<PAGE>   1


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
(Mark one)

(X)      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934, for the fiscal year ended December 31, 2000, or

( )      TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 (no fee required), for the transition period
         from _______________ to ______________.

Commission file number:  0-24145

                            MAIN STREET BANCORP, INC.
                           --------------------------
                 (Name of small business issuer in its charter)

         Pennsylvania                                    23-2960905
------------------------                            --------------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)

Registrant's telephone number, including area code: (610)685-1400
Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:
          Common Stock ($1.00 par value)

          9.625% Junior Subordinated Debentures

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

                  Yes        X                   No    ____
                           -----

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ()


         The aggregate market value of common stock of the Registrant held by
nonaffiliates, based on the closing sale price as of March 14, 2001 was
$90,128,309. As of March 14, 2001, the Registrant had 10,470,380 shares of
Common Stock outstanding.

         Documents incorporated by reference: Portions of the Proxy Statement of
the Registrant relating to the Registrant's Annual Meeting to be held on May 2,
2001 are incorporated by reference into Part III of this report.
<PAGE>   2
                            MAIN STREET BANCORP, INC
                                    FORM 10-K
                                TABLE OF CONTENTS

          Page
Part I

         Item 1.  Business                                            3
         Item 2.  Properties                                         28
         Item 3.  Legal Proceedings                                  28
         Item 4.  Submission of Matters to a Vote of Security
                  Holders                                            28

Part II

         Item 5.  Market for Registrant's Common Equity and
                  Related Stockholder Matters                         28
         Item 6.  Selected Financial Data                             30
         Item 7.  Management's Discussion and Analysis
                  of Financial Condition and Results of
                  Operations                                          31
         Item 7A. Quantitative and Qualitative Disclosures
                  About Market Risk                                   56
         Item 8.  Financial Statements and Supplementary Data         59
         Item 9.  Changes In and Disagreements with
                  Accountants on Accounting and Financial
                  Disclosure                                          87
Part III

         Item 10. Directors and Executive Officers of the
                  Registrant                                          87
         Item 11. Executive Compensation                              87
         Item 12. Security Ownership of Certain Beneficial
                  Owners and Management                               87
         Item 13. Certain Relationships and Related
                  Transactions                                        87

Part IV

         Item 14. Exhibits, Financial Statement Schedules and
                  Reports on Form 8-K                                 88

Signatures


                                                                               2
<PAGE>   3
                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Main Street Bancorp, Inc. ("the Company") is a Pennsylvania corporation
headquartered in Reading, Pennsylvania and, at December 31, 2000 was the bank
holding company for Main Street Bank ("the Bank") and also the parent company of
MBNK Investment Company and MBNK Capital Trust I. The Bank operates under the
Berks County Bank, Heritage Bank and Main Street Bank divisions. The Bank is a
Pennsylvania-chartered bank and member of the Federal Reserve System.

         On May 1, 1998, the Company was formed upon the completion of the
consolidation between BCB Financial Services Corporation ("BCBF") and Heritage
Bancorp, Inc. ("Heritage"). The Company issued approximately 9,680,000 shares of
common stock to stockholders of BCBF and Heritage. BCBF Stockholders received
1.3335 shares of the Company's common stock for each outstanding share and
Heritage Stockholders received 1.05 shares of the Company's common stock for
each outstanding share. The consolidation has been accounted for as a pooling of
interests by the Company. Accordingly, all prior financial information has been
restated.

 MARKET OVERVIEW

         At December 31, 2000, the Bank operated 42 full service branches in
Berks, Bucks, Chester, Dauphin, Lehigh, Montgomery, Northhampton and Schuylkill
Counties in Pennsylvania as well Hunterdon County, New Jersey.

PRODUCTS AND SERVICES

         The Bank offers a range of commercial and retail banking services to
its customers, including personal and business checking and savings accounts,
certificates of deposit, residential mortgages, consumer and commercial loans,
and private banking services. The Bank also performs personal, corporate,
pension and other fiduciary services through its Trust and Investment Services
division. In addition, the


                                                                               3
<PAGE>   4
Bank provides safe deposit boxes, traveler's checks, credit cards, wire transfer
of funds, ACH (Automated Clearing House) origination, internet banking and other
typical banking services. The Bank is a member of the MAC/Plus network. This
membership provides customers with access to automated teller machines
worldwide.

         The Company continues to update its product offerings in order to
remain competitive. The Company intends to offer discount brokerage services,
401(k) and employee benefit plans, alternate investment services and general
insurance products in the next six to twelve months.

SUPERVISION AND REGULATION
         Various requirements and restrictions under the laws of the United
States and the Commonwealth of Pennsylvania affect the Company and the Bank.

General
         The Company is a bank holding company subject to supervision and
regulation by the Federal Reserve Board ("FRB") under the Bank Holding Company
Act of 1956, as amended. As a bank holding company, the Company's activities and
those of its subsidiaries are limited to the business of banking and activities
closely related or incidental to banking and the Company may not directly or
indirectly acquire the ownership or control of more than 5% of any class of
voting shares or substantially all of the assets of any company, including a
bank, without the prior approval of the FRB.

         The Bank is subject to supervision and examination by applicable
federal and state banking agencies. The Bank is a member of the Federal Reserve
System, and therefore, subject to the regulations of the FRB. The Bank is also a
Pennsylvania-chartered bank subject to supervision and regulation by the
Pennsylvania Department of Banking.

         In addition, because the deposits of the Bank are insured by the FDIC,
the Bank is subject to regulation by the FDIC. The Bank is also subject to
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Various consumer laws and regulations
also affect the


                                                                               4
<PAGE>   5
operations of the Bank. In addition to the impact of regulation, commercial
banks are affected significantly by the actions of the FRB in attempting to
control the money supply and credit availability in order to influence the
economy.

Holding Company Structure

         The Bank is subject to restrictions under federal law which limit its
ability to transfer funds to the Company, whether in the form of loans, other
extensions of credit, investments or asset purchases. Such transfers by the Bank
to the Company are generally limited in amount to 10% of the Bank's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specific amounts, and all transactions are required to be on an arm's
length basis. The Bank has not made any loan or extension of credit to the
Company nor has it purchased any assets from the Company.

         Under FRB policy, a bank holding company is expected to act as a source
of financial strength to its subsidiary banks and to commit resources to support
the bank, i.e., to downstream funds to the bank. This support may be required at
times when, absent such policy, the bank holding company might not otherwise
provide such support. Any capital loans by a bank holding company to its
subsidiary bank are subordinate in right of payment to deposits and to certain
other indebtedness of the banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of its subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

Safe and Sound Banking Practices

         The FRB has broad authority to prohibit activities of bank holding
companies and their nonbanking subsidiaries which represent unsafe and unsound
banking practices or which constitute violations of laws or regulations, and can
assess civil money penalties for certain activities conducted on a knowing and
reckless basis, if those activities caused a substantial loss to a depository
institution. The penalties can be as high as $1.0 million for each day the
activity continues.


                                                                               5
<PAGE>   6
Regulatory Restrictions on Dividends

         State and federal banking laws and regulations limit the amount of
dividends that may be paid by the Bank to the Company.

         State and federal regulatory authorities have adopted standards for the
maintenance of adequate levels of capital by banks. Adherence to such standards
further limits the ability of the Bank to pay dividends to the Company.

         The payment of dividends to the Company by the Bank may also be
affected by other regulatory requirements and policies. If, in the opinion of
the FRB, the Bank is engaged in, or is about to engage in, an unsafe or unsound
practice (which, depending on the financial condition of the Bank, could include
the payment of dividends), the FRB may require, after notice and hearing, that
the Bank cease and desist from such practice. The FRB has formal and informal
policies providing that insured banks and bank holding companies should
generally pay dividends only out of current operating earnings.

         On July 25, 2000, the Company and the Bank entered into a Memorandum of
Understanding ("MOU") with the Federal Reserve Bank of Philadelphia ("Reserve
Bank") and the Pennsylvania Department of Banking (the "Department"). The MOU is
not a formal supervisory action by the Reserve Bank or the Department. The MOU
addresses perceived regulatory concerns identified by the Reserve Bank as a
result of its combined regulatory examination of the Company and the Bank as of
December 31, 1999. Under the MOU, the Company and the Bank may declare and pay
corporate dividends, out of funds legally available for the payment of
dividends, after prior notice to the Reserve Bank and the Department. Since the
signing of the MOU, the Reserve Bank has approved payment of the Company's
quarterly dividends to shareholders. The MOU is discussed in greater detail in
the Company's Management's Discussion and Analysis of Financial Condition set
forth elsewhere in this Annual Report on Form 10-K.

FDIC Insurance Assessments

         The FDIC has implemented a risk-related premium schedule for all
insured depository institutions that results in the assessment of premiums based
on capital and supervisory measures.

         Under the risk-related premium schedule, the FDIC, on a semiannual
basis, assigns each institution to one of three capital groups (well
capitalized, adequately capitalized or under capitalized)


                                                                               6
<PAGE>   7
and further assigns such institution to one of three subgroups within a capital
group corresponding to the FDIC's judgment of the institution's strength based
on supervisory evaluations, including examination reports, statistical analysis
and other information relevant to gauging the risk posed by the institution.
Only institutions with a total capital to risk-weighted assets ratio of 10.00%
or greater, a Tier 1 capital to risk-weighted assets ratio of 6.0% or greater
and a Tier 1 leverage ratio of 5.0% or greater, are assigned to the
well-capitalized group.

         On September 30, 1996, Congress enacted a SAIF Recapitalization Plan
and a plan for banks insured by the fully capitalized BIF to share the burden of
repaying outstanding Finance Corporation (FICO) bonds issued to fund SAIF's
predecessor (the "FSLIC") in the late 1980s. The legislation enacted by Congress
containing the Recapitalization Plan is entitled the Deposit Insurance Funds Act
of 1996.

         As part of the legislation, a new formula was adopted whereby BIF
insured institutions, such as the Bank, would be required to share in the burden
of repayment of the FICO bonds issued to finance the FSLIC in the 1980s.
Commencing in calendar year 1997, the only deposit insurance cost for most
well-capitalized, well-managed BIF insured and SAIF insured institutions was the
FICO bond payments. For years 1997 through 1999, SAIF insured institutions paid
approximately 6.5 cents per $100 in deposits toward the FICO bond payments while
BIF insured institutions paid approximately 1.22 cents per $100 in deposits.
From the year 2000 to 2017, both SAIF insured institutions and BIF insured
institutions will be assessed at the same rates to fund the remaining debt
service on the FICO bonds. The FDIC established the FICO assessment rates
effective for the third quarter of 2000 at approximately 2.1 cents per $100
annually for assessable deposits. The assessments are adjusted quarterly to
reflect changes in the bases of the FDIC's insurance funds and do not vary
depending on a depository institution's capitalization or supervisory
evaluations.


                                                                               7
<PAGE>   8
Capital Adequacy

         The FRB adopted risk-based capital guidelines for bank holding
companies, such as the Company. The required minimum ratio of total capital to
risk-weighted assets (including off-balance sheet activities, such as standby
letters of credit) is 8.0%. At least half of the total capital is required to be
"Tier 1 capital," consisting principally of common stockholders' equity,
noncumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less goodwill. The remainder ("Tier 2
capital") may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, perpetual preferred stock, and a limited amount of the general
loan loss allowance.

         In addition to the risk-based capital guidelines, the FRB established
minimum leverage ratio (Tier 1 capital to average total assets) guidelines for
bank holding companies. These guidelines provide for a minimum leverage ratio of
3% for those bank holding companies which have the highest regulatory
examination ratings and are not contemplating or experiencing significant growth
or expansion. All other bank holding companies are required to maintain a
leverage ratio of at least 1% to 2% above the 3% stated minimum. The Company is
in compliance with these guidelines. The Bank is subject to similar capital
requirements.

         The risk-based capital standards are required to take adequate account
of interest rate risk, concentration of credit risk and the risks of
non-traditional activities.

Interstate Banking

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Law"), amended various federal banking laws to provide
for nationwide interstate banking, interstate bank mergers and interstate
branching. The interstate banking provisions allow for the acquisition by a bank
holding company of a bank located in another state.

         Interstate bank mergers and branch purchase and assumption transactions
were allowed effective June 1, 1997; however, states may "opt-out" of the merger
and purchase and assumption provisions by enacting a law which specifically
prohibits such interstate transactions. States could, in the alternative, enact
legislation to


                                                                               8
<PAGE>   9
allow interstate merger and purchase and assumption transactions prior to
June 1, 1997. States could also enact legislation to allow for de novo
interstate branching by out of state banks. In July 1995, Pennsylvania adopted
"opt-in" legislation which allows such transactions.

Gramm-Leach-Bliley Financial Modernization Act of 1999

         Traditionally, the activities of bank holding companies have been
limited to the business of banking and activities closely related or incidental
to banking. On November 12, 1999, however, the Gramm-Leach-Bliley Act was signed
into law which permits bank holding companies to engage in a broader range of
financial activities. Specifically, bank holding companies may elect to become
"financial holding companies" which may affiliate with securities firms and
insurance companies and engage in other activities that are financial in nature
or incidental to a financial activity. A bank holding company may become a
financial holding company under the new statute only if each of its subsidiary
banks is well capitalized, is well managed and has at least a satisfactory
rating under the Community Reinvestment Act. A bank holding company that falls
out of compliance with such requirement may be required to cease engaging in
certain activities. Any bank holding company which does not elect to become a
financial holding company remains subject to the current restrictions of the
Bank Holding Company Act.

         While the FRB will serve as the "umbrella" regulator for financial
holding companies and has the power to examine banking organizations engaged in
new activities, regulation and supervision of activities which are financial in
nature or determined to be incidental to such financial activities will be
handled along functional lines. Accordingly, activities of subsidiaries of a
financial holding company will be regulated by the agency or authorities with
the most experience regulating that activity as it is conducted in a financial
holding company.

         Under the Gramm-Leach-Bliley Act, among the activities that will be
deemed "financial in nature" for "financial holding companies" are, in addition
to traditional lending activities, securities underwriting, dealing in or making
a market in securities, sponsoring mutual funds and investment companies,
insurance underwriting and agency activities, activities which FRB determines to
be closely related to banking, and certain merchant banking activities.


                                                                               9
<PAGE>   10
Privacy

         Under the Gramm-Leach-Bliley Act, federal banking regulators are
required to adopt rules that will limit the ability of banks and other financial
institutions to disclose non-public information about consumers to nonaffiliated
third parties. These limitations will require disclosure of privacy policies to
consumers and, in some circumstances, will allow consumers to prevent disclosure
of certain personal information to a nonaffiliated third party. Federal banking
regulators issued final rules on May 10, 2000. Pursuant to the rules, financial
institutions must provide:

    -   initial notices to customers about their privacy policies, describing
        the conditions under which they may disclose nonpublic personal
        information to nonaffiliated third parties and affiliates;

    -   annual notices of their privacy policies to current customers; and

    -   a reasonable method for customers to "opt out" of disclosures to
        nonaffiliated third parties.

