[LOGO]

                            PRESTIGE FINANCIAL CORP.

                            Doing Well by Doing Good








                               1997 ANNUAL REPORT






<PAGE>



The following chart details the sales price ranges for Prestige Financial Corp.
common stock on a quarterly basis for 1996 and 1997.

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

================================================================================
                                                     High                  Low
--------------------------------------------------------------------------------

1996:
First Quarter                                      $12.33               $ 9.33
Second Quarter                                      13.13                10.73
Third Quarter                                       11.46                 9.38
Fourth Quarter                                      11.98                 9.28
--------------------------------------------------------------------------------

1997:
First Quarter                                      $14.79               $10.83
Second Quarter                                      15.63                13.65
Third Quarter                                       17.00                14.00
Fourth Quarter                                      18.00                14.00
================================================================================

The number of shares outstanding as of December 31, 1997 was 3,308,624.

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


Stock Symbol: PRFN

NASDAQ National Market


Shareholder Inquiries:

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

Arnold F. Horvath
President
908-806-6200


Financial Information and Form 10K:

Persons may obtain a copy, free of charge, of Prestige Financial Corp.'s 1997
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


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

Herzog, Heine, Geduld, Inc.
525 Washington Boulevard
Jersey City, NJ 07310

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

FIA Capital Group
119 Littleton Road
Parsippany, NJ 07054


Corporate Headquarters:

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


Branch Offices

East Clinton
87 Beaver Avenue
Clinton, NJ 08822
908-730-9141

West Clinton
92 Route 173
Clinton, NJ 08822
908-735-7744

Edward's Store
Prestige Plaza
334 Highway 31
Raritan Twp., NJ 08822
908-806-6200

Raritan Borough
34 East Somerset Street
Raritan, NJ 08822
908-218-9898

Reading Ridge Center
8 Reading Road
Flemington, NJ 08822
908-806-6200

Investment Center
Mortgage Division
Prestige Plaza
334 Highway 31
Raritan Twp., NJ 08822
908-806-6200


Annual Shareholders' Meeting:

The annual shareholders' meeting of Prestige Financial Corp. will be held at
5:30 pm on Tuesday, April 21, 1998 at One Royal Road, Flemington, NJ

<PAGE>

<TABLE>
SELECTED FINANCIAL DATA                                                                                     PRESTIGE FINANCIAL CORP.
                                                                                                                      AND SUBSIDIARY


<CAPTION>
Dollars in thousands, except per share data                                               Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
Summary of Income                                                          1997        1996         1995        1994        1993
                                                                        ------------------------------------------------------------
<S>                                                                     <C>         <C>          <C>         <C>         <C>
                              Net interest income                       $   10,603  $     8,471  $    6,545  $    4,862  $   3,949
                              Provision for loan losses                        745          516         350         100        451
                              Non-interest income                            2,500        1,536         700         563        525
                              Non-interest expense                           8,457        6,222       4,898       4,124      3,276
                              Provision for income taxes                     1,197        1,226         825         491        287
                              Extraordinary items                               --           --          --          --         --
                              Cumulative effect of accounting change            --           --          --          --         63
                                                                        ------------------------------------------------------------
                              Net income                                $    2,704  $     2,043  $    1,172  $      710  $     523
                                                                        ============================================================

------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
                              Investments                               $   94,818  $    68,874  $   43,270  $   22,541  $  22,733
                              Total loans, net                             156,093      136,876     112,263      92,534     73,786
                              Total assets                                 283,587      229,517     176,382     132,572    109,636
                              Total deposits                               263,156      212,596     163,517     122,439    100,112
                              Stockholders' equity                      $   18,889  $    15,710  $   12,058  $    9,505  $   8,951
                                                                        ============================================================

------------------------------------------------------------------------------------------------------------------------------------
Financial Ratios
                              Return on average assets                       1.06%        1.01%       0.79%       0.61%      0.55%
                              Return on average equity                      15.60%       14.75%      11.27%       7.72%      6.13%
                              Diluted earnings per common share              $0.78        $0.63       $0.40       $0.26      $0.19
                              Book value per common share                    $5.71        $4.92       $4.08       $3.32      $3.11
                              Cash dividends per common share                $0.33        $0.21       $0.09       $0.05      $0.03
                              Tier 1 capital ratio                          10.78%       11.69%       9.91%      10.02%     11.08%
                              Total risk-based capital ratio                11.83%       12.87%      11.10%      11.16%     12.33%
                              Allowance for loan losses/total loans          1.16%        1.15%       1.17%       1.15%      1.41%
                              Net charge-offs/average total loans            0.34%        0.20%       0.10%       0.10%      0.07%
                                                                        ============================================================






                                                          YEAR-END ASSETS
                                                           (In Millions)
                            [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]

                                                    <<< TABLE TO BE INSERTED >>>




                                                             NET INCOME
                                                           (In Thousands)
                            [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]

                                                    <<< TABLE TO BE INSERTED >>>



                                                         EARNINGS PER SHARE
                                                            (In Dollars)
                            [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]

                                                    <<< TABLE TO BE INSERTED >>>



                                                   YEAR-END MARKET CAPITALIZATION
                                                            (In Millions)
                            [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]

                                                    <<< TABLE TO BE INSERTED >>>




                                                               -----
                                                                 1


</TABLE>

<PAGE>


TO SHAREHOLDERS OF PRESTIGE:


                            DOING WELL BY DOING GOOD

     Prestige Financial Corp. enjoyed another record year in 1997 as Prestige
State Bank continued to "do well by doing good," for shareholders, customers and
the community. From SBA loans and municipal lease financing to support of Little
League Baseball, Prestige State Bank is an active, supportive presence in New
Jersey.

     It is customary in this letter to talk about financial results and the
other traditional measurements by which shareholders and the investment
community judge a company's performance. You will find that information in our
report, of course, but we will also be telling you about another way we would
like you to measure our performance: How well we are fulfilling our obligation
to be a good corporate citizen.

     Prestige is a community bank, and we owe our success to the communities and
individuals who contribute to the bank's growth through their deposits, their
borrowings and their recommendations of the bank to friends and neighbors. Those
who bank with us appreciate that Prestige, its management and its staff know and
understand the needs and expectations of the people and businesses we serve,
because our customers are also our neighbors.

     Some of those neighbors are in need--of the best possible health services,
special education and training programs, child care, recreational facilities and
activities, affordable housing, a better municipal infrastructure, support for
arts projects and the environment, and other contributions to a better quality
of life. Prestige State Bank helps meet these needs in many ways throughout the
year, with donations of volunteer time, financial support, materials and banking
expertise.

     The United Way of Hunterdon County and the social service agencies it
supports provide help to many of the county's neediest citizens, and the people
of Prestige State Bank are among the biggest givers to the United Way's annual
appeal. But the bank gives more than dollars. Prestige lends the time and
leadership skills of its officers, helps with advertising, and supplies
materials and postage for mailings. Our work as a team player with the United
Way has earned Prestige State Bank the United Way Chairman's Award each year for
the past several years.




