.'s financial condition or performance). Management has determined that
based upon its assessment of recoverable taxes, realization of the net deferred
tax asset is more likely than not.

------------
page sixteen

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


--------------------------------------------------------------------------------
(9)  Regulatory Matters

Capital Requirements

     The Federal Reserve Board in the case of bank holding companies such as the
Corp. and the Federal Deposit Insurance Corporation (FDIC) in the case of state
banks such as the Bank have adopted risk-based capital guidelines which require
a minimum ratio of 8% of total risk-based capital to assets, as defined in the
guidelines. At least one half of the total capital, or 4%, is to be comprised of
common equity and qualifying perpetual preferred stock, less deductible
intangibles (Tier 1 capital).

     In addition, the Federal Reserve Board of the FDIC supplemented the
risk-based capital guidelines with an additional capital ratio referred to as
the leverage ratio or core capital ratio. The regulations require a financial
institution to maintain a minimum leverage ratio of 4% to 5%, depending upon the
condition of the institution.

     Under its prompt corrective action regulations, the FDIC is required to
take certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized institution. Such actions could have a
direct material effect on the institution's financial statements. The
regulations establish a framework for the classification of depository
institutions into five categories: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. Generally, an institution is considered well capitalized if it
has a leverage ratio of at least 5.0%; a Tier 1 capital ratio of at least 6.0%;
and a total risk-based capital ratio of at least 10.0%

     The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are subject to qualitative judgements by the regulatory
authorities about capital components, risk weightings and other factors.

     Management believes that, as of December 31, 1996, the Corp. and the Bank
meet all capital adequacy requirements to which they are subject. Further, the
most recent FDIC notification characterized the Bank as a well capitalized
institution under the prompt corrective action regulations. There have been no
conditions or events since that notification that management believes have
changed the Bank's capital classification.

     The following is a summary of the Corp.'s and the Bank's actual capital
amounts and ratios as of December 31, 1996 and 1995, compared to the regulatory
authorities minimum capital adequacy requirements and requirements for
classification as a well capitalized institution (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              Regulatory Requirements
                                                                   ---------------------------------------------
                                                                     Minimum Capital        For Classification
                                                  Actual                 Adequacy           as Well Capitalized
                                            Amount      Ratio      Amount        Ratio      Amount       Ratio
                                           ---------------------------------------------------------------------
<S>                                        <C>           <C>       <C>           <C>       <C>           <C>  
Corp.: December 31, 1996
       Leverage (Tier 1) capital           $15,686       7.01%     $ 8,954       4.00%     $11,193       5.00%
       Risk-based capital:                                                                
         Tier 1                             15,686      11.69%       5,369       4.00%       8,054       6.00%
         Total                              17,278      12.87%      10,738       8.00%      13,423      10.00%
       December 31, 1995                                                                  
       Leverage (Tier 1) capital            12,020       6.81%       7,055       4.00%       8,819       5.00%
       Risk-based capital:                                                                
         Tier 1                             12,020      10.71%       4,489       4.00%       6,734       6.00%
         Total                             $13,345      11.89%     $ 8,979       8.00%     $11,224      10.00%
                                           ---------------------------------------------------------------------
Bank:  December 31, 1996
       Leverage (Tier 1) capital           $14,584       6.55%     $ 8,902       4.00%     $11,177       5.00%
       Risk-based capital:                                                                
         Tier 1                             14,584      10.89%       5,358       4.00%       8,037       6.00%
         Total                              16,176      12.08%      10,715       8.00%      13,394      10.00%
       December 31, 1995                                                                  
       Leverage (Tier 1) capital            11,073       6.32%       7,013       4.00%       8,766       5.00%
       Risk-based capital:                                                                
         Tier 1                             11,073       9.91%       4,468       4.00%       6,702       6.00%
         Total                             $12,398      11.10%     $ 8,935       8.00%     $11,169      10.00%
                                           ---------------------------------------------------------------------
</TABLE>

--------------
page seventeen

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(continued)


--------------------------------------------------------------------------------
(10) Commitments,
     Contingencies and
     Concentrations of
     Credit Risk

Commitments

     The Corp. is party to financial instruments and commitments with
off-balance-sheet credit risk in the normal course of business. These financial
instruments and commitments include unused home equity lines of credit,
commitments to extend credit, and commitments to purchase securities. These
commitments and instruments involve, to varying degrees, elements of risk in
excess of the amounts recognized in the consolidated financial statements.