         The rules were effective November 13, 2000, but compliance is optional
until July 1, 2001. These privacy provisions will affect how consumer
information is transmitted through diversified financial companies and conveyed
to outside vendors. It is not possible at this time to assess the impact of the
privacy provisions on the Company's financial condition or results of
operations.

         The Company has not elected to become a financial holding company. The
Company believes that the Gramm-Leach-Bliley Act will not have a material
adverse effect on its operations in the near-term. However, to the extent that
it permits banks, securities firms and insurance companies to affiliate, the
financial services industry may experience further consolidation. This could
result in a growing number of larger financial institutions that offer a wider
variety of financial services than the Company currently offers and that can
aggressively compete in the markets that the Company currently serves.


                                                                              10
<PAGE>   11
Consumer Protection Rules - Sale of Insurance

         In December 2000, pursuant to the requirements of the
Gramm-Leach-Bliley Act, the federal bank and thrift regulatory agencies adopted
consumer protection rules for the sale of insurance products by depository
institutions. The rule is effective on October 1, 2001. The final rule applies
to any depository institution or any person selling, soliciting, advertising or
offering insurance products or annuities to a consumer at an office of the
institution or on behalf of the institution. The regulation requires oral and
written disclosure before the completion of the sale of an insurance product or
annuity that such product:

    -   is not a deposit or other obligation of, or guaranteed by, the
        depository institution or its affiliate;

    -   is not insured by the FDIC or any other agency of the United States, the
        depository institution or its affiliates; and

    -   has certain risks of investment, including the possible loss of value.

         The depository institution may not condition an extension of credit on
the consumer's purchase of an insurance product or annuity from the depository
institution or from any of its affiliates, or on the consumer's agreement not to
obtain, or a prohibition on the consumer from obtaining, an insurance product or
annuity from an unaffiliated entity. Furthermore, to the extent practicable, a
depository institution must keep insurance and annuity sales activities
physically segregated from the areas where retail deposits are routinely
accepted from the general public. Finally, the rule addresses cross marketing
and referral fees.


                                                                              11
<PAGE>   12
ABC MORTGAGE COMPANY

         The Bank owns an 80% interest in ABC Mortgage Company, a Pennsylvania
business trust. The remaining 20% is owned by a mortgage banking affiliate of
the local Century 21 Advance Realty real estate franchise. As a majority-owned
subsidiary of the Bank, ABC Mortgage Company is authorized to engage in full
service mortgage banking in Pennsylvania. During the latter half of 2000, ABC
Mortgage Company ceased operations and the Bank plans to dissolve the business
trust in 2001. The overall activity of ABC Mortgage Company in 1999 and 2000 was
immaterial in relation to the Company taken as a whole.

NET MORTGAGE COMPANY

         The Bank owns a 75% interest in Net Mortgage Company, a Pennsylvania
business trust. The remaining 25% is owned by a Berkshire Real Estate Network,
Inc. As a majority-owned subsidiary of the Bank, Net Mortgage Company is
authorized to engage in full service mortgage banking in Pennsylvania. During
the latter half of 2000, Net Mortgage Company ceased operations and the Bank
plans to dissolve the business trust in 2001. The overall activity of Net
Mortgage Company in 1999 and 2000 was immaterial in relation to the Company
taken as a whole.

MAIN STREET HOLDINGS

         Main Street Holdings is a wholly-owned subsidiary of the Bank. Main
Street Holdings was organized to fully utilize the strengths of state income tax
benefits provided to Delaware holding companies under 1902(b)(8) of the Delaware
law. Main Street Holdings will provide investment holding services for the Bank,
the Company and other related affiliated companies in the consolidated group.
These services will include, but will not be limited to, asset/liability
management (ALCO), investment monitoring, including call provisions, quality
management, liquidity analysis, conformity to the state banking investment
regulations and FDIC guidelines. Main Street Holdings commenced operation in
1999.


GRANITE MORTGAGE COMPANY

         In November 1999, the Bank acquired Granite Mortgage Company of
Springfield, Virginia. Granite Mortgage Company is a mortgage broker,
originating residential mortgages in the Metro D.C. area including


                                                                              12
<PAGE>   13
Northern Virginia and Maryland. The Bank purchase price was $1,500,000. On May
12, 2000, the Bank ceased its Virginia mortgage operations and closed Granite
Mortgage Corporation due to concerns over its profitability prospects. The Bank
recorded a one-time charge of approximately $2.5 million in the second quarter
of 2000 to reflect liabilities accrued with respect to the closing of Granite
Mortgage Corporation.

COMPETITION

         The Bank faces significant competition from other commercial banks,
savings banks, savings and loan associations and several other financial or
investment services institutions in the communities it serves. Several of these
institutions are affiliated with major banking and financial institutions which
are substantially larger and have greater financial resources than the Company
and the Bank. As the financial services industry continues to consolidate,
competition affecting the Bank may increase. For most of the services that the
Bank performs there is also competition from credit unions and issuers of
commercial paper and money market funds. Such institutions, as well as brokerage
firms, consumer finance companies, insurance companies and pension trusts, are
important competitors for various types of financial services.


LOAN PORTFOLIO

         At December 31, 2000 the Bank's loan portfolio consisted of commercial
real estate loans, commercial loans, residential one-to-four-family mortgage
loans and consumer loans. Commercial loans are primarily made to small
businesses and professionals in the form of term loans and for working capital
purposes with maturities generally between one and five years. The majority of
these commercial loans are collateralized by real estate and further secured by
personal guarantees. At December 31, 2000 the Bank had $433.4 million in
commercial real estate and commercial loans.

         The Bank's commercial lending staff generates and services commercial
and commercial real estate loans generally ranging from $25,000 to $5.0 million.
The Bank's philosophy is to develop a total banking relationship with its
commercial customers by providing all of their lending, deposit and personal
banking needs. New business is


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<PAGE>   14
generated mostly through referrals from accountants, attorneys, realtors and
existing customers.

         The credit risk associated with the Bank's commercial loan portfolio is
greater than the credit risk associated with residential real estate lending.
However, the Bank believes that this is mitigated by the fact that the majority
of the commercial loan portfolio is real estate secured and carries the personal
guaranty of the principals. Asset-based loans and unsecured loans account for
less than 5% the Bank's loan portfolio.

         The Bank's consumer loan portfolio consists primarily of home equity
term loans, home equity lines of credit, installment loans and credit card
borrowings. Although consumer lending also entails greater risk than residential
lending, the Bank's consumer lending portfolio is largely real estate based and
the Bank's experience with home equity lending has been that these loans provide
good yields, collateral coverage and repayment history. Credit cards and
installment loans, which entail greater risk, account for a small percentage of
the loan portfolio (1% and 4%, respectively) because these loans are generally
provided only as an accommodation for existing customers or in conjunction with
an individual switching his or her entire banking relationship to the Bank. At
December 31, 2000, the Bank had $120.7 million in consumer loans, excluding
residential mortgages.

         The Bank is one of the larger originators of residential mortgage loans
in our market area. This includes all mortgage loans and loans in low and
moderate income areas. The Bank is a full service residential lender offering a
wide variety of conventional, FHA/VA and alternative credit programs.

         Thirty year fixed rate mortgages are sold in the secondary market
unless the loan is retained at the specific request of the customer or due to
size (i.e., jumbo loans) or other reasons the loan was not underwritten to
secondary market standards and was deemed suitable for retention in the Bank's
portfolio. At any one time, the Bank may hold thirty year fixed rate mortgages
as available for sale pending disposition in the secondary market. In addition,
the Bank offers selected mortgage products which meet either the investment
objectives of the Company or are designed specifically to meet community lending


                                                                              14
<PAGE>   15
needs. To serve these community lending needs, the Bank selectively retains a
portion of mortgage loans in all categories.

          The Bank underwrites generally in accordance with secondary market
guidelines. Loans in excess of 80% of appraised value are required to have
mortgage insurance placed with an appropriate coverage based upon the loan to
value ratio. The Bank utilizes private mortgage insurance through several
companies and FHA Insurance and VA Guaranty. As a community bank, the Bank
recognizes the need to provide home mortgage financing to all segments of the
market. In that regard, the Bank does have special community based lending
programs that provide financing for home purchases with greater than 80% loan to
value ratios without credit enhancement. This special program is reviewed and
approved annually by the Board of Directors. At December 31, 2000, the Bank had
$196.3 million in residential mortgage loans.

         The Bank is an active participant in the secondary market and sells
loans to several investors, the Federal National Mortgage Association ("Fannie
Mae") and the Federal Home Loan Mortgage Corporation ("Freddie MAC"). The Bank
originates all mortgage loans directly through employees who are full-time
mortgage consultants. The Bank generally does not retain servicing rights on
loans sold except for the loans sold to Freddie MAC.

         With respect to commercial real estate loans, the Bank's lending
policies are to adhere to the guidelines promulgated by federal regulators.
These guidelines outline the permitted loan to value ratios for various types of
real estate loans. Loans in excess of the standards are reported to the
Company's Board of Directors on a quarterly basis. Such loans totaled less than
4% of the loan portfolio and are typically supported with other collateral
and/or guarantees.

         The Company's loans, net of deferred loan fees at December 31, 2000
totaled $838.3 million, an increase of $172.6 million, or 25.9%, compared to net
loans at December 31, 1999 of $665.7 million. This follows an increase of $125.1
million, or 23.1%, from the $540.6 million amount of net loans at December 31,
1998. These increases reflect continued loan demand from the Company's target
customers.


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<PAGE>   16
         The following table sets forth the Company's loans by major categories
as of the dates indicated.

<TABLE>
<CAPTION>
                                                         At December 31,
                                     ----------------------------------------------------
                                       2000       1999       1998       1997       1996
                                     ----------------------------------------------------
                                                       (In thousands)
<S>                                  <C>        <C>        <C>        <C>        <C>
    Commercial, Financial and
      Agricultural                   $433,365   $337,751   $280,107   $222,050   $178,021
    Real estate - construction         87,576     52,251     16,624     15,091     10,662
    Real estate - mortgage            196,313    182,137    171,268    175,978    152,139
    Consumer Loans to individuals     120,651     92,764     71,926     70,077     62,092
                                     --------   --------   --------   --------   --------
                                      837,905    664,903    539,925    483,196    402,914

    Less deferred loan fees (costs)      (442)      (824)      (692)      (380)        52
                                     --------   --------   ---------   --------   -------
          Total loans                $838,347   $665,727   $540,617   $483,576   $402,862
                                     ====================================================
</TABLE>


Loan Maturity and Interest Rate Sensitivity


         The amount of loans outstanding by category as of December 31, 2000,
which are due in (i) one year or less, (ii) more than one year through five
years and (iii) over five years, is shown in the following table. Loan balances
are also categorized according to their sensitivity to changes in interest
rates.


<TABLE>
<CAPTION>
                                                                      At December 31, 2000
                                             -----------------------------------------------------------------
                                                                More Than
                                                                One Year
                                             One Year            Through            Over               Total
                                              or Less          Five Years         Five Years           Loans
                                             --------           --------           --------           --------
                                                                   (Dollars in Thousands)
<S>                                          <C>                <C>                <C>                <C>
Commercial                                   $204,694           $129,173           $ 99,301           $433,168
Construction                                   64,548                987             22,041             87,576
Mortgage                                       39,671            121,865             34,358            195,894
Consumer                                       87,037             18,959             15,713            121,709
                                             --------           --------           --------           --------
  Total (1)                                  $395,950           $270,984           $171,413           $838,347
                                             ========           ========           ========           ========

Loans with fixed rate                        $ 85,228           $190,405           $155,134           $430,767
Loans with floating rate                      310,722             80,579             16,279            407,580
                                             --------           --------           --------           --------
  Total (1)                                  $395,950           $270,984           $171,413           $838,347
                                             ========           ========           ========           ========

Percent composition by maturity                 47.23%             32.32%             20.45%            100.00%
                                             ========           ========           ========           ========

Fixed rate loans as a percentage
  of total loans maturing                       10.17%             22.71%             18.50%             51.38%
                                             ========           ========           ========           ========

Floating rate loans as a percentage
  of total loans maturing                       37.06%              9.61%              1.95%             48.62%
                                             ========           ========           ========           ========
</TABLE>


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

(1)      Includes deferred loan fees

         In the ordinary course of business, loans maturing within one year may
be renewed, in whole or in part, as to principal amount, at interest rates
prevailing at the date of renewal.

         At December 31, 2000, 51.4% of total loans were fixed rate compared to
53.6% at December 31, 1999. For additional information


                                                                              16
<PAGE>   17
regarding interest rate sensitivity, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Asset and Liability
Management."

Credit Quality

         The Company's written lending policies require credit analysis,
underwriting and loan documentation standards to be met prior to funding any
loan. After loans have been approved and funded, continued periodic review is
required. In addition, due to the secured nature of residential mortgages and
the smaller balances of consumer loans, sampling techniques are used on a
continuing basis for credit reviews in these loan areas. The Company has a
policy to generally discontinue accrual of interest income within ten days
following the month end in which a loan becomes 90 days past due in either
principal or interest. In addition, if circumstances warrant, accrual of
interest may be discontinued prior to 90 days. In all cases, any payments
received on non-accrual loans are credited to principal until full recovery of
past due payments has been recognized, and the loan is not restored to accrual
status until the obligation is brought current, has performed in accordance with
the contractual terms for a reasonable period of time and the ultimate
collectability of the total contractual principal and interest is no longer in
doubt. Loans are charged off, in whole or in part, upon determination that a
loss is anticipated. Non-accrual and large delinquent loans are reviewed monthly
to determine potential losses.


                                                                              17
<PAGE>   18
         The following summary shows information concerning loan delinquency and
other non-performing assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                At December 31,
                                          --------------------------------------------------

                                          2000       1999        1998       1997       1996
                                          ----       ----        ----       ----       ----
                                                         (Dollars in thousands)
<S>                                      <C>        <C>        <C>         <C>        <C>
    Loans accruing, but past due
    90 days or more                      $  430     $  513     $  867      $1,293     $  460

    Total non-accrual loans               7,700      5,323      7,353       4,878      3,496

    Restructured loans                       94        106        113          73         79
                                         ------     ------     ------      ------     ------

    Total non-performing loans (1)        8,224      5,942      8,333       6,244      4,035

    Foreclosed real estate                  959        459        401         465      1,183
                                        -------     ------     ------         ---     ------

    Total non-performing
     assets (2)                          $9,183     $6,401     $8,734      $6,709     $5,218
                                         ======     ======     ======      ======     ======


    Non-performing loans as a
     percentage of total loans,
     net of unearned income                0.98%      0.89%      1.54%       1.29%      1.00%
                                            ===       ====       ====        ====       ====

    Non-performing assets as a
     percentage of total assets            0.61%      0.43%      0.75%       0.82%      0.78%
                                           ====       ====       ====         ===       ====
</TABLE>

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

(1)      Non-performing loans are comprised of (i) loans that are on a
         non-accrual basis, (ii) accruing loans that are 90 days or more past
         due which are insured for credit loss, and (iii) restructured loans.