[PHOTO]

The fun-filled "cityscape" at
Des Mares School in Raritan
Township as a result of a
successful Operation
Playground for which Prestige
was recognized as a Platinum
donor.

[PHOTO]

                                      -----
                                        2

<PAGE>


                                                        PRESTIGE FINANCIAL CORP.
                                                        AND SUBSIDIARY

[PHOTO]

On Hunterdon County United Way's Day of Caring, Prestige adds to its financial
support by joining other volunteers to help with painting, repairs, filing,
organizing, transportation, etc. at member-agency locations.


[PHOTO]

Three future "big leaguers" dream of hitting it over the fence at one of the
ball fields maintained via the Flemington-Raritan Little League golf outing
sponsored in large part by Prestige State Bank.




     Prestige is a longtime supporter of the Hunterdon Medical Center, a vital
healthcare facility for everyone in our service area. When we were asked during
1997 to consider making a multi-year pledge of $15,000 to the Center's capital
campaign, we responded with an immediate $25,000 donation and will be recognized
with a plaque in the new Medical Imaging/Diagnostic Center Unit of the hospital.

     We were also a major donor in a campaign to raise $80,000 for expansion and
renovation of the landmark Hunterdon County War Memorial. The association of our
name with the effort helped attract other donors, assuring that the campaign
would be a success.

     Prestige helps the children of the community in many ways. When a project
called "Operation Playground" was organized to build a safe, imaginative place
to play near a new elementary school in Raritan Township, Prestige was the only
"Platinum" level donor not directly involved with the construction of the
playground or with the school. Our name was used by the fund-raising team to
attract other area businesses, and was inscribed on a plaque at the site.

     As the major sponsor throughout our corporate life of the annual
Flemington-Raritan Little League golf tournament, we have -- each year --
provided balls for all players, paid for at least 16 golfers and solicited what
the organizers call "super-sponsors," mostly bank director or advisory board
member companies, who donate $1,000 each. Over the eight-year period, proceeds
have totaled nearly $50,000 for the betterment of our youth.

     We sponsor a composer and performer of children's music named Macheis Wind
who displays our name as he entertains. Children in our area have also been
supported by our donations to Big Brothers Big Sisters, the Boy Scouts, 4-H,
several scholarship funds, a fire safety program for kids, Pop Warner football
and activities for disabled youngsters.




                                     -----
                                       3
<PAGE>

TO SHAREHOLDERS OF PRESTIGE: (Continued)



                            DOING WELL BY DOING GOOD

[PHOTO]

Some of Prestige State Bank's "team"
prepare to take part in the Town of
Clinton's Christmas Parade in which the
bank places a float carrying familiar
characters to please young and old
alike.





     Prestige joins in the celebrations of the communities where it is located,
including the popular Clinton and Flemington Christmas parades, Raritan
Borough's annual street fair, the annual Raritan Township Community Day, a fall
festival in Ringoes and the multicultural, alcohol-free New Years Eve First
Night festivities.

     The bank's officers help the communities where we operate to remain strong,
by serving on boards or committees of chambers of commerce, Rotary Clubs, Elks,
Lions and other civic or fraternal organizations. We contribute to the programs
and fundraisers of the YMCA, churches, synagogues, Hadassah, Catholic Charities,
the American Legion, numerous drug awareness and treatment programs and the
Heart, Diabetes, and Cancer associations. Prestige received the prestigious
Israel Unity Award for our exemplary support of the Jewish community, and the
bank was honored at a dinner with a special commendation and a wall hanging for
its contribution to the Israel Bonds drive.

     We also recognize the importance of culture, arts and the environment to a
community, and we have contributed to the Hunterdon regional art center, concert
performances, a Teen Arts Festival, and a crafts outlet for seniors. Prestige
was recognized for its "distinguished efforts and major contributions on behalf
of the environment" by an area association.

     Prestige has aided groups concerned with affordable housing, including
Habitat for Humanity and the Somerset County Coalition on Affordable Housing,
and is active in the downtown revitalization efforts of Main Street Flemington
and the Flemington Partnership for Progress.

     As a bank with strong community ties and a record of service, we are better
positioned than our larger competitors to be the bankers to municipalities that
are looking for lease financing and to individuals seeking capital to start or
expand a business. Within the past year, Prestige has helped the Township of
Lebanon purchase a new fire engine with a tax-free loan, assisted a school that
is adding a new wing, and loaned $45,000 to Meals on Wheels to buy a building
they had been renting.



                                      -----
                                        4

<PAGE>

                                                        PRESTIGE FINANCIAL CORP.
                                                        AND SUBSIDIARY

[PHOTO]

The Hunterdon County War Memorial received a major facelift and addition with
the help of major givers such as Prestige, whose money and good name were used
to forward the campaign.


[PHOTO]

Municipal Lease Financing is often provided by Prestige to government bodies as
well as school boards as an alternative funding source for purchases such as
this new fire truck for Lebanon Township.





     Officers of Prestige State Bank are sought-after speakers at seminars and
expos for entrepreneurs and small business owners throughout our marketing area.

     Prestige State Bank more than meets the requirements of the Federal
Community Reinvestment Act. And because we have demonstrated that Prestige State
Bank is a force for good in the community, the community turns to us when we can
offer a banking solution to their needs. That's what it means to do well by
doing good.

     And Prestige Financial Corp. did very well in 1997.

     Net income for the year ended December 31, 1997 rose 32 percent, to a
record $2,703,000, or 78 cents per share diluted, from net income of $2,043,000
or 63 cents per share diluted for 1996. Total assets at Dec. 31, 1997 were
$283,587,000, a 24 percent gain from assets of $229,517,000 at the same date
last year.

     Return on average assets for 1997 was 1.06 percent, up 4.95 percent from
1.01 percent for 1996, and return on average equity for 1997 reached 15.60
percent, a 5.76 percent gain from 14.75 percent recorded for 1996.

     Total deposits increased 24 percent to $263,156,000 at Dec. 31, 1997, from
$212,596,000 at Dec. 31, 1996, and total loans, including those "available for
sale," were up 14 percent to $157,931,000 at Dec. 31, 1997 from $138,468,000 at
Dec. 31, 1996.

     Our record performance for 1997 continues an unbroken trend of higher
earnings for each year in the company's history. We are especially pleased that
Prestige maintained its strong year-to-year growth despite costs associated with
opening three new locations during 1997. Although these expenses impacted
results for the fourth quarter, net income through the first nine months of 1997
exceeded that of the full year of 1996.

     In late 1997, the bank opened a full-service branch banking office in the
Hunterdon County community of Clinton, our second location in the growing
Clinton area. Earlier in 1997, we opened a free-standing branch and an in-store
branch on a major highway between Flemington and Clinton.