     The Corp.'s maximum exposure to credit losses in the event of
nonperformance by the other party to these financial instruments and commitments
is represented by the contractual amount. The Corp. uses the same credit
policies in granting commitments and conditional obligations as it does for
financial instruments recorded in the consolidated statements of financial
condition.

     At December 31, 1996 and 1995, financial instruments and commitments whose
contractual amounts represent off-balance-sheet credit risk are as follows:

<TABLE>
<CAPTION>
                                                                   1996          1995
                                                               -------------------------
<S>                                                            <C>           <C>        
Unused portions of commercial lines of credit,
  letters of credit and undisbursed portion of
  construction loans:
  Fixed-rate                                                   $   270,000   $   349,150
  Variable-rate                                                 17,650,314    12,949,431
Unused home equity lines of credit (primarily floating rate)     5,583,328     4,831,539
Unused portion of consumer lines of credit                         841,999       643,237
Commitments to extend credit:
  Fixed-rate                                                     1,819,000       505,000
  Variable-rate                                                 11,872,000    11,558,630
                                                               -------------------------
                                                               $38,036,641   $30,836,987
                                                               =========================
</TABLE>


     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract. Since
many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
The Corp. evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Corp. upon
extension of credit, is based on management's credit evaluation of the customer.
Fixed-rate commitments had interest rates ranging from 8.75% to 9.0% at December
31, 1996.

     Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of an act of a customer to a third party.

     The Corp. leases land and buildings for its banking facilities under
operating leases which expire at various dates through 2013 but which contain
certain renewal options. Included in these leases is an obligation of the Corp.
to Prestige Quarters LP, a partnership whose controlling general partner is a
director of the Corp., for a 20-year lease which commenced in 1993. Also
included in these leases are obligations of the Corp. to Prestige Realty Group
LLC and Prestige Clinton Realty LLC, limited liability companies owned by
certain directors of the Corp., for ten-year leases which commenced in 1994 and
1996. As of December 31, 1996, future minimum rental payments, excluding the
renewal options under these leases, are as follows:

                                                                      ----------
1997                                                                  $  403,546
1998                                                                     380,664
1999                                                                     380,664
2000                                                                     380,664
2001                                                                     380,664
Thereafter                                                            $3,274,161
                                                                      ==========


     The above amounts represent minimum rentals not adjusted for possible
future increases due to escalation provisions. Rental expense, primarily related
to the above described lease obligations, aggregated $427,650, $318,537 and
$275,717 for the years ended December 31, 1996, 1995 and 1994, respectively,
which is included in net occupancy expense in the consolidated statements of
income.

-------------
page eighteen

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


Contingencies

     The Corp. may, in the ordinary course of business, be a party to litigation
involving collection matters, contract claims and other legal proceedings
relating to the conduct of its business. In management's judgment, the financial
position or results of operation of the Corp. will not be affected materially by
the final outcome of any current legal proceedings or other contingent
liabilities and commitments.


Concentrations of Credit Risk

     The Corp. extends credit in the normal course of business to its customers,
the majority of whom operate or reside within the New Jersey, eastern
Pennsylvania, and southern New York business areas. The ability of its customers
to meet contractual obligations is, to some extent, dependent upon the economic
conditions existing in this region.


--------------------------------------------------------------------------------
(11) Stockholders' Equity

The payment of dividends by the Bank is restricted. Under the New Jersey Banking
Act of 1948, as amended, the Bank may pay dividends only out of retained
earnings and out of paid-in capital to the extent that paid-in capital exceeds
50% of stated capital.


Stock Compensation and Other Benefit Plans

     In October 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." This Statement encourages recording in current period
earnings compensation expense related to the fair value of certain stock-based
compensation. Companies may choose to continue to follow the provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," where compensation expense is not recorded for certain
stock-based compensation plans. However, companies are required to disclose pro
forma net income and earnings per share as if they adopted the fair value based
method of accounting. The disclosure requirements for SFAS No. 123 are effective
for fiscal years beginning after December 15, 1995.