(2)      Nonperforming assets are comprised of non-performing loans and
         foreclosed real estate.

         The following summary shows the impact on interest income of nonaccrual
and restructured loans for the periods indicated:

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                           -----------------------------
                                           2000        1999         1998
                                           -----------------------------
                                               (Dollars in thousands)
<S>                                        <C>         <C>          <C>
    Interest income that would have
      been recorded had the loans
      been in accordance with their
      original terms                       $537        $422         $605

    Interest income included in net
      income                                180         153          126
</TABLE>

         Restructured loans are loans whose terms have been modified, because of
a deterioration in the financial position of the borrower, to provide for a
reduction of either interest or principal. At December 31, 2000, there were two
restructured loans in the amount of $94,000.

         At December 31, 2000, the Company had no foreign loans. The Company did
have loan concentrations exceeding 10% of total loans to Non-Residential
Building Operators in the amount of $91.8 million, or 11.0%, of total loans.
Loan concentrations are considered to exist


                                                                              18
<PAGE>   19
when there are amounts loaned to a multiple number of borrowers engaged in
similar activities that would cause them to be similarly impacted by economic or
other conditions.

         Foreclosed real estate is initially recorded at fair value, net of
estimated selling costs at the date of foreclosure, thereby establishing a new
cost basis. After foreclosure, valuations are periodically performed by
management and the assets are carried at the lower of cost or fair value, less
estimated costs to sell. Revenues and expenses from operations and changes in
the valuation allowance are included in other expenses.

         Potential problem loans consist of loans that are included in
performing loans, but for which potential credit problems of the borrowers have
caused management to have serious doubts as to the ability of such borrowers to
continue to comply with present repayment terms. At December 31, 2000, all
identified potential problem loans were included in the non-performing assets
table, except for $26.7 million of loans included on the Bank's internal watch
list.

         The Bank had no credit exposure to "highly leveraged transactions" at
December 31, 2000, as defined by the Federal Reserve Bank of Philadelphia
("FRB").


                                                                              19
<PAGE>   20
ALLOWANCE FOR LOAN LOSSES

         A detailed analysis of the Company's allowance for loan losses for each
of the years in the five year period ended December 31, is as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                        --------------------------------------------------------------------
                                          2000           1999            1998          1997           1996
                                        --------       --------       --------       --------       --------
                                                                    (Dollars in thousands)
<S>                                     <C>            <C>            <C>            <C>            <C>
 Balance at beginning of year:          $  7,002       $  7,222       $  5,738       $  5,072       $  4,883

  Charge-offs:
    Commercial                             1,374            309            207             97            497
    Real estate-mortgage                     574          1,216            440            300            344
    Consumer                                 407            435            302            308            154
                                        --------       --------       --------       --------       --------

      Total Charge-offs                 $  2,355       $  1,960       $    949       $    705       $    995
                                        --------       --------       --------       --------       --------

  Recoveries:
    Commercial                                72            111             59            128            236
    Real estate-mortgage                     232            350             84             56             29
    Consumer                                  95             62             80             47             52
                                        --------       --------       --------       --------       --------

      Total recoveries                  $    399       $    523       $    223       $    231       $    317
                                        --------       --------       --------       --------       --------

  Net charge-offs                          1,956          1,437            726            474            678
  Provision for loan losses                4,625          1,217          2,210          1,140            867
                                        --------       --------       --------       --------       --------

Balance at end of year                  $  9,671       $  7,002       $  7,222       $  5,738       $  5,072
                                        ========       ========       ========       ========       ========

Average loans outstanding (1)           $757,044       $595,032       $517,944       $444,839       $357,831
                                        ========       ========       ========       ========       ========
Allowance as a percent of each
    of the following:
  Total loans, net of
    unearned income                         1.15%          1.05%          1.34%          1.19%          1.26%
   Total non-performing loans             117.59%        117.84%         86.67%         91.90%        125.70%

As a percent of average loans (1):
  Net charge-offs                           0.26%          0.24%          0.14%          0.11%          0.19%
  Provision for loan losses                 0.61%          0.20%          0.43%          0.26%          0.24%
</TABLE>


                   -------

(1)      Includes non-accruing loans

         Main Street Bank's Allowance for Loan and Lease Loss ("ALLL")
Methodology includes a detailed analysis of the loan portfolio, to be performed
on a regular and ongoing basis. During the fourth quarter of 2000, management
adopted changes in the Loan Loss Reserve Policy and the ALLL methodology. All
loans are considered, whether individually or grouped as homogeneous pools.
Loans to be evaluated for impairment on an individual basis are done so in
accordance with FASB 114, ("Accounting by Creditors for Impairment of a Loan").
The remainder of the portfolio is segmented into groups of loans with similar
risk characteristics for evaluation and analysis according to FASB 5,
("Accounting for Contingencies"). All known internal and external factors that
are relevant are considered when determining the collectibility of loans. This
methodology is applied consistently, but may be modified for new factors
affecting collectibility of loans.


                                                                              20
<PAGE>   21
The particular risks inherent with different kinds of lending are considered.
Collateral values, less the costs to sell and other carrying expenses are
considered where appropriate. The ALLL methodology includes clear explanations
of the supporting analyses and rationale, and is based on current and reliable
data. It includes a systematic and logical method to consolidate the loss
estimates and ensures that the ALLL balance is recorded in accordance with
accounting principals generally accepted in the United States of America.

For the ALLL process, Main Street Bank stratifies its commercial loan portfolio
by industry groups, using a range of Standard Industry Classification (SIC)
codes for identification purposes. Loss factors are assigned for each group
based on qualitative and quantitative factors, which are identified in the
methodology below. Specific commercial loans identified as impaired due to
nonaccrual status, are assigned a separate allocation in accordance with FASB
114, if a shortfall is indicated. Other commercial loans individually evaluated
under FASB 114, but not considered individually impaired, are grouped in a
category with an assigned loss factor, as per FASB 5. Loans of this type do not
require a specific allocation.

The Fair Value of Collateral method is used to measure impairment in secured
loans. Measuring the fair market value of real estate collateral takes into
account the appraised value, the age of the appraisal if a new appraisal or
update has not been obtained, any valuation assumptions used, estimated costs to
sell, and trends in the market since the appraisal date. The Asset Recovery
Department provides any estimated costs to sell or other information pertinent
in determining the valuation, including estimates of collateral value based upon
similar properties or locations, as well as previous liquidation experience. For
other types of collateral, such as business assets, vehicles, or equipment, the
measurement includes the most recent financial statements available, appraisals,
publications such as NADA book values, or any other information available to
arrive at a legitimate value. The Asset Recovery Department provides credit
memos and other written information for the credit file and for the Loan Review
Department in an effort to stay abreast of fair market values.


                                                                              21
<PAGE>   22
The Present Value of Future Cash Flows method is used to measure impairment for
unsecured loans, or loans where the collateral value is immaterial or cannot be
reasonable estimated. The Loan Review Department makes this determination based
on existing financial statements in file, and the required payment amounts based
upon the loan documentation, discounted by the contractual rate of interest. The
Asset Recovery Department provides documentation for any special arrangements
such as forbearance agreements, to help determine the present value of future
cash flows.

Residential mortgages, home equity loans, installment loans, credit cards, and
ready cash loans are grouped in pools and have an appropriate loss factor based
on internal historical loss rates, delinquency, charge-offs and recoveries,
underwriting standards, lending policies and procedures, and other environmental
factors such as changes in the local and national economy, market fluctuations,
etc. Loss factors are assigned for each group based on qualitative and
quantitative factors, which are identified below. The summary of allocations
realized from the analysis of impaired commercial loans according to FASB 114,
and the analysis of reserves for homogeneous pools of loans according to FASB 5,
represents the determination process used by Main Street Bank, which results in
a recommended ALLL.

Management maintains an ALLL balance that is deemed adequate based on the
findings of the determination process and will adjust the overall ALLL by either
increasing or decreasing the provision for ALLL on a quarterly basis. In
addition, the bank shall maintain a "reserve for general risk" to be maintained
between 5% and 20% of the actual Loan Loss Reserve allocation, based upon credit
quality trends, loan volume, recent loss experience, and general economic
trends.

A detailed allocation of the allowance for loan losses for each of the five
years ended December 31 follows. The increase in the allocation for real estate
- construction is due to the identification and correction of SIC codes at
December 31, 2000, as well as new loan growth in this area.


                                                                              22
<PAGE>   23
<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31,
               ------------------------------------------------------------------------------------------------------------------

                                   2000                 1999               1998                 1997                1996
               ------------------------------------------------------------------------------------------------------------------

                                       Percent             Percent             Percent              Percent              Percent
                                       of Loans            of Loans            of Loans             of Loans             of Loans
                                       in Each             in Each             in Each              in Each              in Each
                                      Category             Category            Category             Category            Category
                             Amount   to Loans     Amount  to Loans    Amount  to Loans    Amount   to Loans    Amount   to Loans
                             ------   ---------    ------  --------    ------  --------    ------   --------    ------   --------
<S>                          <C>      <C>          <C>     <C>       <C>      <C>         <C>      <C>        <C>      <C>
                                                                       (Dollars in thousands)
Allocation of
    allowance for
    loan losses:

    Commercial, financial
       and agricultural      $5,902    51.67%     $4,661     50.78%  $4,124    51.85%     $1,819    46.06%    $1,398    44.17%
    Real Estate -
       Mortgage                 698    23.37%        978     27.29%     981    31.67%        689    36.31%       509    37.72%
    Real Estate -
       Construction           1,066    10.45%        290      7.84%      72     3.15%         56     3.11%        73     2.73%
    Consumer loans
       to individuals           938    14.51%        699     14.09%     544    13.33%        709    14.52%       292    15.38%
    Unallocated               1,067                  374              1,501                2,465               2,800
                             ------               ------             ------               ------              ------

    Total                    $9,671   100.00%     $7,002    100.00%  $7,222   100.00%     $5,738   100.00%    $5,072   100.00%
                             ======               ======             ======               ======              ======
</TABLE>


SECURITIES PORTFOLIO

         The Company's securities portfolio is intended to provide liquidity,
help manage interest rate risk and contribute to earnings without exposing the
Company to credit risk. During 2000, the securities portfolio decreased $166.9
million from $700.0 million at December 31, 1999 to $533.1 million at December
31, 2000. The Company elected to sell approximately $230.0 million in primarily
long-term government agency and municipal securities and incur security losses
of $7.0 million as part of a plan to restructure the balance sheet to decrease
interest rate risk volatility in changing interest rate environments and enhance
net interest margin.

         A summary of securities available for sale and securities held to
maturity at December 31, 2000, 1999 and 1998 follows:

<TABLE>
<CAPTION>
                                                 Securities                             Securities
                                             Available for Sale                      Held To Maturity
                                              at December 31,                         at December 31,
                                  ------------------------------------      ---------------------------------
                                    2000           1999         1998          2000          1999       1998
                                    ----           ----         ----          ----          ----       ----
                                              (In Thousands)                          (In Thousands)
<S>                               <C>           <C>           <C>           <C>           <C>           <C>
    U.S. Treasury                 $     --      $ 29,464      $  9,256      $     --      $     --      $--
    U.S. Government agencies        89,300       130,251       192,705       121,658       121,657       --
    State and municipal            196,903       190,937       233,615        37,193       139,505       --
    Mortgage-backed and asset-
    backed securities (1)           59,874        67,570        57,583         9,171           598       --
    Other securities (2)            19,077        46,945        39,491            --            25       25
                                  --------      --------      --------      --------      --------      ---

    Total Amortized Cost of
      Securities                  $365,154      $465,167      $532,650      $168,022      $261,785      $25
                                  ========      ========      ========      ========      ========      ===

    Total Fair Value of
      Securities                  $365,043      $438,173      $534,526      $163,969      $235,829      $25
                                  ========      ========      ========      ========      ========      ===
</TABLE>


                                                                              23
<PAGE>   24
(1)      All of these obligations consist of U.S. Government Agency issued
         securities.

(2)      Comprised mostly of FHLB stock, Federal Reserve Bank stock and
         Pennsylvania community bank stocks.

         The following table presents the maturity distribution and weighted
average yield of the securities portfolio of the Company at December 31, 2000.
Weighted average yields on tax-exempt obligations have been computed on a
taxable equivalent basis.

<TABLE>
<CAPTION>
                                                             Available for Sale
                                                              December 31, 2000
                                                              -----------------
                                                            (Dollars in Thousands)

                                                After 1 Year     After 5 Years
                                                    But               But              After 10 Years
                             Within 1 Year     Within 5 Years    Within 10 Years   or no maturity (1)        Total
                             -------------    ----------------   ----------------   ----------------    ----------------
                             Amount  Yield     Amount    Yield   Amount     Yield    Amount    Yield     Amount    Yield
                             -------------    ----------------   ----------------   ----------------    ----------------
<S>                          <C>     <C>      <C>        <C>     <C>        <C>     <C>        <C>      <C>        <C>
Amortized Cost:
  U.S. Treasury Securities   $   --     --%   $    --       -%   $    --       --%  $     --      --%   $     --      --%
  U.S. Government Agencies       --     --     15,000    7.053    60,700    7.305     13,600   7.124      89,300   7.235
  State and Municipal            --     --         --       --        --       --    196,903   7.232     196,903   7.232
  Mortgage-backed and
    asset-backed
    securities                   --     --         --       --         6    7.500     59,868   7.200      59,874   7.200
  Other Securities               --     --         25    7.500        --       --     19,052   7.239      19,077   7.239
                             ------  -----    -------    -----   -------    -----   --------   -----    --------   -----
  Total securities
    available for sale       $   --     --%   $15,025    7.054%  $60,706    7.305%  $289,423   7.221%   $365,154   7.228%
                             ======  =====    =======    =====   =======    =====   ========   =====    ========   =====
</TABLE>


<TABLE>
<CAPTION>
                                                         Held to Maturity
                                                        December 31, 2000
                                                        -----------------
                                                      (Dollars In Thousands)

                                             After 1 Year   After 5 Years
                                                 But              But           After 10 Years
                           Within 1 Year    Within 5 Years  Within 10 Years   or no maturity (1)        Total
                          ---------------   --------------  ---------------   ------------------   ----------------
                          Amount    Yield   Amount  Yield   Amount   Yield    Amount      Yield    Amount    Yield
                          ---------------   -------------   --------------   ------------------   ----------------
<S>                       <C>       <C>    <C>      <C>     <C>      <C>     <C>          <C>      <C>       <C>
Amortized Cost:
  U.S. Treasury
    Securities            $   --      --%  $    --     --%  $   --      --%  $     --        --%       --      --%
  U.S. Government
    Agencies                  --      --        --     --       --      --    121,658     6.581    121,658   6.581
  State and Municipal         --      --        --     --       --      --     37,193     7.155     37,193   7.155
  Mortgage-backed and
    asset-backed
    securities                --      --        --     --       --      --      9,171     7.949      9,171   7.949
  Other Securities            --      --        --     --       --      --         --       --          --      --
                          ------    -----   ------  -----   ------   -----   ---------    -----   --------   -----
  Total securities
    Held to maturity      $    0        0%  $    0      0%  $    0       0%  $ 168,022    6.783%  $168,022   6.783%
                          ======    =====   ======  =====   ======   =====   =========    =====   ========   =====
</TABLE>

(1)      The majority of the securities listed in this category are callable or
         likely to repay within five years.