                                     -----
                                       5

<PAGE>

TO SHAREHOLDERS OF PRESTIGE: (Continued)



[PHOTO]

Instead of a "promise to pay"-Prestige
hands over a "pay to the order of"-the
Hunterdon Medical Center Foundation for
$25,000 to help fund major renovations
to the county's hospital.




     Prestige State Bank continues to be a premier SBA lender as it has been
since the bank was founded in 1990. But as important as SBA lending has been in
our history and growth, such services as mortgage lending, home equity loans and
municipal financing are increasingly important contributors to our bottom line.

     We also have a history of rewarding our shareholders, and we are proud that
Prestige Financial Corp. has declared consecutive quarterly dividends in every
quarter since March 31, 1995 and has paid special year-end dividends in each of
the past two years.

     As we enter 1998, we are confident in the strong prospects for both the
company and the growing New Jersey banking market we serve.

     We intend to direct increasing attention to the Somerset County portion of
our service area, perhaps opening an additional branch either right within that
market or, at least, as a "bridge" location between our Hunterdon and Somerset
facilities. Now that our Mortgage and Municipal Lease Financing Divisions have
fully developed, we expect to rely on them to continue the balance we've
established among all our earning assets. Non-interest income enhancements will
also be counted upon to better diversify the sources of the company's revenues.
We anticipate that the company's subsidiary, PFC Financial Services Inc. will
play a large role in such diversification by offering professional investment
services for those who desire optional routes for their own, personal finances.
Add to this that banking-at-home will become a reality in 1998 at Prestige and
one can see that we strive to increase income first by increasing levels of
service--not by finding ways to charge more for services already in place. Just
more assurance that Prestige will continue to be an example of how a financial
institution--or any business--can do well by doing good. We thank you, as
always, for your attention and continued support.

Sincerely,


/s/ Arnold F. Horvath                     /s/ Robert J. Jablonski
Arnold F. Horvath                         Robert J. Jablonski
President                                 Chief Executive Officer





                                     -----
                                       6

<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS                                                              PRESTIGE FINANCIAL CORP.
OF FINANCIAL CONDITION                                                               AND SUBSIDIARY


<CAPTION>
                                                                                                             December 31,
------------------------------------------------------------------------------------------------------------------------------------
Assets                                                                                                 1997               1996
                                                                                                 -----------------------------------
<S>                                                                                               <C>                <C>
                              Cash and due from banks                                             $   10,297,330     $    9,579,368
                              Federal funds sold and short-term investments                           11,312,578          8,950,028
                                                                                                 -----------------------------------
                                    Total cash and cash equivalents                                   21,609,908         18,529,396
                                                                                                 -----------------------------------
                              Loans held for sale, net                                                16,284,462         15,013,245
                              Investment securities, net (estimated market value of $95,360,123
                                and $68,680,887 in 1997 and 1996, respectively)                       94,818,190         68,874,149
                              Loans, net                                                             141,646,514        123,454,671
                              Less: Allowance for loan losses                                          1,838,207          1,592,078
                                                                                                 -----------------------------------
                              Net loans                                                              139,808,307        121,862,593
                                                                                                 -----------------------------------
                              Accrued interest receivable                                              2,009,120          1,537,994
                              Premises and equipment, net                                              3,427,564          2,490,059
                              Other assets                                                             5,629,122          1,210,011
                                                                                                 -----------------------------------
                                    Total assets                                                  $  283,586,673     $  229,517,447
                                                                                                 ===================================

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

Liabilities and
Stockholders' Equity
                              Liabilities:
                                Deposits:
                                  Non-interest bearing                                            $   47,595,244     $   35,318,480
                                  Interest bearing                                                   215,560,598        177,277,801
                                                                                                 -----------------------------------
                                    Total deposits                                                   263,155,842        212,596,281
                                Accrued interest payable                                                 426,111            308,082
                                Accrued expenses and other liabilities                                 1,115,879            903,162
                                                                                                 -----------------------------------
                                    Total liabilities                                                264,697,832        213,807,525
                                                                                                 -----------------------------------
                              Stockholders' equity:
                                Common stock, par value $.01; 5,000,000 shares authorized;
                                3,308,624 shares and 2,661,331 shares issued and
                                outstanding at December 31, 1997 and 1996, respectively                   33,086             26,613
                                Paid-in capital                                                       15,071,131         13,581,186
                                Retained earnings                                                      3,784,624          2,102,123
                                                                                                 -----------------------------------
                                    Total stockholders' equity                                        18,888,841         15,709,922
                              Commitments and contingencies (note 10)
                                                                                                 -----------------------------------
                                    Total liabilities and stockholders' equity                    $  283,586,673     $  229,517,447
                                                                                                 ===================================


                              See accompanying notes to consolidated financial statements.




                                                               -----
                                                                 7
</TABLE>

<PAGE>

<TABLE>
CONSOLIDATED STATEMENTS                                                              PRESTIGE FINANCIAL CORP.
OF INCOME                                                                            AND SUBSIDIARY

<CAPTION>
                                                                                                 Years ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                                                          1997            1996            1995
                                                                                     -----------------------------------------------
<S>                                                                                  <C>              <C>             <C>
                              Interest income:
                                Loans                                                $  14,032,350    $  11,920,839   $  10,048,068
                                Investment securities
                                  Taxable                                                5,041,347        3,590,295       1,624,625
                                  Exempt from Federal income tax                           201,937          100,244         138,744
                                Federal funds sold and short-term investments              446,435          427,861         443,000
                                                                                     -----------------------------------------------
                                  Total interest income                                 19,722,069       16,039,239      12,254,437
                                                                                     -----------------------------------------------
                              Interest expense:
                                Deposits                                                 9,117,481        7,565,484       5,708,330
                                Short-term borrowings                                        1,872            2,901             408
                                                                                     -----------------------------------------------
                                  Total interest expense                                 9,119,353        7,568,385       5,708,738
                                                                                     -----------------------------------------------
                                  Net interest income                                   10,602,716        8,470,854       6,545,699
                              Provision for loan losses                                    744,500          515,600         350,000
                                                                                     -----------------------------------------------
                                  Net interest income after provision for loan losses    9,858,216        7,955,254       6,195,699
                                                                                     -----------------------------------------------
                              Non-interest income:
                                Service charges on deposit accounts                        384,687          266,719         153,419
                                Gain on sale of loans held for sale                      1,764,750        1,180,301         571,837
                                Loss on sale of securities                                      --               --         (76,125)
                                Other income                                               350,166           89,116          51,060
                                                                                     -----------------------------------------------
                                  Total non-interest income                              2,499,603        1,536,136         700,191
                                                                                     -----------------------------------------------
                              Non-interest expense:
                                Salaries and employee benefits                           3,918,682        3,149,948       2,257,405
                                Net occupancy expense                                    1,848,310        1,268,291       1,033,182
                                Data processing                                            408,917          308,680         203,002
                                Advertising and business development                       374,436          244,382         187,008
                                Directors' compensation                                    326,971          162,980         124,219
                                Federal deposit insurance                                   26,480            2,000         139,781
                                Other operating expenses                                 1,553,676        1,086,050         953,706
                                                                                     -----------------------------------------------
                                  Total non-interest expense                             8,457,472        6,222,331       4,898,303
                                                                                     -----------------------------------------------
                                  Income before provision for income taxes               3,900,347        3,269,059       1,997,587
                              Provision for income taxes                                 1,196,863        1,226,341         825,322
                                                                                     -----------------------------------------------
                                Net income                                           $   2,703,484    $   2,042,718   $   1,172,265
                                                                                     ===============================================