     At December 31, 1996 the Corp. has four stock-based compensation plans,
which are described below. All amounts presented reflect the five-for-four stock
split effective on April 19, 1996 and the 10% stock dividend effective on March
31, 1995. The Corp. has elected to continue to account for stock-based
compensation under APB Opinion No. 25 and to provide pro forma disclosures as
required by SFAS No. 123. Accordingly, no compensation cost has been charged
against income for option plans where the exercise price is equal to the market
value of the underlying stock at the date of grant. The compensation cost that
has been charged against income for option plans where the exercise price is
less than the market value of the underlying stock at the date of grant was
$117,944 and $18,799 in 1996 and 1995, respectively. Had compensation cost for
the Corp.'s stock option plans been determined consistent with SFAS No. 123, the
Corp.'s net income and earnings per share would have been reduced to the pro
forma amounts indicated below:

                                                           1996          1995
                                                        ------------------------
Net income                            As Reported        2,042,718     1,172,265
                                      Pro forma          1,918,311     1,157,534
Primary earnings per share            As Reported       $      .76    $      .48
                                      Pro forma         $      .72    $      .48
Fully diluted earnings per share      As Reported       $      .75    $      .47
                                      Pro forma         $      .71    $      .47


     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: dividend yield of 2%; expected
volatility of 20%; risk-free interest rates equal to the five year CMT on the
date of each option grant; and expected lives of five years.

     Pursuant to the 1990 Long-term Incentive Compensation Plan for Key
Employees (the 1990 Plan), 3,300 shares of Corp. stock remain reserved for
issuance to eligible employees of the Corp. upon the exercise of options granted
under the 1990 Plan. Under the 1994 Stock Option Plan for Key Employees (the
KEP), the Corp. may grant options to its key employees for up to 207,250 shares
of common stock. Under the 1990 Plan and the KEP, the exercise price of each
option granted equals 85% of the market price of the Corp.'s stock on the date
of grant. Under the 1994 Stock Option Plan for Senior Management (the SMP), the
Corp. may grant options to its senior management personnel for up to 68,750
shares of common stock. Under the 1994 Stock Option Plan for Outside Directors
(the ODP), the Corp. may grant options to its outside directors for up to 60,500
shares of common stock. Under the SMP and the ODP, the exercise price of each
option equals the market price of the Corp.'s stock on the date of grant.
Options

-------------
page nineteen

<PAGE>

Notes to Consolidated
Financial Statements
December 31, 1996, 1995 and 1994
(continued)


granted in accordance with the above plans vest over a period not to exceed five
years and have a maximum term of ten years.

     A summary of the status of the Corp.'s stock option plans as of December
31, 1996 and 1995 and changes during the years ended on those dates is presented
below:

<TABLE>
<CAPTION>
                                                    1996                     1995
                                            ---------------------------------------------
                                                         Weighted                Weighted
                                                          Average                 Average
                                                         Exercise                Exercise
                                             Shares       Price       Shares      Price
                                            ---------------------------------------------
<S>                                         <C>          <C>         <C>          <C>  
Outstanding at beginning of year            160,485      $ 6.03      143,656      $5.33
Granted                                     167,784       10.36       51,313       6.02
Exercised                                    (5,700)       5.24      (33,521)      3.08
Forfeited                                    (1,988)       8.51         (963)      5.13
Outstanding at end of year                  320,581        8.33      160,485       6.03
Options exercisable at year-end             129,458        6.08       58,251       5.97

Weighted average fair value of options
  granted during the year                     $3.35                    $2.11
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
                                          Options Outstanding                     Options Exercisable
                               -------------------------------------------------------------------------
                                               Weighted
                                                Average        Weighted                        Weighted
Range of                                       Remaining       Average                          Average
Exercise                          Number      Contractual      Exercise          Number         Exercise
Prices                         Outstanding       Life            Price         Exercisable        Price
--------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>                <C>             <C>              <C>  
$5.13- 6.37                      154,018       91 months         $ 6.07          128,989          $6.07
$9.53-14.25                      166,563      110 months         $10.42              469          $9.53
</TABLE>


     The Corp. established a stock grant plan for founding outside directors in
1994. The plan provides for the issuance of 46,750 shares of Corp. common stock.
At December 31, 1996, 18,700 shares have been issued under this plan.