         The Company maintains a securities portfolio for the secondary
application of funds as well as a secondary source of liquidity. At December 31,
2000, securities having an amortized cost of $193.8 million were pledged as
collateral for public funds and other purposes as required or permitted by law.

         Neither the Company nor the Banks held securities of any one issuer,
excluding U.S. Treasury and U.S. Government Agencies, that exceeded 10% of
stockholders' equity at December 31, 2000 or any prior period end.


                                                                              24
<PAGE>   25
DEPOSIT STRUCTURE

         The following is a distribution of the average balances of the Bank's
deposits and the average rates paid thereon for the years ended December 31,
2000, 1999 and 1998.

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                               -------------------------------------------------------
                                       2000                1999               1998
                               ----------------     ----------------  ----------------
                                Amount    Rate      Amount     Rate    Amount     Rate
                               --------   -----     -------    -----  --------   -----
                                                (Dollars in thousands)
<S>                           <C>         <C>      <C>         <C>    <C>        <C>
Demand--non-interest bearing  $ 127,192   ----%    $103,805    ----%  $ 72,866   ----%
Demand--interest-bearing        139,708   3.33%     110,771    3.02%    62,915   1.67%
Savings                         377,952   3.94%     328,123    3.36%   278,860   3.75%
Time deposits                   509,568   5.83%     376,985    5.34%   290,147   5.43%
                             ----------   ----     --------    ----   --------   ----

  Total deposits             $1,154,420   4.26%    $919,684    3.75%  $704,788   3.87%
                             ==========   ====     ========    ====   ========   ====
</TABLE>

         The following is a breakdown, by maturities, of the Bank's certificates
of deposit issued in denominations of $100,000 or more as of December 31, 2000.

<TABLE>
<CAPTION>
                                             December 31, 2000
                                             -----------------
                                               (In thousands)

                                                   CD's
                                                 -------
<S>                                          <C>
Maturing in:

Three months or less                             $28,543
Over three through six months                     20,831
Over six through twelve months                    22,819
Over twelve months                                27,781
                                                 -------

  Total                                          $99,974
                                                 =======
</TABLE>

Long-Term Debt and Other Borrowed Funds

         The Bank maintains a U.S. Treasury tax and loan note option account for
the deposit of withholding taxes, corporate income taxes and certain other
payments to the federal government. Deposits are subject to withdrawal and are
evidenced by an open-ended interest-bearing note. Borrowings under this note
option account were approximately $3.5 million and $4.9 million at December 31,
2000 and 1999.

         The Bank had other short-term borrowings from the FHLB at December 31,
1999 in the amount of $202.7 million, which were due in 2000, at an average
interest rate of 5.30%. There were no other short-term borrowings from the
Federal Home Loan Bank at December 31, 2000.


                                                                              25
<PAGE>   26
      The Bank enters into agreements with customers as part of its cash
management services where the Bank sells securities to the customer overnight
with the agreement to repurchase them at par. Securities sold under these
agreements generally mature one day from the transaction date. The securities
underlying all of these agreements were under the Bank's control. Borrowings
under these agreements totalled $15.2 million and $10.1 million at December 31,
2000 and 1999, respectively. In addition, the Bank had repurchase agreements
with other institutions in the amount of $56.8 million at December 31, 1999.
Borrowings under these agreements have terms ranging from one to three months
and are collateralized by certain investment securities.


                                                                              26


<PAGE>   27




     The following table sets forth information regarding short-term borrowings
at and for the periods ended December 31, 2000, 1999 and 1998.

<TABLE>
<CAPTION>
                                                  2000        1999       1998
                                                --------    --------    --------
                                                        (In Thousands)
<S>                                             <C>         <C>         <C>
Short-term advances from the FHLB
  bearing interest at a weighted
  average rate of 5.15% and 4.95%
  as of December 31, 1999 and 1998,
  respectively: ...............................   $   --     $202,675   $ 81,200

Securities sold under agreements to
  repurchase at a weighted average
  rate of 5.67%, 5.75% and 4.59% as
  of December 31, 2000, 1999, and 1998,
  respectively: ...............................     15,198     66,905      4,228
                                                  --------   --------   --------

                                                  $ 15,198   $269,580   $ 85,428
                                                  ========   ========   ========

 Maximum amount of short-term advances
   from the FHLB outstanding at any
   month-end during the years ended
   December 31, 2000, 1999, and 1998: .........   $199,873   $202,675   $ 81,200

 Maximum amount of securities sold
   under agreements to repurchase
   outstanding at any month-end during
   the years ended December 31, 2000,
   1999, and 1998: ............................    111,525     66,905      4,228
                                                  --------   --------   --------

                                                  $311,398   $269,580   $ 85,428
                                                  ========   ========   ========

Average amount of short-term advances
  outstanding during the years ended
  December 31, 2000, 1999 and 1998 at
  weighted average interest rates of
  6.37%, 5.30% and 5.59%, respectively ........   $133,962   $158,356   $ 40,766

Average amount of securities sold under
  Agreements to repurchase outstanding
  during the years ended December 31,
  2000, 1999 and 1998 at weighted
  average interest rates of 5.90%, 4.99%
  and 4.42%, respectively: ....................     40,154     24,243      3,800
                                                  --------   --------   --------

                                                  $174,116   $182,599   $ 44,566
                                                  ========   ========   ========
</TABLE>

     The Bank's maximum borrowing capacity with the FHLB is approximately
$402,000,000 at December 31, 2000. Advances from the FHLB are required to be
secured by qualifying assets of the Banks.




                                                                              27
<PAGE>   28

ITEM 2. PROPERTIES

     The Company's headquarters are located at 601 Penn Street, Reading,
Pennsylvania. At December 31, 2000, the Bank operated 42 full service community
banking offices. Of the forty-two banking offices, 18 are owned, 5 are land
leases only and 19 are building and land leases from independent owners.


ITEM 3. LEGAL PROCEEDINGS

     The Company and the Bank are , from time to time, a party (plaintiff or
defendant) to lawsuits that are in the normal course of the Company's and the
Banks' business. While any litigation involves an element of uncertainty,
management, after reviewing pending actions with its legal counsel, is of the
opinion that the liability of the Company and the Bank, if any, resulting from
such actions will not have a material effect on the financial condition or
results of operations of the Company and the Bank.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

     Shares of the Company's common stock are traded in the over-the-counter
market and are quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") National Market System under the symbol
"MBNK".




                                                                              28
<PAGE>   29





      The table below presents the high and low trade prices reported for the
Company's common shares and the cash dividends declared on such common shares
for the periods indicated. The range of high and low prices is based on trade
prices reported on NASDAQ. Market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission, and may not necessarily
reflect actual transactions.
<TABLE>
<CAPTION>
                                                             Dividends
          Year        Quarter        High          Low       Per Share
          ----        -------        ----          ---       ---------
<S>                   <C>           <C>           <C>        <C>
          2000          4th          8-5/16        5-3/8       $0.05
                        3rd          9-1/8         7-3/4        0.14
                        2nd         10-1/2           8          0.14
                        1st         10-15/16       8-5/8        0.14
          1999          4th         13-3/8         9-7/16      $0.14
                        3rd         14-1/2        11-5/8        0.14
                        2nd         17-1/4        14-1/16       0.14
                        1st         18-3/4        14-7/8        0.14
</TABLE>


     At March 19, 2001, the total number of holders of record of the Company's
common shares was approximately 7,000.

     For certain limitations on the Banks' abilities to pay dividends to the
Company, see "Description of Business - Supervision and Regulation" hereof and
Note 17 to "Notes to Consolidated Financial Statements."




                                                                              29
<PAGE>   30




ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                               At or for the
                                                                                            Year ended December 31,
                                                                     ---------------------------------------------------------------
                                                                        2000           1999          1998        1997         1996
                                                                     ---------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>         <C>          <C>
Income Statement Data:
      Total interest income                                            $105,307        $85,889      $65,719     $54,463      $41,809
      Total interest expense                                             65,587         49,502       33,264      25,978       18,654
                                                                     ---------------------------------------------------------------
      Net interest income                                                39,720         36,387       32,455      28,485       23,155
      Provision for loan losses                                           4,625          1,217        2,210       1,140          867
      Other income                                                        3,812          6,820       10,301       4,535        3,559
      Other expenses                                                     48,790         36,617       25,092      19,234       16,536
      Federal income taxes (benefit)                                     (7,008)        (2,574)       3,711       3,317        2,428
                                                                     ---------------------------------------------------------------

      Net income                                                       $ (2,875)        $7,947      $11,743      $9,329       $6,883
                                                                     ===============================================================

      Operating Income (1)                                               $8,506         $9,397      $10,307      $9,093       $6,883
                                                                     ===============================================================

Per Share Data:
      Earnings per share (1)(2)
         Basic                                                          $ (0.27)        $ 0.76       $ 1.13      $ 1.02       $ 0.82
         Diluted                                                          (0.27)          0.76         1.12        1.00         0.82
      Operating Earnings Per Share (1)(2)                                  0.81           0.90         0.98        0.98         0.82
      Cash dividends declared per share(2)                                 0.47           0.56         0.49        0.36         0.30
      Book value per share (2)(3)                                          8.35           7.54         9.14        8.60         7.16

Balance Sheet Data:
      Total assets                                                   $1,496,144     $1,496,747   $1,158,541    $813,863     $666,476
      Total loans, net                                                  828,676        658,725      533,395     477,838      397,790
      Total securities                                                  533,065        699,958      534,551     280,020      203,236
      Total deposits                                                  1,310,324      1,024,516      818,550     626,760      518,567
      Borrowings                                                         78,676        359,434      221,072      84,758       81,120
      Junior subordinated deferrable interest debentures                 10,000         10,000            -           -            -
      Total stockholders' equity                                        $87,437        $78,778      $94,912     $88,720      $59,785

Performance Ratios:
      Return on average assets                                           (0.19)%         0.61%        1.28%       1.28%        1.22%
      Return on average stockholders' equity                             (3.60)%         9.02%       12.34%      13.16%       12.05%
      Net interest margin (4)                                             3.28%          3.53%        4.03%       4.30%        4.54%
      Efficiency ratio                                                   72.20%         69.43%       56.55%      56.61%       59.39%

Asset Quality Ratios:
      Allowance for loan losses as a percentage of loans                  1.15%          1.05%        1.34%       1.19%        1.26%
      Allowance for loan losses as a percentage of
         non-performing loans(5)                                        117.59%        117.84%       86.67%      91.90%      125.70%
      Non-performing loans as a percentage of total loans, net (5)        0.98%          0.89%        1.54%       1.29%        1.00%
      Non-performing assets as a percentage of total assets (5)           0.61%          0.43%        0.75%       0.82%        0.78%

Capital Ratios:
      Tier 1 capital to risk-weighted assets (6)                         10.15%         13.38%       14.83%      17.56%       14.81%
      Leverage ratio (6)(7)                                               6.46%          7.43%        8.70%      10.93%        9.81%
      Total capital to risk-weighted assets (6)                          11.18%         14.28%       15.97%      18.72%       16.06%
</TABLE>



     (1) Operating Earnings and Operating Earnings Per share exclude special
     charges, security gains and losses, and other one-time charges, net of
     taxes.

     (2) Per common share data are adjusted for all stock dividends and stock
     splits effected through December 31, 2000.

     (3) Based upon total shares issued and outstanding at the end of each
     respective period.

     (4) Represents net interest income as a percentage of average
     total-interest earning assets, calculated on a tax-equivalent basis.

     (5) Non-performing loans are comprised of (i) loans which are on a
     nonaccrual basis, (ii) accruing loans that are 90 days or more past due
     which are insured for credit loss, and (iii) restructured loans.
     Non-performing assets are comprised of non-performing loans and foreclosed
     real estate (assets acquired in foreclosure).

     (6) Based on Federal Reserve Board risk-based capital guidelines, as
     applicable to the Company.

     (7) The leverage ratio is defined as Tier 1 capital to average total
     assets.


                                                                              30
<PAGE>   31




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


General

Main Street Bancorp, Inc. (the "Company"), is a $1.5 billion holding company in
which its banking subsidiary, Main Street Bank, currently operates 42 offices in
9 counties through its divisions - Berks County Bank in Berks County, Heritage
Bank in Schuylkill and Dauphin Counties and Main Street Bank in Chester, Lehigh,
Montgomery, Bucks, and Northhampton Counties within Pennsylvania and Hunterdon
County, New Jersey. The Company was formed in May 1998 upon the completion of a
merger between Reading-based Berks County Bank, which was founded in 1987 and
Pottsville-based Heritage National Bank, which was founded in 1828.