                              Net income per common share:
                                Basic                                                $         .83    $         .66   $         .41
                                Diluted                                              $         .78    $         .63   $         .40
                                                                                     ===============================================

                              Weighted average shares outstanding:
                                Basic                                                    3,242,536        3,073,968       2,651,311
                                Diluted                                                  3,478,449        3,241,523       2,751,793
                                                                                     ===============================================


                              See accompanying notes to consolidated financial statements.



                                                               -----
                                                                 8

</TABLE>

<PAGE>

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


<CAPTION>
                              ------------------------------------------------------------------------------------------------------
                                                                                                                           Total
                                                                      Preferred    Common     Paid-in      Retained    stockholders'
                                                                        stock       stock     capital      earnings       equity
                                                                      --------------------------------------------------------------
<S>                                                                   <C>          <C>     <C>           <C>           <C>
                              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
                              Exercise of warrants (3,737 shares)            --        37         38,029           --        38,066
                              Exercise of options (7,619 shares)             --        77         49,572           --        49,649
                              Common stock grants (9,348 shares)            --         93         59,407          --         59,500
                              Dividend reinvestment and stock
                                purchase plan (81,714 shares)                --       817      1,247,298           --     1,248,115
                              401(k) plan (6,452 shares)                     --        65         95,639           --        95,704
                              Six-for-five common stock split
                                (538,423 shares)                             --     5,384             --       (5,384)           --
                              Common stock cash dividend
                                ($.325 per share)                            --        --             --   (1,015,599)   (1,015,599)
                              Net income                                     --        --             --    2,703,484     2,703,484
                                                                      --------------------------------------------------------------
                              Balance, December 31, 1997                     --    33,086  $  15,071,131 $  3,784,624  $ 18,888,841
                                                                      ==============================================================


                              See accompanying notes to consolidated financial statements.



                                                               -----
                                                                 9

</TABLE>

<PAGE>

<TABLE>
CONSOLIDATED STATEMENTS                                                              PRESTIGE FINANCIAL CORP.
OF CASH FLOWS                                                                        AND SUBSIDIARY


<CAPTION>
                                                                                                  Years ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                                                           1997           1996            1995
                                                                                      ----------------------------------------------
<S>                                                                                   <C>             <C>            <C>
                              Cash flows from operating activities:
                                Net income                                            $   2,703,484   $   2,042,718  $    1,172,265
                                Adjustments to reconcile net income to net cash
                                  used in operating activities:
                                    Provision for loan losses                               744,500         515,600         350,000
                                    Depreciation                                            489,815         367,961         297,842
                                    Amortization (accretion) of investment securities
                                      premiums and discounts, net                           600,575         479,182        (329,627)
                                    Amortization of organizational costs                     14,137          14,137          18,131
                                    Increase in accrued interest receivable                (471,126)       (579,629)       (492,072)
                                    (Increase) decrease in other assets                    (627,248)        680,010        (971,344)
                                    Loss on sale of securities                                   --              --          76,125
                                    Gain on sale of loans held for sale                  (1,764,750)     (1,180,301)       (571,837)
                                    Proceeds from sale of loans held for sale            38,710,090      24,076,664       9,423,281
                                    Loss on sale of other real estate owned                      --              --          25,000
                                    Net increase in loans held for sale                 (38,216,557)    (27,668,627)    (18,060,531)
                                    Increase in accrued interest payable                    118,029          59,069         111,960
                                    Increase in accrued expenses and other liabilities      212,717         345,804          67,250
                                    Increase (decrease) in deferred loan fees
                                      and unearned discounts                                 51,116        (273,507)        265,924
                                    Common stock grants                                      59,500          59,500          59,500
                                                                                      ----------------------------------------------
                                        Net cash provided by (used in)
                                          operating activities                            2,624,282      (1,061,419)     (8,558,133)
                                                                                      ----------------------------------------------
                              Cash flows from investing activities:
                                Proceeds from sale of securities available for sale              --              --       3,630,250
                                Proceeds from maturities of investment securities        31,074,402      32,379,423      15,933,625
                                Principal paydowns on mortgage-backed securities          7,336,561       4,915,156       1,079,558
                                Purchases of investment and
                                  mortgage-backed securities                            (64,955,579)    (63,377,775)    (41,119,376)
                                Net increase in loans                                   (18,741,330)    (19,472,380)    (11,510,847)
                                Loan participations purchased                                    --        (610,750)             --
                                Purchase of corporate owned life insurance               (3,806,000)             --              --
                                Capital expenditures                                     (1,427,320)       (927,263)       (215,615)
                                Proceeds from sale of other real estate owned                    --              --         350,000
                                                                                      ----------------------------------------------
                                        Net cash used in investing activities           (50,519,266)    (47,093,589)    (31,852,405)
                                                                                      ----------------------------------------------
                              Cash flows from financing activities:
                                Net increase in demand deposits, money market,
                                  NOW accounts and savings accounts                      33,271,174      34,014,121      11,636,393
                                Net increase in certificates of deposit                  17,288,387      15,065,274      29,441,226
                                Proceeds from issuance of common stock, net               1,431,534       2,169,412       2,523,124
                                Dividends paid                                           (1,015,599)       (620,181)       (301,763)
                                Redemption of preferred stock                                    --              --        (900,000)
                                                                                      ----------------------------------------------
                                        Net cash provided by financing activities        50,975,496      50,628,626      42,398,980
                                                                                      ----------------------------------------------
                                        Increase in cash and cash equivalents             3,080,512       2,473,618       1,988,442
                              Cash and cash equivalents at beginning of year             18,529,396      16,055,778      14,067,336
                                                                                      ----------------------------------------------
                              Cash and cash equivalents at end of year                $  21,609,908   $  18,529,396  $   16,055,778
                                                                                      ==============================================

                              Supplemental disclosures:
                                Cash paid for interest                                $   9,001,324   $   7,509,316  $    5,596,778
                                Cash paid for income taxes                                1,906,000       1,251,008         800,078
                                Loans transferred to other real estate owned                417,893              --         375,000
                                Investment securities transferred to
                                  securities available for sale                                  --              --       3,706,375
                                                                                      ==============================================

                              See accompanying notes to consolidated financial statements.