     In addition, the Corp. provides a 401(k) deferred compensation plan to all
eligible employees. Under this plan, the employer matches employee contributions
up to 7% of base salary. Employer matching contributions totalled $97,000,
$75,000 and $53,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.


Stock Warrants

     In 1996 the Corp. issued warrants for 6,250 shares of common stock as
compensation to an outside vendor. The warrants are fully exercisable in
February, 1997 at an exercise price of $11.60 per share. The warrants expire in
1998.


--------------------------------------------------------------------------------
(12) Fair Value of
     Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of fair value information about financial instruments, whether or not
recognized on the face of the balance sheet, for which it is practicable to
estimate that value. The assumptions used in the estimation of fair value of the
Corp.'s financial instruments are detailed below. Where quoted prices are not
available, fair values are based on estimates using discounted cash flows and
other valuation techniques. The following fair value estimates were made as of
December 31, 1996 and 1995 based on pertinent market data and relevant
information on each financial instrument. These estimates do not include any
premium or discount that could result from an offer to sell the Corp.'s entire
holdings of a particular financial instrument or category thereof at one time.
Since no market exists for a substantial portion of the Corp.'s financial
instruments, fair value estimates were necessarily based on judgments with
respect to future loss experience, current economic conditions, risk assessments
of various financial instruments involving a myriad of individual borrowers and
other factors. Given the innately subjective nature of these estimates, the
uncertainties surrounding them and the matters of significant judgment that must
be applied, these fair value estimations cannot be calculated with precision.
Modifications in such assumptions could meaningfully alter these estimates.
Since these fair value approximations were made solely for financial instruments
at

------------
page twenty

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


December 31, 1996 and 1995, no attempt was made to estimate the value of
anticipated future business or the value of nonfinancial assets and liabilities.
Other important elements which are not deemed to be financial assets or
liabilities include the value of the Corp.'s existing core deposit base,
premises and equipment, and goodwill. Furthermore, certain tax implications
related to the realization of the unrealized gains and losses could have a
substantial impact on these fair value estimates and have not been incorporated
into the estimates.

     The following methods and assumptions were used by the Corp. in estimating
the fair value of its financial instruments:

     Cash and due from banks: Fair value equals the carrying value of such
assets. Federal funds sold and short-term investments: Due to the short-term
nature of these assets, the carrying values of these assets approximate their
fair values. 

     Loans held for sale: Fair values are based upon quoted market prices for
comparable loans as to interest rate, credit risk and term.

     Investment Securities: Fair values are based on quoted market prices.

     Loans: All fixed rate loans were valued using discounted cash flows. The
discount rate used to determine the present value of these loans was based on
interest rates currently being charged by the Bank on comparable loans as to
credit risk and term. Fair values for variable rate loans are considered to
approximate carrying values.

     Commitments to extend credit and letters of credit: The majority of the
Corp.'s commitments to extend credit and letters of credit carry current market
interest rates if converted to loans. Because commitments to extend credit and
letters of credit are generally unassignable by either the Corp. or the
borrower, they only have value to the Corp. and the borrower. The estimated fair
value approximates the recorded deferred fee amounts.

     Deposits: The fair values of deposits without stated maturities are equal
to the carrying value of such deposits. Deposits without stated maturities
include noninterest bearing demand deposits, savings accounts, NOW accounts and
money market demand accounts. Discounted cash flows have been used to value
certificates of deposit. The discount rate used is based on interest rates
currently being offered by the Bank on comparable deposits as to amount and
term.