On July 25, 2000, the Company and the Bank entered into a Memorandum of
Understanding ("MOU") with the Federal Reserve Bank of Philadelphia ("FRB") and
the Pennsylvania Department of Banking (the "Department"). The MOU is not a
formal supervisory action by the FRB or the Department. Generally, the MOU
addresses perceived regulatory concerns identified by the FRB as a result of its
combined examination of the Company and the Bank and its information systems and
transfer agent examinations of the Bank, all as of December 31, 1999. The
Company and the Bank agreed in the MOU to: establish a risk management program;
revise its ALCO policies, limits, and procedures; develop a contingency
liquidity plan; develop an interest rate-risk plan; conduct a risk assessment
relating to internet banking; develop a comprehensive strategic plan and budget;
take certain corrective actions with respect to loan policies, and credit
management; take various actions with respect to information systems; and take
certain corrective actions with respect to transfer agent activities. The
management and Directors of the Company and the Bank also agreed to establish an
asset liability committee and a compliance committee of at least three (3)
outside directors and to engage an outside consultant to evaluate management's
interest rate models and the strategies used to monitor interest rate risk. The
agreement establishes a schedule for compliance and requires additional
regulatory reporting by the Company and the Bank. Under the MOU, the Company and
the Bank may declare and pay corporate dividends, out of funds legally available
for the payment of dividends, after prior notice to the FRB and the Department.
Since the signing of the MOU, the FRB has approved payment of the Company's
quarterly dividends. The Company may incur additional debt and the Company may
redeem its own stock with prior written approval from the FRB and the
Department. The Company and the Bank continue to take those actions necessary to
comply with their respective obligations under the MOU.

The year 2000 was a transition period for the Company as evidenced by an
executive management reorganization, the closing and sale of a business
subsidiary and retail branches and the restructuring of the balance sheet, which
were implemented to achieve long-term shareholder value. The management
reorganization resulted in the rebuilding of the management team during the
second half of the year. Additionally, during the year the Company closed the
Granite Mortgage Corporation, a wholly-owned subsidiary based in Virginia,
resulting from the lack of current and projected profitability. The Company's
assessment of the profitability and strategic fit of all retail branches
resulted in two branches closing during the fourth quarter, another branch being
sold and charges taken on two additional branches that will either be sold or
closed during 2001. Finally, the Company restructured the balance sheet by
selling $230 million in long-term government agencies and municipal securities
which was used to pay down $256 million in short-term debt, thereby reducing
interest rate risk and enhancing the net interest margin while providing an
increased concentration of higher-yielding loans relative to the total level of
assets. The Company's strategic direction places an increased emphasis on
profitability rather than growth.

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and is intended to assist in
understanding and evaluating the major changes in the financial condition and
results of operations of the Company.


                                                                              31
<PAGE>   32


Financial Condition Highlights

The Company maintained its total asset base of $1.5 billion at December 31,
2000, compared to December 31, 1999. Despite the asset size remaining constant,
the Company made significant strides to restructure its balance sheet during the
year ended December 31, 2000. The transition resulted in an increased
concentration of higher yielding assets and less reliance on investment
securities and borrowed funds. The sale of over $230 million in investment
securities, and increases in deposits enabled the Company to pay off short-term
debt of $256 million and Federal Home Loan Bank of Pittsburgh ("FHLB") long-term
debt of $25 million. The retail deposit growth of 28% allowed the Company to
increase its loan portfolio in excess of $170 million. Stockholders' equity
increased $8.6 million, or 11%, during the year due entirely to the improvement
in net unrealized losses on securities available for sale.

Cash and amounts due from banks, interest-bearing deposits (which are held at
Federal Home Loan Bank of Pittsburgh, "FHLB") and federal funds sold are all
liquid funds. The aggregate amount in these three categories increased by $12.5
million to $63.0 million at December 31, 2000. Proceeds from security sales were
invested in interest-bearing deposits at year-end pending reinvestment into
other securities.

Total investment securities decreased $166.9 million, or 23.8%, from $700.0
million at December 31, 1999, to $533.1 million at December 31, 2000. The
decrease was substantially due to the sale of approximately $230.0 million in
primarily long-term government agency and municipal securities, partially offset
by the purchase of approximately $67 million in securities, most of which were
callable government agencies. The Company incurred security losses of $7.0
million as part of a plan to restructure the balance sheet to decrease interest
rate risk volatility in changing interest rate environments and enhance the net
interest margin. On October 1, 2000, the Company adopted FAS 133, "Accounting
for Derivative Instruments and Hedging Activities," and, as permitted by the
Statement, the Company transferred securities with an amortized cost of $102.1
million and net unrealized losses of approximately $4.9 million from the held to
maturity to the available for sale category. Other than the transfer of
securities, the adoption of the FAS 133 had no material effect on the Company's
financial

                                                                              32
<PAGE>   33

statements. The Company also transferred securities with an amortized cost of
approximately $10.9 million from available for sale to held to maturity. These
securities were transferred at their fair market value on the date of transfer,
which was $1.7 million less than the amortized cost. The difference of $1.1
million, net of taxes of $574,000, is included in accumulated other
comprehensive income and is being amortized over the remaining contractual life
of the respective securities.


Loans receivable, net of allowance for loan losses of $9.7 million at December
31, 2000, and $7.0 million at December 31, 1999, increased to $828.7 million at
December 31, 2000, from $658.7 million at December 31, 1999, an increase of
25.8%. The change was primarily due to an increase in commercial real estate and
home equity loans due to the continued favorable economic climate within the
Company's markets and several home equity promotions during 2000. Mortgages held
for sale decreased from $4.9 million at December 31, 1999, to a zero balance at
December 31, 2000. During the second quarter of 2000, the Company elected to
sell all of the mortgages classified as held for sale, which at the time of the
sale totaled $7.9 million. As a result of this sale, the Company recorded a
pretax loss in the income statement of $487,000. The Company elected to sell
these fixed rate mortgages, which were 100 to 200 basis points below market
rates at the time of the sale, to improve the Company's net interest margin.

Amounts due from mortgage investors decreased from $5.0 million at year-end 1999
to $1.6 million at year-end 2000. These amounts represent loans originated by
the Company for other mortgage investors/lenders under standing commitments.
These loans are temporarily funded for such investors for periods ranging from
three to forty-five days.

Bank premises and equipment, net of accumulated depreciation, decreased slightly
from $36.5 million at year-end 1999 to $36.1 million at year-end 2000. The
decrease represents depreciation expense, offset by purchases of equipment and
furniture.

Accrued interest receivable and other assets declined $7.6 million from $41.2
million at December 31, 1999 to $33.6 million at December

                                                                              33
<PAGE>   34

31, 2000. The decrease was due to the recording of a $9.4 million deferred tax
asset relating to the accounting requirements of FASB 115 at December 31, 1999,
versus a deferred tax asset of $612,000 at December 31, 2000.

Total liabilities of $1.4 billion at December 31, 2000, decreased $9.0 million,
or 0.6%, from year-end 1999. During this period, deposits increased by 27.9%,
from $1.0 billion at December 31, 1999, to $1.3 billion at December 31, 2000.
Non interest-bearing deposits increased 24.9% to $152.8 million at December 31,
2000, from $122.3 million at December 31, 1999, resulting from the Company's
continued promotion of free personal and business checking accounts.
Interest-bearing checking increased from $137.4 million at December 31, 1999, to
$158.1 million at December 31, 2000, an increase of 15.1% while savings deposits
increased to $404.7 million at December 31, 2000, from $327.4 million at
December 31, 1999, an increase of 23.6%. Time deposits increased from $437.5
million at December 31, 1999, to $594.7 million at year-end 2000, an increase of
35.9%. The growth in these retail deposit products was attributed to the retail
branch expansion in 1999 and the various deposit product promotions throughout
the year.

Accrued interest payable and other liabilities decreased $14.3 million, or
59.6%, from $24.0 million at December 31, 1999 to $9.7 million at December 31,
2000. Most of the decline in accrued interest payable and other liabilities was
due to the recording of $10.5 million in securities payable at December 31,
1999. Accounting rules require companies to record securities purchases at trade
date versus settlement date. Also, at December 31, 1999, the Company had
recorded $2.6 million in accrued interest payable on debt (total debt was $359.4
million) versus $250,000 at December 31, 2000 (total debt was $78.7 million).

Other borrowed funds decreased $255.7 million, or 93.2%, from $274.4 million at
December 31, 1999, to $18.7 million at December 31, 2000. Long-term borrowings
from the FHLB decreased $25.0 million, or 29.4%, to $60.0 million at December
31, 2000. The Company was able to pay-down its other borrowed funds and
long-term debt from the gathering of retail deposits and the proceeds of the
sale of securities as mentioned above.


                                                                              34
<PAGE>   35


In December 1999, the Company issued $10.0 million of 9.625% junior subordinated
deferrable interest debentures to MBNK Capital Trust I, a wholly-owned
subsidiary of the Company. The Trust then issued $10.0 million preferred
securities to investors. The preferred securities are redeemable by the Company
on or after December 31, 2004. The preferred securities must be redeemed upon
maturity of the debentures on December 31, 2029.

Stockholders' equity increased $8.6 million, or 10.9%, to $87.4 million at
December 31, 2000, from $78.8 million at December 31, 1999. The increase
resulted from the improvement in net unrealized losses on securities available
for sale of $16.4 million which was partially offset by the net loss of $2.9
million and dividends of $5.0 million declared and paid to stockholders during
2000. The decline in unrealized losses occurred in the fourth quarter of 2000
resulting from the Company's sale of $102.1 million in long-term securities and
the impact of a decrease in the general interest rate environment.

Results of Operations for the Years Ended December 31, 2000, 1999 and 1998

Overview

The Company's net income (loss) for the year ended December 31, 2000, was ($2.9)
million compared to $7.9 million for the year ended December 31, 1999, and $11.7
million in 1998. The 2000 net loss was due to the Company incurring $11.4
million (including realized losses on sales of securities) in after-tax special
charges and other one-time charges and income compared to after-tax special
charges of $1.5 million in 1999 and $2.0 in 1998. Pre-tax special charges of
$6.9 million and other one-time charges of $300,000 for a total of $7.2 million
in 2000 consists of $2.0 million in costs related to the closing of Granite
Mortgage Company, $3.7 million in severance payments and employee-related costs,
and $1.5 million in expenses to close branches and loan production offices and
related professional fees. During 1999, the Company incurred a $2.0 million
pre-tax charge for change of control payments to two former Heritage Bank
executives under agreements with the former Heritage Bancorp, Inc. In 1998, the
Company incurred one-time merger related costs of $2.0 million, which

                                                                              35
<PAGE>   36

consisted primarily of professional fees and related transaction costs.
Operating net income, which excludes these special charges and other one-time
charges and income, was $8.5 million, $9.4 million and $10.3 million in 2000,
1999 and 1998, respectively. The decline in operating net income from 1999 to
2000 was due primarily to the increased loan loss provision, exclusive of the
one-time additional provision of $1.5 million in the fourth quarter of 2000 (see
"Provision for Loan Losses"). The increase in tax-equivalent net interest income
of $3.8 million and non-interest income of $3.0 million was offset by the
increase in operating expenses of $7.0 million related mainly to the retail
branch expansion. The decline in operating net income from 1998 to 1999 was due
to the retail branch expansion program in 1999. Diluted earnings (loss) per
share, as reported, amounted to ($0.27), $0.76 and $1.12 for 2000, 1999 and
1998, respectively. Diluted earnings per share, on an operating basis, were
$0.81, $0.90, and $0.98 for 2000, 1999, and 1998, respectively.


Net Interest Income

Net interest income is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The table, Average Balances, Average Rates, and Net Interest Margin, provides an
analysis of net interest income on a tax-equivalent basis, setting forth for the
periods (i) average assets, liabilities and stockholders' equity, (ii) interest
income earned on interest-earning assets and interest expense paid on
interest-bearing liabilities, (iii) average yields earned on interest-earning
assets and average rates paid on interest-bearing liabilities, and (iv) the
Company's net interest margin.

Net interest income may also be analyzed by segregating the volume and rate
components of interest income and interest expense. The Rate/Volume Analysis of
Changes in Net Interest Income table, which follows, sets forth an analysis of
volume and rate changes in net interest for the periods indicated. For purposes
of this table, changes in interest income and interest expense are allocated to
volume and rate categories based upon the respective percentage changes in
average balances and average rates.




                                                                              36
<PAGE>   37





<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                            2000 vs. 1999                               1999 vs. 1998
                                                             Change due to                               Change due to
                                                ------------------------------------------------------------------------------------
                                                Average        Average        Increase       Average        Average       Increase
                                                 Volume          Rate        (Decrease)       Volume         Rate         (Decrease)
                                                --------       --------       --------       --------       --------       --------
                                                                  (In thousands)
<S>                                             <C>            <C>            <C>            <C>            <C>            <C>
Interest earned on:
  Interest-bearing deposits
    with banks ...........................      $     37       $     14       $     51       $    (26)      $     (1)      $    (27)
  Federal funds sold .....................            (6)             4             (2)          (192)            (3)          (195)
  Securities (1) .........................         3,213          1,700          4,913         20,562           (421)        20,141
  Loans (1) ..............................        14,201            769         14,970          6,916         (2,149)         4,767
                                                --------       --------       --------       --------       --------       --------
Total interest income ....................      $ 17,445       $  2,487       $ 19,932       $ 27,260       $ (2,574)      $ 24,686
                                                --------       --------       --------       --------       --------       --------

Interest paid on:
 Interest-bearing demand
    and savings deposits .................      $  2,549       $  2,596       $  5,145       $  2,645       $    231       $  2,876
  Time deposits ..........................         7,074          2,513          9,587          4,719           (374)         4,345
  Borrowed funds .........................          (273)         1,626          1,353          9,572           (555)         9,017
                                                --------       --------       --------       --------       --------       --------
Total interest expense ...................      $  9,350       $  6,735       $ 16,085       $ 16,936       $   (698)      $ 16,238
                                                --------       --------       --------       --------       --------       --------
Net interest income ......................      $  8,095       $ (4,248)      $  3,847       $ 10,324       $ (1,876)      $  8,448
                                                ========       ========       ========       ========       ========       ========
</TABLE>

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

(1) Interest income is reported on a tax-equivalent basis, using a 34%
statutory tax rate for 2000 and a 35% statutory rate for 1999 and 1998 and
adjusted for the disallowance of the deduction for interest expense to carry
bank eligible tax-exempt securities and loans.