</TABLE>

                                                               -----
                                                                 10


<PAGE>
NOTES TO CONSOLIDATED                                  PRESTIGE FINANCIAL CORP.
FINANCIAL STATEMENTS                                   AND SUBSIDIARY
December 31, 1997, 1996 and 1995



--------------------------------------------------------------------------------
(1) Summary of      Business
    Significant
    Accounting           Prestige Financial Corp. provides a full range of
    Policies        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.


                                     -----
                                       11
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)



                         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 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. Leasehold improvements are depreciated over
                    periods not exceeding twenty years, while furniture and
                    equipment is depreciated over periods not exceeding seven
                    years.

                    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.


                                     -----
                                       12
<PAGE>
                                                       PRESTIGE FINANCIAL CORP.
                                                       AND SUBSIDIARY



                    Net Income Per Common Share

                         Effective December 31, 1997, the Corp. adopted the
                    provisions of Statement of Financial Accounting Standards
                    No. 128, "Earnings Per Share." All prior period share
                    amounts have been restated to conform with the provisions of
                    this Statement.

                         Basic net income per common share is calculated by
                    dividing net income less preferred stock dividends, if any,
                    by weighted average shares outstanding.

                         Diluted net income per common share is calculated by
                    dividing net income less preferred stock dividends, if any,
                    by weighted average shares outstanding (as adjusted for the
                    assumed exercise of potential common stock, using the
                    treasury stock method). Potential common stock resulting
                    from stock option agreements totaled 235,913 shares, 167,555
                    shares and 100,482 shares in 1997, 1996 and 1995,
                    respectively.

                         Preferred stock dividends totaled $73,024 in 1995. All
                    outstanding preferred stock was redeemed in 1995 All
                    weighted average shares outstanding reflect the six-for-five
                    stock split effective on April 18, 1997; 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 1996 and 1995 have been
                    reclassified to conform with the 1997 presentation.

--------------------------------------------------------------------------------
(2) Cash and Due    The Corp.'s banking subsidiary is required to maintain
    from Banks      reserve balances with the Federal Reserve Bank. Such
                    balances amounted to $2,770,000 and $1,190,000 at December
                    31, 1997 and 1996, respectively.

--------------------------------------------------------------------------------
(3) Investment      The amortized cost, gross unrealized gains and losses
    Securities,     and estimated market values of Investment Securities at
    Net             December 31, 1997 and 1996 are summarized as follows:


<TABLE>
<CAPTION>
                                                                                     Gross        Gross        Estimated
                                                                    Amortized     Unrealized   Unrealized       Market
                    1997                                              Cost           Gains       Losses          Value
                    -------------------------------------------------------------------------------------------------------
                    <S>                                          <C>             <C>           <C>          <C>
                    U.S. Government and Federal agencies         $   41,379,452  $   252,165   $   73,412   $   41,558,205
                    Other securities                                  7,002,628       99,725      14,336         7,088,017
                    Mortgage-backed securities                       46,436,110      349,371       71,580       46,713,901
                                                                 ----------------------------------------------------------
                      Total investment securities                $   94,818,190  $   701,261   $  159,328   $   95,360,123
                                                                 ==========================================================

<CAPTION>
                                                                                     Gross        Gross        Estimated
                                                                    Amortized     Unrealized   Unrealized       Market
                    1996                                              Cost           Gains       Losses          Value
                    -------------------------------------------------------------------------------------------------------
                    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>


                         There were no sales of investment securities during
                    1997 or 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.

                         At December 31, 1997, securities having a book value of
                    approximately $19,000,000 were pledged to secure certain
                    public fund deposits and for other purposes required by law.



                                     -----
                                       13
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)


                         The amortized cost and estimated market values of
                    investment debt securities at December 31, 1997 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         $  6,967,243   $  6,952,955
                    Due after one year through
                      five years                      16,394,432     16,426,866
                    Due after five years through
                      ten years                        5,270,115      5,283,910
                    Due after ten years                1,884,478      1,960,995
                    Mortgage-backed securities        46,436,110     46,713,901
                    SBA guaranteed loan pool
                      certificates                    17,865,812     18,021,496
                                                    ----------------------------
                      Total                         $ 94,818,190   $ 95,360,123
                                                    ============================


--------------------------------------------------------------------------------
(4) Loans           A summary of loans at December 31, 1997 and 1996 is as
                    follows:
                                                        1997           1996
                                                    ----------------------------
                    Real estate mortgages:
                      Residential                   $ 10,112,982   $  9,964,053
                      Construction and land
                        development                    7,835,831      7,950,569
                      Commercial                      50,400,048     37,909,538
                    Commercial loans                  57,586,106     55,758,733
                    Home equity and second
                      mortgages                       11,900,094      7,069,592
                    Consumer                          22,855,600     22,524,000
                                                    ----------------------------
                                                     160,690,661    141,176,485
                    Less:
                      Allowance for
                        loan losses                    1,838,207      1,592,078
                      Deferred loan fees
                        and discounts                  2,759,685      2,708,569
                      Loans held for sale             16,284,462     15,013,245
                                                    ----------------------------
                      Net loans                     $139,808,307   $121,862,593
                                                    ============================


                         Loans in the amount of $920,433 and $454,135 were on a
                    nonaccrual status and considered impaired at December 31,
                    1997 and 1996, respectively. If these loans had continued to
                    realize interest in accordance with their contractual terms,
                    approximately $73,000 and $37,000 of interest income would
                    have been realized in 1997 and 1996, respectively. Actual
                    interest income recognized on these loans was nominal. No
                    specific reserves were required for impaired loans at
                    December 31, 1997 or 1996. The average recorded investments
                    in impaired loans during 1997 and 1996 were approximately
                    $424,000 and $330,000, respectively. Loans which were past
                    due 90 days or more and still accruing totaled $153,744 and
                    $355,865 at December 31, 1997 and 1996, respectively.

                         At December 31, 1997 and 1996, loans to directors,
                    executive officers and their affiliated interests amounted
                    to $3,966,911 and $2,568,098, respectively, which were
                    current as to principal and interest. During 1997, new
                    extensions of credit to directors, executive officers and
                    their affiliated interests totaled $1,975,000 and repayments
                    by such persons were $576,187.