     The carrying amounts and estimated fair values of the Corp.'s financial
instruments are as follows at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                                                        Carrying            Estimated
                                                                         Amount            Fair Value
                                                                     ---------------------------------
<S>                                                                  <C>                  <C>         
December 31, 1996
  Financial Assets:
    Cash and due from banks                                          $  9,579,368         $  9,579,368
    Federal funds sold and short-term investments                       8,950,028            8,950,028
    Loans held for sale, net                                           15,013,245           15,763,907
    Investment Securities, net                                         68,874,149           68,680,887
    Loans, net                                                        123,454,671          124,137,000
    Less: Allowance for loan losses                                     1,592,078            1,592,078
    Net loans                                                         121,862,593          122,544,922
  Financial liabilities:                                                                
    Deposits with no stated maturities                                108,192,413          108,192,413
    Certificates of deposit                                          $104,403,868         $104,587,000
December 31, 1995                                                                       
  Financial Assets:                                                                     
    Cash and due from banks                                          $  5,530,778         $  5,530,778
    Federal funds sold and short-term investments                      10,525,000           10,525,000
    Loans held for sale, net                                           10,240,981           10,855,440
    Investment Securities, net                                         43,270,135           43,466,781
    Loans, net                                                        103,346,182          103,025,809
    Less: Allowance for loan losses                                     1,324,626            1,324,626
    Net loans                                                         102,021,556          101,701,183
  Financial liabilities:                                                                
    Deposits with no stated maturities                                 74,178,292           74,178,292
    Certificates of deposit                                          $ 89,338,594         $ 89,883,559
</TABLE>

---------------
page twenty-one

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(continued)

--------------------------------------------------------------------------------
(13) Condensed Financial
     Information of
     Parent Company

     The condensed financial statements of Prestige Financial Corp. are as
follows:

Parent Only Statements of Financial Condition

<TABLE>
<CAPTION>
                                                                            1996              1995
                                                                        ------------------------------
<S>                                                                     <C>               <C>         
Assets:
  Cash and due from banks                                               $    185,303      $    514,036
  Investment securities, net (estimated market value $1,099,957 and
    $500,000 at December 31, 1996 and 1995, respectively)                  1,099,957           500,000
  Investment in subsidiary                                                14,584,185        11,073,242
  Other assets                                                                28,868            44,614
                                                                        ------------------------------
      Total assets                                                      $ 15,898,313      $ 12,131,892
                                                                        ==============================
Liabilities and stockholders' equity:
  Other liabilities                                                          188,391            73,419
  Stockholders' equity                                                    15,709,922        12,058,473
                                                                        ------------------------------
Total liabilities and stockholders' equity:                             $ 15,898,313      $ 12,131,892
                                                                        ==============================
Parent Only Statements of Income
Interest income                                                         $     50,912      $      2,473
Operating expenses                                                           (14,137)          (14,137)
Income tax (provision) benefit                                                (5,000)            2,631
Dividends from subsidiary                                                       --             115,200
Equity in undistributed income of subsidiary                               2,010,943           993,074
                                                                        ------------------------------
Net income available to common stockholders                             $  2,042,718      $  1,099,241
                                                                        ==============================
Parent Only Statements of Cash Flows
Cash flows from operating activities:
  Net income available to common stockholders                           $  2,042,718      $  1,099,241
  Less equity in undistributed income of subsidiary                       (2,010,943)         (993,074)
  Adjustments to reconcile net income to net cash provided by
    operating activities:
      Amortization of organizational costs                                    14,137            14,137
      Decrease in other assets                                                 1,609            11,881
      Increase in other liabilities                                          114,972            73,419
      Common stock grants                                                     59,500            59,500
                                                                        ------------------------------
        Net cash provided by operating activities                            221,993           265,104
                                                                        ------------------------------
Cash flows from investing activities:
  Proceeds from maturities of investment securities                        9,185,575              --
  Purchases of investment securities                                      (9,785,532)         (500,000)
  Increase in investment in subsidiary                                    (1,500,000)       (1,555,453)
        Net cash used in investing activities                             (2,099,957)       (2,055,453)
Cash flows from financing activities:
  Proceeds from issuance of common stock, net                              2,169,412         2,523,124
  Cash dividends paid                                                       (620,181)         (228,739)
                                                                        ------------------------------
        Net cash provided by financing activities                          1,549,231         2,294,385
                                                                        ------------------------------
        (Decrease) increase in cash and cash equivalents                    (328,733)          504,036
Cash and cash equivalents at beginning of year                               514,036            10,000
                                                                        ------------------------------
Cash and cash equivalents at end of year                                $    185,303      $    514,036
                                                                        ==============================
</TABLE>