                                                                              37
<PAGE>   38
p                            MAIN STREET BANCORP, INC.
             AVERAGE BALANCE, AVERAGE RATES AND NET INTEREST MARGIN

<TABLE>
<CAPTION>

For twelve months  ended:                         December 31, 2000              December 31, 1999           December 31, 1998
------------------------------------------------------------------------------------------------------------------------------------

                                                        Interest                     Interest                    Interest
(Dollars in thousands)                         Average  Income/    Yield/   Average  Income/    Yield/   Average Income/    Yield/
                                               Balance  Expense(1) Rate (2) Balance  Expense(1) Rate (2) Balance Expense(1) Rate (2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>         <C>      <C>         <C>     <C>      <C>        <C>     <C>
INTEREST-EARNING ASSETS:

   Interest-bearing deposits at banks         $    1,351  $      85   6.29%    $     651   $   34  5.22%    $  1,124  $   61   5.43%
                                              -----------------------------    -------------------------    ------------------------

   Federal Funds Sold                                347         21   6.05           470       23  4.89         3,990     218  5.46
                                              -----------------------------    -------------------------    ------------------------

   Taxable securities                            378,594     25,756   6.80       340,309   21,942  6.45       241,599  15,545  6.43
   Tax-exempt securities (3)                     301,870     22,572   7.48       291,754   21,473  7.36       102,778   7,729  7.52
                                              -----------------------------    -------------------------    ------------------------
        Total securities                         680,464     48,328   7.10       632,063   43,415  6.87       344,377  23,274  6.76
                                              -----------------------------    -------------------------    -----------------------

   Commercial loans (3)                          381,434     33,902   8.89       311,503   26,466  8.50       254,583  22,760  8.94
   Commercial construction loans                  59,790      5,699   9.53        22,649    1,930  8.52        11,313     842  7.44
   Mortgage loans                                210,279     15,877   7.55       180,759   14,177  7.84       184,330  14,794  8.03
   Installment loans                             105,541      8,900   8.43        80,121    6,835  8.53        67,718   6,245  9.22
                                              -----------------------------    -------------------------    ------------------------
        Total loans (4)                          757,044     64,378   8.50       595,032   49,408  8.30       517,944  44,641  8.62
                                              -----------------------------    -------------------------    -----------------------
            Total interest-earning assets       1,439,206   112,812   7.84     1,228,216   92,880  7.56       867,435  68,194  7.86
                                                            ---------------                -------------               ------------

Unrealized gains (losses) on
  available for sale securities                  (22,363)                         (9,951)                       5,312
Allowance for loan losses                         (7,769)                         (7,048)                      (6,344)
Non-interest earning assets                      112,495                          96,610                       53,871
                                               ---------                       ---------                    ---------
        Total assets                         $ 1,521,569                     $ 1,307,827                     $920,274
                                               =========                       =========                     ========

INTEREST-BEARING LIABILITIES:

   Demand deposits, interest- bearing         $  139,708     4,647    3.33%   $  110,771    3,340  3.02%    $  62,915   1,050  1.67%
   Savings deposits                              377,952    14,874    3.94       328,123   11,036  3.36       278,860  10,450  3.75
   Other time deposits                           509,568    29,700    5.83       376,985   20,113  5.34       290,147  15,768  5.43
                                               ---------------------------     -------------------------      ----------------------
        Total deposits                         1,027,228    49,221    4.79       815,879   34,489  4.23       631,922  27,268  4.32
   Other borrowed funds                          188,141    11,575    6.15       186,821    9,899  5.30        46,855   2,490  5.31
   Junior subordinated debentures                 10,000       963    9.63           639       61  9.55             0       0  0.00
   Long-term borrowings                           77,391     3,828    4.95       102,480    5,053  4.93        64,401   3,506  5.44
                                               ---------------------------     -------------------------      ----------------------
        Total interest-bearing liabilities     1,302,760    65,587    5.03     1,105,819   49,502  4.48       743,178  33,264  4.48
                                               ---------------------------     ---------------------------    ----------------------

   Spread                                                            2.81%                         3.08%                       3.38%
                                                                   -------                      --------                   --------

Demand deposits, non-interest bearing            127,192                         103,805                       72,866
Other non-interest bearing liabilities            11,861                          10,141                        9,051
                                                ---------                      ---------                     --------
        Total liabilities                      1,441,813                       1,219,765                      825,095

Stockholders' equity                              79,756                          88,062                       95,179
                                                ---------                      ---------                     --------
Total liabilities and
   stockholders' equity                      $ 1,521,569                     $ 1,307,827                    $ 920,274
                                               =========                       =========                     ========

Net interest income                                      $  47,225                      $  43,378                     $34,930
                                                        ==========                       ========                 ===========

Net interest margin (5)                                              3.28%                          3.53%                      4.03%
                                                                  ========                       =======                   ========
</TABLE>





(1)  Includes loan fee income.

(2)  Yields on investments are calculated on amortized cost. All yields are
     annualized.

(3)  Full taxable equivalent basis, using a 34% effective tax rate and adjusted
     for TEFRA disallowance.

(4)  Loans outstanding include non-accruing loans.

(5)  Represents the difference between interest earned and interest paid,
     divided by average total interest earning assets.


                                                                              38
<PAGE>   39


Net interest income of $47.2 million in 2000, on tax-equivalent basis, increased
$3.8 million, or 8.8%, from $43.4 million in 1999. The increase in net interest
income was primarily due to an increase in average interest-earning assets,
which increased $211.0 million, or 17.2%, to $1.4 billion. The increase in
average interest-earning assets occurred primarily in average outstanding loans,
which increased $162.0 million to $757.0 million at December 31, 2000. The
increase in loans occurred primarily in commercial, commercial construction and
home-equity lines of credit.

Net interest margin, which is the difference between interest earned and
interest paid, divided by average total-interest earning assets, decreased 25
basis points to 3.28% for the year ended December 31, 2000, compared to 3.53%
for the year ended December 31, 1999, calculated on a tax equivalent basis.

Interest income earned on interest-earning assets increased $19.9 million, or
21.4%, to $112.8 million for the year ended December 31, 2000, calculated on a
tax-equivalent basis due to a higher level of interest-earning assets and an
increase in the yield. The yield on average interest-earning assets, calculated
on a tax-equivalent basis, increased from 7.56% at December 31, 1999, to 7.84%
at December 31, 2000, primarily due to the rising interest rate environment
during 2000, which impacted loans tied to prime rate as well as loan origination
rates. As a result of the higher level of average

                                                                              39
<PAGE>   40

interest-earning assets and higher corresponding yields, interest income from
loans increased $15.0 million, or 30.4%, while interest income from securities
increased $4.9 million, or 11.3%, for the year ended December 31, 2000.

The Company's total interest expense increased $16.1 million, or 32.5%, to $65.6
million in 2000 from $49.5 million in 1999 due to an increased level of
interest-bearing liabilities and an increase in the interest rates. The increase
in total interest expense and the average rate paid on interest-bearing
liabilities was primarily due to the retail branch expansion and also the
deposit product promotions to attract potential customers. Average
interest-bearing deposits increased $211.1 million, or 25.9%, to $1.0 billion at
December 31, 2000, compared to $815.9 million at December 31, 1999. The average
rate paid on interest-bearing liabilities was 5.03% for the year ended December
31, 2000, compared to 4.48% for the comparable period in 1999 while the average
rate paid on interest-bearing deposits increased 56 basis points to 4.79% in
2000 from 4.23% in 1999.

Net interest income, on tax-equivalent basis, increased $8.5 million, or 24.4%,
to $43.4 million in 1999 from $34.9 million in 1998. The increase in net
interest income was primarily due to an increase in average interest-earning
assets. For the year, average interest-earning assets increased $360.8 million,
or 41.6%, to $1.2 billion from $867.4 million a year ago. The increase in
average interest-earning assets occurred primarily in average securities, which
increased $287.7 million to $632.1 million at December 31, 1999, from $344.4
million at year-end 1998 and were funded mainly with FHLB borrowings.

Net interest margin decreased 50 basis points to 3.53% for the year ended
December 31, 1999, compared to 4.03% for the year ended December 31, 1998,
calculated on a tax equivalent basis. The primary reasons net interest margin
decreased were the significant increase in non interest-earning assets related
to the branch openings coupled with a higher level of investment securities that
provided a lower yield than the loan portfolio.

Interest income earned on interest-earning assets increased $24.7 million, or
36.2%, to $92.9 million for the year ending December 31,

                                                                              40
<PAGE>   41

1999, calculated on a tax-equivalent basis. Interest income from securities,
which accounted for the majority of the change, increased $20.1 million, or
86.3%, to $43.4 million for the year ending December 31, 1999. The yield on
average interest-earning assets, calculated on a tax-equivalent basis, decreased
from 7.86% at December 31, 1998, to 7.56% at December 31, 1999, primarily due to
the addition of securities at yields below 7.86% and a lower average prime rate
during 1999.

The Company's total interest expense increased $16.2 million, or 48.6%, to $49.5
million in 1999. The average rate paid on interest-bearing liabilities was
maintained at 4.48% for both 1999 and 1998. While the cost of deposits actually
decreased 9 basis points in 1999 to 4.23% from 4.32% in 1998, the mix of
funding, which had an increased percent of higher-cost borrowings due to the
expansion plan, resulted in no overall net change in the average rate paid.
Average interest-bearing liabilities increased $362.6 million, or 48.8%, to $1.1
billion in 1999. Average interest-bearing deposits increased $184.0 million, or
29.1%, to $815.9 million at December 31, 1999, which were mainly attributable to
the retail branch expansion. In December of 1999, the Company issued $10 million
of junior subordinated debentures at a rate of 9.625%.

While the cost of funds is higher for the junior subordinated debentures
relative to retail deposits and wholesale borrowings, the Company was permitted
to include 100% of these preferred securities as Tier I capital.

Average other borrowed funds and average long-term borrowings increased $178.0
million, or 160.0%, to $289.3 million at December 31, 1999, as the Company used
the proceeds from the borrowings to purchase investment securities to generate
earnings to offset the operating expenses associated with the branch expansion
initiatives.

Provision for Loan Losses

The Company establishes provisions for loan losses, which are charged to
earnings, in order to maintain the allowance for loan and lease losses at a
level which is deemed to be appropriate based upon assessment of prior loss
experience, the volume and type of lending

                                                                              41
<PAGE>   42

presently being conducted by the Company, industry standards, past due loans,
economic conditions in the Company's market area generally and other factors
related to the collectibility of the Company's loan portfolio. The provision for
loan losses was $4.6 million for 2000 compared to $1.2 million for 1999 and $2.2
million for 1998. In the fourth quarter of 2000, the Company increased its loan
loss provision, above and beyond its normal provision, by $1.5 million, due to
the recent growth in the loan portfolio and the recent declining economic
trends. At December 31, 2000, non-performing assets were 0.61% of total assets
and the allowance for loan losses to non-performing loans was 117.6%, as
compared to 0.43% of total assets and 117.8%, of total loans, respectively, at
December 31, 1999.

During the fourth quarter, management adopted changes in the Loan Loss Reserve
Policy and the methodology for calculating the reserve. These changes represent
a pro-active approach to a proposed Policy Statement from the four federal
banking agencies regarding the Allowance for Loan and Lease Losses. Many factors
are considered regarding the maintenance of adequate Reserves. The Company
provides written documentation pertaining to any and all changes in loss factors
assigned to all loan types or pools, the rationale for levels of specific
reserve allocations and any other pertinent information.

The Company's Loan Review Department uses the following quantitative tools and
ratios in order to ascertain the adequacy of the allowance for loan losses.
These include the following:

-    4 quarter cumulative charge-off average for all loan pools- This exhibits
     the Bank's historical loss experience by loan pools over a rolling 4
     quarter period. This can be compared to regional and national trends. At
     December 31, 2000, the charge-off averages were: Home equity lines of
     credit - 0.02%; Installment and Student Loans - 0.64%; Credit Cards -
     2.49%; Ready Cash and Overdraft Lines - 3.14%; Residential Mortgages -
     0.11%. Commercial loans are analyzed by Standard Industry Code (SIC) and
     historical charge-off information is unavailable by SIC code. Therefore,
     the Company uses other quantitative and qualitative factors for commercial
     loans.

-    Allowance to Total Loans and Leases- This helps determine the overall
     composition of the Bank's portfolio. An up or down trend is explained as to
     why this is occurring. At December 31, 2000, the ratio was 1.15% compared
     to 1.05% at December 31, 1999. The increase was a result of the increased
     loan loss provision.

-    Allowance to Non performing loans - This tool helps measure and ensure that
     the Bank's non performing loans are not or have not been increasing at a
     faster rate than the balance in the Allowance. At

                                       42
<PAGE>   43

     December 31, 2000, the ratio of the allowance to non-performing loans was
     117.6% compared to 117.8% at December 31, 1999.

-    Recoveries to Total Loans, Net of the Reserve and Recoveries to Prior
     Period Losses- This ratio helps measure the Bank's charge-off policy.
     Typically banks with higher recovery rates are considered to have a more
     aggressive charge-off policy. At December 31, 2000, the ratio of recoveries
     to total loans was .05% compared to .08% at December 31, 1999.

-    Percentage of Special Mention and Classified Assets to Total Bank Capital-
     This percentage helps ascertain the Bank's overall credit quality. At
     December 31, 2000, the ratio was 38.3% compared to 14.0% at December 31,
     1999. This increase is attributed primarily to internal factors such as the
     increase in portfolio credit reviews in 2000 and the improved early
     identification of problem loans. A contributing external factor was the
     economic slowdown occurring during the year.

-    Net Losses to Total Loans- This ratio states the net percentage of the loan
     portfolio that is being charged off. At December 31, 2000, this ratio was
     .24% compared to .22% at December 31, 1999.

-    Provision to Gross Losses- This ratio exhibits the percentage of coverage
     between the provision versus gross losses. At December 31, 2000, this ratio
     was .55% compared to .18% at December 31, 1999. Given the change in the
     above ratios and the economic slowdown, management significantly increased
     its loan loss provision during the fourth quarter of 2000.

Management also looks at loan concentrations in determining the adequacy of the
allowance for loan losses. During the fourth quarter, loans to Non-Residential
Building Operators grew to $91.8 million, up from $71.4 million at 09/30/00. The
increase is attributed to the growth of loans in this industry, particularly in
Chester, Montgomery, and Bucks County regions, as well as in South Jersey. This
industry continues to represent the largest single industry concentration in the
portfolio, representing 17.6 % of all commercial loans and 97.1% of capital. At
December 31, 2000, Main Street's credit policy limits loans to a single industry
group to no more than 100% of capital, with loans beyond this limit requiring
Board approval. Residential Construction loans grew 60%, from $29.9 million at
9/30/00 to $50 million at 12/31/00. This growth can be attributed to the recent
identification and correction of commercial loan SIC code assignments, as well
as new loans in this area. Additionally, these loans represented 52.9% of
capital at year end, up from 30% at 09/30/00. Loans to Residential Building
Operators and Lessors grew from $39.3 million to $49 million through the
quarter, and represent the third largest industry concentration at 51.8% of
capital, compared to 39.4% of capital at 09/30/00. This is the largest industry
group measured

                                                                              43
<PAGE>   44

in terms of number of loans with 422 individual loans. Also, this group had
fourteen (14) non-performing loans for $944,000, and four (4) previous loans
from this group are now Foreclosed Real Estate, totaling $102,000 after
charge-downs.