                                     -----
                                       14

<PAGE>
                                                       PRESTIGE FINANCIAL CORP.
                                                       AND SUBSIDIARY


                         An analysis of the allowance for loan losses for the
                    years ended December 31, 1997, 1996 and 1995 is as follows:

<TABLE>
                                                          1997          1996           1995
                                                     ------------------------------------------
                    <S>                              <C>          <C>             <C>
                    Balance at beginning of year     $ 1,592,078  $   1,324,626   $  1,077,026
                    Provision charged to operations      744,500        515,600        350,000
                    Loans charged off, net              (498,371)      (248,148)      (102,400)
                                                     ------------------------------------------
                    Balance at end of year           $ 1,838,207  $   1,592,078   $  1,324,626
                                                     ==========================================
</TABLE>

--------------------------------------------------------------------------------
(5) Accrued         A summary of accrued interest receivable at December 31,
    Interest        1997 and 1996 is as follows:
    Receivable

<TABLE>
                                                                      1997           1996
                                                                  -----------------------------
                    <S>                                           <C>             <C>
                    Loans                                         $     852,362   $    689,347
                    Investment securities and other
                      interest-earning assets                         1,156,758        848,647
                                                                  -----------------------------
                                                                  $   2,009,120   $  1,537,994
                                                                  =============================
</TABLE>

--------------------------------------------------------------------------------
(6) Premises and    Premises and equipment consists of the following at
    Equipment       December 31, 1997 and 1996:

<TABLE>
                                                                        1997          1996
                                                                  -----------------------------
                    <S>                                           <C>             <C>
                    Premises and improvements                     $   3,055,137   $  2,067,628
                    Furniture and equipment                           2,281,121      1,841,310
                                                                  -----------------------------
                      Total                                           5,336,258      3,908,938
                    Accumulated depreciation                         (1,908,694)    (1,418,879)
                                                                  -----------------------------
                                                                  $   3,427,564   $  2,490,059
                                                                  =============================
</TABLE>

--------------------------------------------------------------------------------
(7) Deposits        A summary of deposit balances at December 31, 1997 and 1996
                    is as follows:

<TABLE>
                                                                      1997           1996
                                                                  -----------------------------
                    <S>                                           <C>             <C>
                    Regular checking                              $  47,595,244   $ 35,318,480
                    NOW accounts                                     19,746,360     14,121,069
                    Money market accounts                            30,804,508     20,362,771
                    Regular savings accounts                         43,317,475     38,390,093
                    Certificates of deposit:
                      $100,000 and over                              29,328,715     21,462,600
                      Less than $100,000                             92,363,540     82,941,268
                                                                  -----------------------------
                                                                  $ 263,155,842   $212,596,281
                                                                  =============================
</TABLE>

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

<TABLE>
                    <S>                                           <C>
                    1999                                          $  14,542,539
                    2000                                              6,643,264
                    2001                                              1,727,508
                    2002                                                310,979
                    Thereafter                                           30,911
</TABLE>

                         Interest expense includes interest on certificates of
                    deposit greater than $100,000 of $1,408,966, $1,059,333 and
                    $1,047,725 for the years ended December 31, 1997, 1996 and
                    1995, respectively.


                                     -----
                                       15

<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)


--------------------------------------------------------------------------------
(8) Income Taxes    Total income tax expense in the consolidated statements of
                    income is summarized as follows:

<TABLE>
                                                                      Current        Deferred       Total
                                                                   ------------------------------------------
                    <S>                                            <C>            <C>            <C>
                    Year ended December 31, 1997:
                      U.S. Federal                                 $  1,264,861   $   (150,000)  $  1,114,861
                      State and local                                   127,002        (45,000)        82,002
                                                                   ------------------------------------------
                                                                   $  1,391,863   $   (195,000)  $  1,196,863
                                                                   ==========================================

                    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
                                                                   ==========================================
</TABLE>


                         A reconciliation of "expected" income tax expense at
                    December 31, 1997, 1996 and 1995, computed at the Federal
                    statutory rate, to reported income tax expense is as
                    follows:

<TABLE>
                                                                      1997            1996           1995
                                                                   ------------------------------------------
                    <S>                                            <C>            <C>            <C>
                    Provision computed at statutory tax rate       $  1,326,118   $  1,111,480   $    679,180
                    State and local taxes, net of Federal
                      benefit                                            54,121        162,913        129,956
                    Tax exempt income                                  (192,998)       (42,837)       (57,568)
                    Change in valuation allowance                            --         (7,554)            --
                    Other, net                                            9,622          2,339         73,754
                                                                   ------------------------------------------
                                                                   $  1,196,863   $  1,226,341   $    825,322
                                                                   ==========================================
</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, 1997 and 1996 are
                    as follows:

<TABLE>
                                                                                       1997          1996
                                                                                  ---------------------------
                    <S>                                                           <C>            <C>
                    Deferred tax assets:
                      Deferred fee income                                         $      2,095    $    17,917
                      Non-qualified stock options                                      104,424         54,352
                      Allowance for loan losses                                        637,975        585,034
                      Net operating loss carryforward                                   46,053             --
                      Other                                                             51,035         23,621
                                                                                  ---------------------------
                        Total gross deferred tax assets                                841,582        680,924
                    Deferred tax liabilities:
                      Differences in depreciation methods                               27,954         62,296
                        Total gross deferred tax liabilities                            27,954         62,296
                                                                                  ---------------------------
                        Net deferred tax asset                                    $    813,628    $   618,628
                                                                                  ===========================
</TABLE>


                         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.


                                     -----
                                       16

<PAGE>
                                                       PRESTIGE FINANCIAL CORP.
                                                       AND SUBSIDIARY

--------------------------------------------------------------------------------
(9) Regulatory      Capital Requirements
    Matters
                         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 and 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 judgments by the
                    regulatory authorities about capital components, risk
                    weightings and other factors.

                         Management believes that, as of December 31, 1997, 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,
                    1997 and 1996, compared to the regulatory authorities
                    minimum capital adequacy requirements and requirements for
                    classification as a well capitalized institution (dollars in
                    thousands):

<TABLE>
                                                                                          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, 1997
                           ------------------------------
                           Leverage (Tier1) capital         $  18,880    6.75%    $ 11,191   4.00%    $  13,989    5.00%
                           Risk-based capital:
                             Tier 1                            18,880   10.78%       7,007   4.00%       10,510    6.00%
                             Total                             20,718   11.83%      14,013   8.00%       17,517   10.00%

                           December 31, 1996
                           ------------------------------
                           Leverage (Tier1) 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%
                                                            --------------------------------------------------------------
                    Bank:  December 31, 1997
                           ------------------------------
                           Leverage (Tier1) capital         $  17,224    6.26%    $ 10,998   4.00%    $  13,748    5.00%
                           Risk-based capital:
                             Tier 1                            17,224    9.85%       6,991   4.00%       10,487    6.00%
                             Total                             19,062   10.91%      13,982   8.00%       17,478   10.00%

                           December 31, 1996
                           ------------------------------
                           Leverage (Tier1) 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%
                                                            --------------------------------------------------------------

</TABLE>

                                     -----
                                       17

<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)