---------------
page twenty-two

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


(14) Recent Accounting
     Pronouncements

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
amends portions of SFAS No. 115, amends and extends to all servicing assets and
liabilities the accounting standards for mortgage servicing rights now in SFAS
No. 65, and supersedes SFAS No. 122. The Statement provides consistent standards
for distinguishing transfers of financial assets which are sales from transfers
that are secured borrowings. Those standards are based upon consistent
application of a financial components approach that focuses on control. The
Statement also defines accounting treatment for servicing assets and other
retained interest in the assets that are transferred. SFAS No. 125 is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, except for certain provisions
which were deferred until January 1, 1998 by SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125" issued in
December, 1996. The adoption of the Statement is to be applied prospectively and
is not expected to have a material effect on the Corp.'s financial condition or
results of operations.

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


INDEPENDENT
AUDITORS' REPORT

The Stockholders and
Board of Directors
Prestige Financial Corp.:

     We have audited the accompanying consolidated statements of financial
condition of Prestige Financial Corp. and subsidiary as of December 31, 1996 and
1995, and the related statements of income, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Corp.'s management. Our responsibility is to express an opinion on these
consolidated 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 that 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 Prestige
Financial Corp. and subsidiary as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.



/s/ KPMG Peat Marwick LLP

Short Hills, New Jersey
January 17, 1997

-----------------
page twenty-three

<PAGE>

STOCK PRICE INFORMATION                                 PRESTIGE FINANCIAL CORP.
                                                                  AND SUBSIDIARY


The following chart details the sales price ranges for Prestige Financial Corp.
common stock on a quarterly basis for 1995 and 1996.

These prices reflect actual transactions exclusive of commissions, as adjusted
for stock distributions via dividends and splits.

===============================================
                          High            Low
-----------------------------------------------
1995:
First Quarter            $ 7.00         $ 6.00
Second Quarter             9.00           6.40
Third Quarter              9.40           6.60
Fourth Quarter            12.60           9.80
-----------------------------------------------
1996:
First Quarter            $14.80         $11.20
Second Quarter            15.75          12.88
Third Quarter             13.75          11.25
Fourth Quarter            14.38          11.13
===============================================

The number of shares outstanding as of December 31, 1996 was 2,661,331.

The Corporation's common stock is listed on the NASDAQ National Market and the
ranges of sales prices were obtained from that source.


Corporate Headquarters:

Prestige Financial Corp.
One Royal Road
P.O. Box 2480
Flemington, NJ 08822


Shareholder Inquiries:

For information regarding your shares of common stock of Prestige Financial
Corp., please contact:

Arnold F. Horvath
President
908-806-6200


Stock Symbol: PRFN

NASDAQ National Market


Market Makers:

The common stock of Prestige Financial Corp. is generally inactively traded. The
most active market makers known to the Corp. are:

Sandler O'Neil & Partners
2 World Trade Center
104th Floor
New York, NY 10048

Ryan, Beck & Co.
80 Main Street
West Orange, NJ 07052

Troster Singer
10 Exchange Place
Jersey City, NJ 07302

FIA Capital Group
119 Littleton Road
Parsippany, NJ 07054


Financial Information and Form 10K:

Persons may obtain a copy, free of charge, of Prestige Financial Corp.'s 1996
Annual Report on Form 10K (excluding exhibits) as filed with the Securities and
Exchange Commission. Investors, securities analysts and others desiring
financial information or a copy of such report should contact:

Robert J. Jablonski
Chief Executive Officer
908-806-6200


Registrar and Transfer Agent:

Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016


Annual Shareholders' Meeting:

The annual shareholders' meeting of Prestige Financial Corp. will be held at
5:30 pm on Tuesday, April 22, 1997 at One Royal Road, Flemington, NJ



Designed by Curran & Connors, Inc.

----------------
page twenty-four

<PAGE>






                            PRESTIGE FINANCIAL CORP.

       One Royal Road, P.O. Box 2480, Flemington, NJ 08822 o 908-806-6200