Other Income

Other operating income, excluding the net loss on sale of securities and losses
on mortgages held for sale, of $10.7 million in 2000 represented an increase of
$3.8 million, or 55.1%, above the previous year primarily due to increased
customer service fees. During 2000, the Company sold approximately $230 million
of available for sale securities and incurred a loss of $7.0 million and also
sold approximately $7.9 million in mortgages held for sale and incurred a loss
of $487,000. These losses were attributable to the plan to restructure the
balance sheet to decrease interest rate risk volatility in changing rate
environments and enhance the net interest margin. During 1999, the Company
realized losses on sales of securities of $96,000. Therefore, other income, as
reported, decreased $3.0 million, or 44.1%, from $6.8 million in 1999 to $3.8
million in 2000.

Income from customer service fees increased $4.1 million to $7.8 million in
2000. Customer service fees consist of charges for overdrafts and NSF
(non-sufficient funds), safe deposit rentals, ATM, and other services that are
primarily deposit driven. The increase was a direct result of new accounts,
primarily from the retail branch expansion program, new products, fee increases
and higher deposit activity levels. Income from mortgage banking activities
decreased $600,000 from $1.3 million in 1999 to $700,000 in 2000 and also
decreased from $2.0 million in 1998. Income from mortgage banking activities
represents income generated from mortgages originated and sold in the secondary
market. The decrease from 2000 to 1999 was due to the sale of mortgages held for
sale as previously mentioned as well as the closing of several loan production
offices in 2000 as part of the overall restructuring plan. Income from fiduciary
activities of $952,000 declined by $161,000, or 14.5%, due to a loss of customer
accounts and a lower value of assets under management.


                                                                              44
<PAGE>   45


Other income of $6.8 million in 1999 decreased $3.5 million, or 34.0%, from
$10.3 million in 1998. The decline in other income was mostly due to realized
gains and losses on sales of securities and a decline in mortgage banking
income. During 1999, the Company realized losses on sales of securities of
$96,000 compared to realized gains on sales of securities of $4.3 million in
1998. The 1998 realized gains on securities were the result of sales of its
available-for-sale equity securities of Pennsylvania banks in order to provide
additional revenue to help offset one-time expenses that occurred during the
year. These one-time expenses included $2.0 million of merger related costs,
$1.7 million in loan loss provisions and approximately $0.2 million of
facilities expense related to the acquisition and relocation of the Company's
new headquarters to 601 Penn Street, Reading, PA. Other income on an operating
basis, excluding net realized gains and losses on sales of securities, was $6.9
million in 1999 versus $6.0 million in 1998. Income from customer service fees
of $3.7 million in 1999 increased $1.1 million, or 42%, from $2.6 million in
1998 due primarily to the increased customer deposit base associated with the
retail branch expansion. Income from mortgage banking activities of $1.3 million
in 1999 declined $700,000 from $2.0 million in 1998 due to the high level of
home refinancings during 1998 resulting from attractive mortgage rates.

Other Expenses

Other operating expenses, excluding special charges and other one-time charges,
were $41.6 million and $34.6 million for the years ended 2000 and 1999,
respectively. This increase of $7.0 million, or 20.2% was primarily attributable
to the 21 retail branches that were added in 1999 and the 2 retail branches
added in 2000. Salaries and benefits increased $3.2 million, or 19.0%, from
$16.8 million in 1999 to $20.0 million in 2000. Increased occupancy expenses of
$1.1 million, or 26.8%; equipment depreciation and maintenance expenses of
$793,000, or 32.6%; and advertising expenses of $205,000, or 8.2%, were all
mainly associated with the opening of the new retail branches. Data processing
and MAC fees increased $1.2 million, or 66.6%, to $3.0 million resulting from
increased volume in credit card/ATM processing due to the new ATMs located at
the new retail branches and also fees linked to customer service activity.
Professional fees increased $672,000, or 86.4%, to $1.5 million due to
additional legal fees on

                                                                              45
<PAGE>   46

collections and loans, the outsourcing of the internal audit function and also
to increased consulting fees in conjunction with the corporate restructuring.
Total other expenses, as reported, increased $12.2 million, or 33.3%, to $48.8
million in 2000 as compared to $36.6 million in 1999.

Total other expenses amounted to $36.6 million in 1999, which resulted in an
increase of $11.5 million, or 45.8%, above the level of 1998. During 1998,
one-time merger related costs, consisting primarily of professional fees and
related transaction costs, totaled $2.0 million. The increases in other
operating expenses occurred in advertising, data processing and MAC fees, office
supplies and expense and professional fees. Excluding the special charges of
$2.0 million previously noted above during 1999, other expenses totaled $34.6
million. Salaries and benefits of $16.8 million increased by $4.4 million during
1999 from $12.4 million in 1998 due to the retail branch expansion launched in
March. Occupancy expenses of $4.1 million in 1999 increased $2.0 million, or
95.2%, from $2.1 million in 1998 due to the commencement of lease payments on
March 1, 1999, for seventeen of the twenty-one branches opened in 1999.
Equipment depreciation and maintenance increased to $2.4 million in 1999 from
$1.6 million in 1998 mostly due to a full year of depreciation and maintenance
on equipment and furniture for the new branches. Advertising expenses more than
doubled to $2.5 million in 1999 from $1.2 million in 1998 as a result of the
advertising and marketing related to the opening of the 21 new branches. Data
processing and MAC fees increased $600,000, or 50.0%, to $1.8 million in 1999
from $1.2 million in 1998. The increase was the result of an increased volume in
credit card processing/ATM processing due to the new ATMs located at the 23 new
branches, ongoing service fees for selected deposit products related to new
deposit accounts and also due to increased credit card processing. Office
supplies and expense of $2.0 million increased $0.7 million, or 53.8%, from $1.3
million in 1998 in order to support the Company's growth and the new branches.

Provision for Income Taxes

The provision for federal income taxes was a $7.0 million benefit for the year
ended December 31, 2000, compared to a $2.6 million benefit in 1999 and a $3.7
million expense in 1998. The tax benefit in 2000

                                                                              46
<PAGE>   47
resulted from the special charges and other one-time charges during the year and
also from an increased level of tax-exempt interest income earned on
bank-qualified municipal securities and tax free loans compared to pretax
income. For federal income tax purposes, the Company is subject to the
alternative minimum tax. Since this tax creates a credit that can be carried
forward indefinitely to offset future federal income taxes, it is not an expense
of the Company. The alternative minimum tax has, therefore, been recorded as a
deferred tax asset, which will be recoverable in future years as the bank has
taxable income. A reconciliation of the statutory income tax at a rate of 34% is
included in footnote No. 9 to the consolidated financial statements.

Asset Quality

Non-performing assets, which include non-accruing loans, accruing loans that are
90 days or more past due, foreclosed real estate and restructured loans,
amounted to $9.2 million at December 31, 2000. This represented an increase of
$2.8 million from $6.4 million at December 31, 1999, due to increases of $2.4
million in non-accrual loans and $500,000 in foreclosed real estate. The
increases in nonaccrual loans and foreclosed real estate was mostly due to
commercial and commercial real estate loans, respectively. It is the Company's
policy to classify a loan as non-performing within 10 days after the month end
in which the loan becomes 90 days past due for either principal or interest.

As a financial institution that assumes lending and credit risks as a principal
element of its business, the Company anticipates that credit losses will be
experienced in the normal course of business. Accordingly, management makes a
monthly determination as to an appropriate provision from earnings necessary to
maintain an allowance for loan losses that is adequate for potential yet
undetermined losses. Management's evaluation is based upon a continuing review
of the loan portfolio, which includes factors such as the risk characteristics
of both individual loans and the total loan portfolio, loan charge-off
experience, delinquency rates, local and general economic conditions, and
regular examinations of the loan portfolio by the bank's regulators.


                                                                              47
<PAGE>   48
When it is determined that the prospect for recovery of the principal of a loan
has significantly diminished, that portion of the loan is immediately charged
against the allowance account. Subsequent recoveries, if any, are credited to
the allowance account. In addition, non-accrual and large delinquent loans are
reviewed monthly to determine potential losses.

The balance in the allowance for loan losses was $9.7 million, or 1.15% of total
loans at December 31, 2000, compared to $7.0 million, or 1.05% of total loans at
December 31, 1999. The ratio of the allowance for loan losses to non-performing
loans was 117.6% at December 31, 2000, compared to 117.8% at December 31, 1999.

Management believes the allowance for loan losses was adequate to cover risks
inherent in its loan portfolio at December 31, 2000. However, there can be no
assurance that the Company will not have to increase its provision for loan
losses in the future as a result of changes in economic conditions or for other
reasons, which could adversely affect both the estimates made by management and
the Company's results of operations.

Asset and Liability Management

Market risk is the risk of loss arising from adverse changes in the fair value
of financial instruments due to changes in interest rates, exchange rates and
equity prices. The Company's market risk is composed primarily of interest rate
risk. The Company's Asset/Liability Committee ("ALCO") is responsible for
reviewing the interest rate sensitivity position of the Company and establishing
policies to monitor and limit exposure to interest rate risk. The operations of
the Company do not subject it to foreign currency exchange or commodity price
risk. At December 31, 2000, the Company did not utilize interest rate swaps,
caps or other hedging transactions.

The principal objective of the Company's asset and liability management function
is to maximize the Company's net interest income while maintaining a level of
risk appropriate given the Company's business focus, operating environment,
capital and liquidity requirements and performance objectives; establish prudent
asset


                                                                              48
<PAGE>   49
concentration guidelines; and manage risk consistent with Board of Directors
approved guidelines. Through such management, the Company seeks to manage the
sensitivity of its operations to changes in interest rates. The Company's
actions in this regard are taken under the guidance of the ALCO, which is
comprised principally of members of the Company's executive management. The ALCO
meets once a month to review, among other things, the sensitivity of the
Company's assets and liabilities to interest rate changes, the results of net
interest income simulation and market-value analysis, the book and market values
of assets and liabilities, unrealized gains and losses, purchase and sale
activity and maturities of investments and borrowings. In connection therewith,
the ALCO generally reviews the Company's liquidity, cash flow needs, maturities
of investments, deposits and borrowings and current market conditions and
interest rates. The ALCO also monitors the capital adequacy of the Company on a
monthly basis. A pricing committee meets weekly to make pricing and funding
decisions with respect to the Company's retail deposits and selected consumer
loans. Adjustments to the mix of assets and liabilities are made periodically in
an effort to provide dependable and steady growth in net interest income
regardless of the behavior of interest rates. Part of interest rate risk
management involves managing the extent to which interest-sensitive assets and
interest-sensitive liabilities are matched. The Company typically defines
interest-sensitive assets and interest-sensitive liabilities as those that
re-price within one year or less. Maintaining an appropriate match is a method
of avoiding wide fluctuations in net interest margin during periods of changing
interest rates. The difference between interest-sensitive assets and
interest-sensitive liabilities is known as the "interest-sensitivity gap"
("GAP"). A positive GAP occurs when interest-sensitive assets exceed
interest-sensitive liabilities re-pricing in the same time periods, and a
negative GAP occurs when interest-sensitive liabilities exceed
interest-sensitive assets re-pricing in the same time periods. A negative GAP
suggests that a financial institution may be better positioned to take advantage
of declining interest rates rather than increasing interest rates, and a
positive GAP ratio suggests the converse. The following table presents a summary
of the Company's interest rate sensitivity at December 31, 2000. For purposes of
this table, the Company has used assumptions based on industry data and
historical experience to calculate the expected cash flows of securities and
loans because, statistically,


                                                                              49
<PAGE>   50
certain categories of securities and loans are prepaid before their maturity
date, even without regard to interest rate fluctuations.

Shortcomings are inherent in a simplified and static GAP analysis that may
result in an institution with a negative GAP having interest rate behavior
characteristics of an asset-sensitive balance sheet. Although certain assets and
liabilities may have similar maturities or periods to re-pricing, they may react
in different degrees to changes in market interest rates. For example, GAP
analysis implicitly assumes that the interest rates on all assets and
liabilities that re-price within a given re-pricing period change by the same
amount as the change in the market interest rate of the same duration.
Prepayment and early withdrawal levels could also deviate significantly from
those assumed in calculating GAP in the manner presented in the table.
Accordingly, the Company measures its interest-rate risk by conducting various
analyses in addition to the traditional static GAP report, including simulation
modeling, duration analyses and Economic Value of Equity (EVE) analysis.
<TABLE>
<CAPTION>

                                     INTEREST RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 2000 (1)
------------------------------------------------------------------------------------------------------------------

                                   1 days       91 days    181 days   1 year
                                   through      through    through    through    Over 5
                                   90 days      180 days   1 year     5 years    Years       Total
                                   -------      --------   --------   -------    ------      -----
    <S>                           <C>       <C>         <C>         <C>        <C>        <C>
    Interest-earning assets:
    Loans                         $316,022      28,794    $51,133    $270,982   $171,416   $ 838,347
    Securities (2)                 180,791       8,243     17,046     126,863    200,233     533,176
    Interest-bearing deposits
      With banks& Fed Funds
      sold                          23,784           0          0           0          0      23,784
                                   -------      ------    -------     -------    -------   ---------
    Total                         $520,597     $37,037   $ 68,179    $397,845   $371,649  $1,395,307
                                   -------      ------    -------     -------    -------   ---------

    Interest-bearing liabilities:
    Interest bearing deposits(3)  $361,336      91,781   $196,662    $201,955   $305,773  $1,157,507
    Borrowed FundS and
      Debentures(4)                 18,676           0          0      60,000     10,000      88,676
    Non-interest-bearing
      deposits                       7,051           0          0      93,860     51,906     152,817
                                   -------      ------    -------     -------    -------   ---------
    Total                         $387,063     $91,781   $196,662    $355,815   $367,679  $1,399,000
                                   -------      ------    -------     -------    -------   ---------

    Interest-rate sensitivity
      gap:
    Interval                      $133,534   $ (54,744)  $(128,483)   $ 42,030   $  3,970  $   (3,693)
                                   =======    ========    ========     =======    =======  ==========

    Cumulative                    $133,534   $  78,790  $ (49,693)   $ (7,663)  $ (3,693) $   (3,693)
                                   =======    ========    ========    ========    =======   =========


    Ratio of cumulative gap
      to total rate-sensitive
      assets                          9.56%       5.64%    ( 3.56%)     (0.55%)    (0.26%)     (0.26%)
                                     ======      =====     =======      ======     ======      ======

</TABLE>



                                                                              50
<PAGE>   51
<TABLE>
<CAPTION>



                                     INTEREST RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1999 (1)
------------------------------------------------------------------------------------------------------------------

                                   1 days       91 days    181 days   1 year
                                   through      through    through    through    Over 5
                                   90 days      180 days   1 year     5 years    Years       Total
                                   -------      --------   --------   -------    ------      -----
    <S>                           <C>         <C>        <C>         <C>        <C>       <C>
    Interest-earning assets:
    Loans                          $206,160      24,686    $57,356    $242,916   $134,609  $  665,727
    Securities (2)                  119,078       6,808     97,753     216,160    287,153     726,952
    Interest-bearing deposits
      With banks& Fed Funds
      sold                              584           0          0           0          0         584
                                    -------      ------    -------     -------    -------   ---------
    Total                          $325,822     $31,494   $155,109    $459,076   $421,762  $1,393,263
                                    -------      ------    -------     -------    -------   ---------

    Interest-bearing liabilities:
    Interest bearing deposits(3)   $275,839      58,200   $ 83,717    $221,424   $263,053  $  902,233
    Borrowed Funds and
      Debentures(4)                 274,434           0     25,000      60,000     10,000     369,434
    Non-interest-bearing
     deposits                             0           0          0      61,142     61,141     122,283
                                    -------      ------    -------     -------    -------   ---------
    Total                          $550,273     $58,200   $108,717    $342,566   $334,194  $1,393,950
                                    -------      ------    -------     -------    -------   ---------

    Interest-rate sensitivity
      gap:
    Interval                      $(224,451)  $ (26,706) $  46,392     116,510    $87,568  $    (687)
                                   ========     =======     ======     =======     ======  ==========

    Cumulative                    $(224,451)  $(251,157) $(204,765)   $(88,255)   $  (687) $    (687)
                                   =========   =========  =========   =========    =======  =========


    Ratio of cumulative gap
      to total rate-sensitive
      assets                        (16.11%)    (18.03%)   (14.70%)     (6.33%)    (0.05%)    (0.05%)
                                    =======     =======    =======      ======     ======     ======

</TABLE>


(1) Maturity is based upon estimated repayments of principal loans and the
repricing characteristics of adjustable rate loans.