--------------------------------------------------------------------------------
(10) Commitments,   Commitments
     Contingencies
     and                 The Corp. is party to financial instruments and
     Concentrations commitments with off-balance-sheet credit risk in the normal
     of Credit      course of business. These financial instruments and
     Risk           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, 1997 and 1996, financial instruments
                    and commitments whose contractual amounts represent
                    off-balance-sheet credit risk are as follows:

<TABLE>
                                                                                              1997                 1996
                                                                                        ----------------------------------
                    <S>                                                                 <C>                 <C>
                    Unused portions of commercial lines of credit,
                      letters of credit and undisbursed portion of
                      construction loans:
                      Fixed-rate                                                        $   1,656,301       $      270,000
                      Variable-rate                                                        18,353,874           17,650,314
                    Unused home equity lines of credit (primarily floating rate)            8,777,758            5,583,328
                    Unused portion of consumer lines of credit                              1,261,206              841,999
                    Commitments to extend credit:
                      Fixed-rate                                                           10,961,850            1,819,000
                      Variable-rate                                                        18,293,455           11,872,000
                                                                                        ----------------------------------
                                                                                        $  59,304,444       $   38,036,641
                                                                                        ==================================
</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 7.50% to 9.75% at December 31,
                    1997.

                         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 2007 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, 1997, future minimum rental payments, excluding
                    the renewal options under these leases, are as follows:

                    1998                                          $      570,109
                    1999                                                 571,150
                    2000                                                 553,025
                    2001                                                 533,234
                    2002                                                 514,459
                    Thereafter                                    $    3,580,396
                                                                  ==============

                         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 $625,283, $427,650
                    and $318,537 for the years ended December 31, 1997, 1996 and
                    1995, respectively, which is included in net occupancy
                    expense in the consolidated statements of income.

                                     -----
                                       18

<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'  The payment of dividends by the Bank is restricted.  Under
     Equity         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

                         At December 31, 1997 the Corp. has four stock-based
                    compensation plans, which are described below. All amounts
                    presented reflect the six-for-five stock split effective on
                    April 18, 1997, 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,
                    "Accounting for Stock Issued to Employees" and to provide
                    pro forma disclosures of net income and earnings per share
                    as if the Corp. had adopted the fair value based method of
                    accounting in accordance with SFAS No. 123, "Accounting for
                    Stock-Based Compensation." 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 $132,646, $117,944
                    and $18,799 in 1997, 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:

<TABLE>
                                                                  1997            1996             1995
                                                              ---------------------------------------------
                    <S>                         <C>           <C>             <C>              <C>
                    Net income                  As Reported   $  2,703,484    $  2,042,718     $  1,172,265
                                                Pro forma        2,488,673       1,918,311        1,157,534

                    Basic earnings per share    As Reported   $        .83    $        .66     $        .41
                                                Pro forma     $        .77    $        .62     $        .41

                    Diluted earnings per share  As Reported   $        .78    $        .63     $        .40
                                                Pro forma     $        .72    $        .59     $        .39
</TABLE>

                         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 1997, 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), 3,960 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 248,700 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 104,100 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 105,600 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.

                                     -----
                                       19

<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)


                    Options 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, 1997 and 1996 and changes during
                    the years ended on those dates is presented below:

<TABLE>
                                                                              1997                    1996
                                                                      ----------------------------------------------
                                                                                    Weighted                Weighted
                                                                                     Average                 Average
                                                                                    Exercise                Exercise
                                                                        Shares        Price     Shares        Price
                                                                      ----------------------------------------------
                    <S>                                               <C>         <C>         <C>           <C>
                    Outstanding at beginning of year                    384,697     $ 6.94      192,582       $5.03
                    Granted                                              74,300      11.45      201,340        8.63
                    Exercised                                            (7,619)      5.54       (6,840)       4.37
                    Forfeited                                            (1,420)      9.95       (2,385)       7.09
                    Outstanding at end of year                          449,958       7.70      384,697        6.94
                    Options exercisable at year-end                     276,988       6.34      155,349        5.07

                    Weighted average fair value of options granted
                      during the year                                     $3.18                   $2.79

</TABLE>

                         The following table summarizes information about stock
                    options outstanding at December 31, 1997.

<TABLE>
                                                                     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>
                    $ 4.28- 5.31                                178,918      79 months   $ 5.07       178,918      $5.07
                    $ 7.94-11.25                                251,340     101 months   $ 9.23        98,070      $8.67
                    $12.00-12.04                                 19,700     118 months   $12.00            --      $  --
</TABLE>

                         The Corp. established a stock grant plan for founding
                    outside directors in 1994. The plan provides for the
                    issuance of 56,100 shares of Corp. common stock. At December
                    31, 1997, 33,660 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 totaled
                    $124,000, $97,000 and $75,000 for the years ended December
                    31, 1997, 1996 and 1995, respectively.

                         The Corp. established a supplemental retirement plan
                    for certain officers and directors in 1997. The compensation
                    cost recognized in 1997 totaled $203,000.


--------------------------------------------------------------------------------
(12) Fair Value     SFAS No. 107, "Disclosures about Fair Value of Financial
     of Financial   Instruments" requires disclosure of fair value information
     Instruments    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,
                    1997 and 1996 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

                                     -----
                                       20
<PAGE>
                                                       PRESTIGE FINANCIAL CORP.
                                                       AND SUBSIDIARY



                    with precision. Modifications in such assumptions could
                    meaningfully alter these estimates. Since these fair value
                    approximations were made solely for financial instruments at
                    December 31, 1997 and 1996, 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,
                    1997 and 1996:

<TABLE>
                                                                                          Carrying        Estimated
                                                                                           Amount         Fair Value
                                                                                       -------------------------------
                    <S>                                                                <C>               <C>
                    December 31, 1997 Financial Assets:
                        Cash and due from banks                                        $  10,297,330     $  10,297,330
                        Federal funds sold and short-term investments                     11,312,578        11,312,578
                        Loans held for sale, net                                          16,284,462        17,098,685
                        Investment Securities, net                                        94,818,190        95,360,123
                        Loans, net                                                       141,646,514       141,968,078
                        Less: Allowance for loan losses                                    1,838,207         1,838,207
                        Net loans                                                        139,808,307       140,129,871
                      Financial liabilities:
                        Deposits with no stated maturities                               141,463,587       141,463,587
                        Certificates of deposit                                        $ 121,692,255     $ 121,766,173
                    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

</TABLE>

                                     -----
                                       21
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(continued)


--------------------------------------------------------------------------------
(13) Condensed      The condensed financial statements of Prestige Financial
     Financial      Corp. are as follows:
     Information
     of Parent
     Company
<TABLE>
                    Parent Only Statements of Financial Condition                           1997                 1996
                                                                                        ---------------------------------
<S>                                                                                     <C>                 <C>
                    Assets:
                      Cash and due from banks                                           $     277,263       $     185,303
                      Investment securities, net (estimated market value $1,679,711 and
                        $1,099,957 at December 31, 1997 and 1996, respectively)             1,679,711           1,099,957
                      Investment in subsidiary                                             17,224,411          14,584,185
                      Other assets                                                             15,599              28,868
                                                                                        ---------------------------------
                          Total assets                                                  $  19,196,984       $  15,898,313
                                                                                        =================================

                    Liabilities and stockholders' equity:
                      Other liabilities                                                       308,143             188,391
                                                                                        ---------------------------------
                      Stockholders' equity                                                 18,888,841          15,709,922
                                                                                        ---------------------------------

                    Total liabilities and stockholders' equity:                         $  19,196,984       $  15,898,313
                                                                                        =================================

                    Parent Only Statements of Income
                    Interest income                                                     $      78,967       $      50,912
                    Operating expenses                                                        (14,137)            (14,137)
                    Income tax provision                                                       (1,572)             (5,000)
                    Equity in undistributed income of subsidiary                            2,640,226           2,010,943
                                                                                        ---------------------------------
                    Net income available to common stockholders                         $   2,703,484       $   2,042,718
                                                                                        =================================

                    Parent Only Statements of Cash Flows Cash flows
                    from operating activities:
                      Net income available to common stockholders                       $   2,703,484       $   2,042,718
                      Less equity in undistributed income of subsidiary                    (2,640,226)         (2,010,943)
                      Adjustments to reconcile net income to net cash provided by
                        operating activities:
                          Amortization of organizational costs                                 14,137              14,137
                          (Increase) decrease in other assets                                    (868)              1,609
                          Increase in other liabilities                                       119,752             114,972
                          Common stock grants                                                  59,500              59,500
                                                                                        ---------------------------------
                            Net cash provided by operating activities                         255,779             221,993
                                                                                        ---------------------------------
                    Cash flows from investing activities:
                      Proceeds from maturities of investment securities                     9,601,902           9,185,575
                      Purchases of investment securities                                  (10,181,656)         (9,785,532)
                      Increase in investment in subsidiary                                         --          (1,500,000)
                            Net cash used in investing activities                            (579,754)         (2,099,957)
                    Cash flows from financing activities:
                      Proceeds from issuance of common stock, net                           1,431,534           2,169,412
                      Cash dividends paid                                                  (1,015,599)           (620,181)
                                                                                        ---------------------------------
                            Net cash provided by financing activities                         415,935           1,549,231
                                                                                        ---------------------------------
                            Increase (decrease) in cash and cash equivalents                   91,960            (328,733)
                    Cash and cash equivalents at beginning of year                            185,303             514,036
                                                                                        ---------------------------------
                    Cash and cash equivalents at end of year                            $     277,263       $     185,303
                                                                                        =================================

</TABLE>

                                     -----
                                       22

<PAGE>
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, 1997 and 1996, and the related
                    consolidated statements of income, changes in stockholders'
                    equity, and cash flows for each of the years in the
                    three-year period ended December 31, 1997. 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, 1997 and 1996, and the results
                    of their operations and their cash flows for each of the
                    years in the three-year period ended December 31, 1997 in
                    conformity with generally accepted accounting principles.





                    /s/ KPMG Peat Marwick LLP
                    Short Hills, New Jersey
                    January 20, 1998





                                     -----
                                       23

<PAGE>
CORPORATE INFORMATION                                  PRESTIGE FINANCIAL CORP.
                                                       AND SUBSIDIARY


                    Board of Directors

[PHOTO]             Louis R. DeFalco
                    Chairman (& Vice Chairman-
                    Prestige State Bank)

[PHOTO]             Roland D. Boehm, Sr.
                    Vice Chairman (& Chairman-
                    Prestige State Bank)

[PHOTO]             Arnold F. Horvath

[PHOTO]             Robert J. Jablonski

[PHOTO]             Gerald A. Lustig

[PHOTO]             James W. MacDonald

[PHOTO]             Arthur Stryker, Jr.

                    Hunterdon
                    Advisory Board

                    Brian Barbiche

                    David Bond

                    Alan Castroll

                    Sam Leon

                    John Little, Jr.

                    James T. McPherson

                    Somerset
                    Advisory Board

                    Edward J. Dougherty, Ed.D.

                    Gerard C. Pascale


                    Officers

                    Arnold F. Horvath
                    President

                    Robert J. Jablonski
                    Chief Executive Officer

                    Greg Schneider
                    Executive Vice President
                    Senior Lending Officer

                    Annette M. Dalley
                    Sr. Vice President
                    Human Resources
                    Branch Administration

                    Lorraine A. Cook
                    Sr. Vice President
                    Bank Controller

                    Jeffrey D. Mattison
                    Sr. Vice President
                    Loan Officer

                    Thomas M. Lyons
                    Vice President
                    Financial Corp. Controller

                    Joseph D. Ercolino
                    Vice President
                    Business Development

                    Thomas Thompson
                    Vice President
                    SBA Loan Officer

                    Thomas W. Ort
                    Vice President
                    Loan Administration

                    Mark C. Dooley
                    Vice President
                    Mortgage Officer

                    Christopher J. Pribula
                    Vice President
                    Operations

                    Stan Hall
                    Vice President

                    Karen M. McKeon
                    Assistant Vice President

                    Andrew Piech
                    Assistant Vice President

                    Rosemary Dente
                    Assistant Vice President
                    Sr. SBA Bus. Development

                    Arnold Robbins
                    Assistant Vice President
                    Auditor

                    Linda E. Burns
                    Assistant Vice President

                    Maria Fusca
                    Assistant Vice President

                    Judith Wallace
                    Assistant Secretary

                    Deborah Fabian
                    Assistant Secretary

                    J. Susan Berger
                    Corporate Secretary
                    Assistant Treasurer

                    JoAnn Cronce
                    Assistant Treasurer
                    Security Officer

                    Christine Ploski
                    Assistant Treasurer

                    Juanita Ombalski
                    Assistant Secretary

                    Louise A. Maziarz
                    Assistant Treasurer

                    Patrick McDermott
                    Assistant Treasurer

                    Deborah A. Gutschmidt
                    Assistant Treasurer

                    Amy E. Rabosky
                    Assistant Treasurer

                    Sandra Stephens
                    Assistant Secretary

                    Joyce Bietka
                    Assistant Secretary

                    Julia Locandro
                    Assistant Treasurer

                    Jennifer Mock
                    Assistant Treasurer

                    Glenn C. Guerin
                    Financial Consultant


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                                       24

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COMPANY PROFILE


                    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".


                    [WEB BROWSER PHOTO]


                    Visit our web site at: www.prestigefinancialcorp.com
                                           www.prestigestatebank.com












<PAGE>

                            PRESTIGE FINANCIAL CORP.

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