(2) Maturity of securities is based on maturity date (if there is no call date
or prepayment possibility), call date or expected cash flows; excludes
unrealized depreciation on available for sale securities.

(3) Maturity is based upon contractual date for time deposits and historical
data related to the sensitivity of the pricing of all other interest-bearing
deposits relative to changes in market rates.

(4) Borrowings are based on maturity date if no call or put date, or by expected
call or put if one applies.


The Company's primary ALCO monitoring tool is asset/liability simulation models,
which are prepared at a minimum on a monthly basis and are designed to capture
the dynamics of balance sheet, rate and spread movements and to quantify
variations in net interest income under different interest rate environments.
The Company examines changes to net interest income assuming interest rate
shocks, both up and down, of 100, 200 and 300 basis points in its analysis of
interest rate risk. The restructuring of the balance sheet through the sale of
long-term investment securities, which facilitated the pay-down of short-term
and long-term debt, improved the Company's interest rate risk. As a result, the
Company's simulation analysis at December 31, 2000, resulted in an increase of
3.20% in net interest income in a 200 basis point rate increase versus a 6.95%
decline in net interest income for a similar interest rate shock at December 31,
1999. In a down 200 basis point rate shock, net interest income would decline 5%
at December 31, 2000 versus a 6% increase in net interest income for a similar
rate shock at December 31, 1999. The Company also utilizes


                                                                              51
<PAGE>   52
market-value analysis, which addresses the change in equity value arising from
movements in interest rates in the same manner as simulation analysis. The
estimated market value of equity is the difference in the market value of the
Company's assets and liabilities. The extent to which assets have gained or lost
value in relation to the gains or losses of liabilities determines the
appreciation or depreciation in equity on a market-value basis. Market-value
analysis is intended to evaluate the impact of immediate and sustained
interest-rate shifts of the current yield curve upon the market value of the
current balance sheet. The Company also reduced interest rate risk using
market-value analysis by more than 50% from December 31, 1999, to December 31,
2000, assuming a 200 basis point rate increase, again due to the restructuring
previously noted.

Capital

The Company's Tier 1 capital to risk-weighted assets ratio at December 31, 2000,
was 10.15% compared to 13.38% at December 31, 1999. These ratios exceeded the
regulatory Tier 1 capital requirement of 4.00%. The Company's total capital to
risk-weighted assets ratio at December 31, 2000, was 11.18% compared to 14.28%
at December 31, 1999. These ratios exceeded the regulatory total risk-based
capital requirement of 8.00%. At December 31, 2000, the Company's leverage ratio
was 6.46% versus 7.43% at December 31, 1999, exceeding the regulatory leverage
ratio requirement of 4.00%. The Company is categorized as "well-capitalized" at
December 31, 2000, under applicable Federal regulations in regards to all of its
capital ratios.

Liquidity and Capital Resources

Financial institutions must maintain liquidity to meet day-to-day requirements
of depositors and borrowers, take advantage of market opportunities, and provide
a cushion against unforeseen needs. Liquidity needs can be achieved by either
reducing assets or increasing liabilities. Sources of asset liquidity are
provided by the fair market value of securities not pledged as collateral, cash
and amounts due from banks, interest-bearing deposits and Federal funds sold.
Held-to-maturity securities are classified as liquid assets to the extent they
are not pledged as collateral. These liquid assets


                                                                              52
<PAGE>   53
totaled $534.7 million at December 31, 2000, compared to $339.5 million at
December 31, 1999.

Liability liquidity can be met by attracting deposits with competitive rates,
buying Federal funds, or utilizing the borrowing facilities of the Federal
Reserve System or the FHLB system. The Company utilizes a variety of these
methods of liability liquidity. At December 31, 2000, the Company had
approximately $442 million in unused lines of credit available to it under
informal arrangements with correspondent banks compared to $231.8 million at
December 31, 1999. These lines of credit enable the Company to purchase funds
for short-term needs at current market rates. Certificates of deposit scheduled
to mature within one year or less amounted to $384.6 million at December 31,
2000. Management believes that the Company has adequate resources, including
principal repayments and repayments of loans, to fund all of its commitments to
the extent required. In addition, although the Company has extended commitments
to fund loans or lines of credit, historically, the Company has not been
required to fund all of its outstanding commitments. Management believes that a
significant portion of maturing customer accounts will remain with the Company.

Impact of Inflation and Changing Prices

The Consolidated Financial Statements of the Company and related notes presented
herein have been prepared in accordance with generally accepted accounting
principles ("GAAP") which require the measurement of financial position and
operating results principally in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation.

Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates.

Forward-Looking Statements

                                                                              53
<PAGE>   54
This report contains various forward-looking statements and includes assumptions
concerning the Company's operations, future results, and prospects. These
forward-looking statements are based upon current expectations and are subject
to risk and uncertainties. In connection with the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, the Company provides the
following cautionary statement identifying important factors, which could cause
the actual results or events to differ materially from those set forth in or
implied by the forward-looking statements and related assumptions.

Such factors include the following:

1) the effect of changing regional and national economic conditions;

2) the significant changes in interest rates and prepayment speeds;

3) credit risks of commercial, real estate, consumer, and other lending
activities;

4) changes in federal and state banking regulations;

5) the presence in the Company's market area of competitors with greater
financial resources than the Company and;

6) other external developments which could materially impact the Company's
operational and financial performance.



                                                                              54
<PAGE>   55
QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

The following represents quarterly financial data of the Company, which, in the
opinion of management, reflects all adjustments necessary for a fair
presentation (in thousands, except per share data):

<TABLE>
<CAPTION>


Three Months Ended:
              2000                                        MARCH 31               JUNE 30        SEPT. 30           DEC. 31
--------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>           <C>              <C>
Interest income                                       $    25,447              $    26,379   $    26,732      $    26,749
Interest expense                                          (16,024)                 (16,344)      (16,850)          (16,369)
                                                      ---------------------------------------------------------------------
       Net interest income                                  9,423                   10,035         9,882            10,380

Provision for loan losses                                    (375)                  (1,000)         (750)           (2,500)
Net realized losses on sale of securities                     (17)                     (43)         (183)           (6,787)
Special charges                                                  -                  (4,797)         (961)           (1,160)
Other expenses, net of other income                        (8,066)                  (8,475)       (7,352)           (7,137)
                                                      ---------------------------------------------------------------------
       Income before income taxes (benefits)                  965                   (4,280)          636            (7,204)

Income taxes (benefits)                                      (988)                  (1,877)         (800)           (3,343)
                                                      ---------------------------------------------------------------------
Net income (loss)                                     $     1,953              $    (2,403)  $     1,436      $     (3,861)
                                                      =====================================================================
Earnings (loss) per share of common stock:
   Basic                                              $       0.19             $      (0.23) $      0.13      $      (0.37)
                                                      =====================================================================
   Diluted                                            $       0.19             $      (0.23) $      0.13      $      (0.37)
                                                      =====================================================================
</TABLE>

<TABLE>
<CAPTION>



   Three Months Ended:
              1999                                        March 31               June 30        Sept. 30           Dec. 31
--------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>           <C>              <C>
Interest income                                       $    19,679              $    21,131   $    21,795      $    23,284
Interest expense                                          (11,064)                 (11,848)      (12,574)         (14,016)
                                                      --------------------------------------------------------------------
       Net interest income                                  8,615                    9,283         9,221            9,268

Provision for loan losses                                    (300)                    (300)         (200)            (417)
Net gains (losses) on sale of securities                       (2)                     (76)          (35)              17
Special charges                                                 -                     (331)       (1,727)              31
Other expenses, net of other income                        (5,559)                  (7,612)       (7,597)          (6,906)
                                                      --------------------------------------------------------------------
       Income before income taxes (benefits)                2,754                      964          (338)           1,993

Income taxes (benefits)                                        23                     (688)       (1,108)            (801)
                                                      --------------------------------------------------------------------
Net income                                            $     2,731              $     1,652   $       770      $     2,794
                                                      ===================================================================
Earnings per share of common stock:
    Basic                                             $      0.26              $      0.16   $      0.07      $      0.27
                                                      ===================================================================
    Diluted                                           $      0.26              $      0.16   $      0.07      $      0.27
                                                      ===================================================================
</TABLE>


                                                                              55
<PAGE>   56
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

         Market risk is the risk of loss arising from adverse changes in the
fair value of financial instruments due to changes in interest rates, exchange
rates, and equity prices. The Company's market risk is composed primarily of
interest rate risk. The Company's Asset/Liability Committee (ALCO) is
responsible for reviewing the interest rate sensitivity position of the Company
and establishing policies to monitor and limit exposure to interest rate risk.
The operations of the Company do not subject it to foreign currency exchange or
commodity price risk. Also, the Company and the Bank do not utilize interest
rate swaps, caps, or other hedging transactions.

Interest Rate Sensitivity

         See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Asset and Liability Management" for discussion on
interest rate sensitivity.

Interest Rate Sensitivity - Cash Flow Analysis

         The Interest Rate Sensitivity Tables below illustrate the cash flows
expected from earning assets for each of the next five years at December 31,
2000 and 1999. Cash flows from loans are based on contractual payments and
actual cash flows will most likely vary based on the fluctuation of interest
rates. Generally, loans will prepay faster in a decreasing rate environment.
This will result in lower interest income because there are more cash flows to
reinvest at lower interest rates. Cash flows from bullet securities, which
include U.S. Treasury securities, obligations of states and political
subdivisions, and other securities are based on the earlier of the contractual
maturity or the call date if the security is likely to be called, with little or
no change in interest rates from December 31, 2000 or 1999. Cash flows from
mortgage-backed securities are based on consensus prepayment speeds under an
unchanged rate environment over the next


                                                                              56
<PAGE>   57
five years. Similar to loans, prepayments on mortgage-backed securities tend to
increase as interest rates fall, and fall as rates rise.

         Also included on the tables are the contractual maturities of all
interest bearing liabilities. Interest bearing demand and savings deposits are
included as maturing in the following year. These customers have no obligation
to keep their money with the Company for any period of time. In order to
determine the effect of market interest rates on these products, the Company
uses a simulation model. While the entire balance of these products is affected
immediately when there is an interest rate change, the interest rate change is
generally not equal to the change in Fed funds or the prime rate. The Company
has noted that competitive pressures drive this rate more than small changes in
market rates. Time deposits are presented by contractual maturity. Short-term
borrowings consist of repurchase agreements and overnight borrowings from the
FHLB. Generally, the funds mature within 1 business day. Long-term borrowings
are presented by contractual maturity.

  At December 31, 2000:
<TABLE>
<CAPTION>

                                                     CASH FLOWS YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------------------------------------------

(IN THOUSANDS)                      2001      2002       2003      2004      2005      THEREAFTER      TOTAL       FAIR VALUE
                                    ----      ----       ----      ----      ----      ----------      -----       ----------
<S>                               <C>      <C>        <C>       <C>       <C>            <C>        <C>              <C>

INTEREST EARNING ASSETS:


Loans:
 Fixed Rate                      $85,041   $59,832    $55,851   $43,286   $34,640        $151,269   $429,919         $413,013
  Average Rate                      8.38%     8.64%      8.45%     8.18%     8.37%           8.04%      8.28%
 Variable Rate                  $147,537   $34,769    $10,912   $14,176   $ 8,961        $192,073   $408,428         $407,055
  Average Rate                      9.18%     9.81%      8.95%     9.12%     8.89%           8.30%      8.80%

Investment Securities           $206,080   $10,085    $30,527   $61,792   $24,459        $200,122   $533,067         $529,012
 Average Rate                       6.84%     7.27%      7.03%     7.12%     7.66%           7.29%      7.10%
Int Bearing Deposits              23,784         0          0         0         0               0    $23,784          $23,784
 Average Rate                       5.22%                                                               5.22%

INTEREST BEARING LIABILITIES:

Interest Bearing Demand          158,075   $     0    $     0   $     0   $     0        $      0   $158,075         $158,075
 Average Rate                       3.71%        0%         0%        0%        0%              0%      3.71%
Savings Deposits                $404,723   $     0    $     0   $     0   $     0        $      0   $404,723         $404,723
 Average Rate                       4.11%        0%         0%        0%        0%              0%      4.11%
Time Deposits:
 Fixed Rate                    $ 349,294  $154,337    $39,078   $ 4,762   $ 3,776        $  7,759  $ 559,006         $560,916
  Average Rate                      5.82%     6.67%      5.97%     5.12%     5.58%           5.25%      6.05%
 Variable Rate                   $35,320      $383    $     0   $     0   $     0        $      0  $  35,703         $ 35,703
  Average Rate                      5.89%     5.13%         0%        0%        0%              0%      5.89%
Fixed-Rate Borrowings                $ 0        $0         $0       $ 0        $0        $      0  $       0         $      -
 Average Rate                          0%        0%         0%        0%        0%              0%         0%
Variable Rate Borrowings         $18,676        $0    $60,000        $0        $0              $0    $78,676          $74,953
 Average Rate                       5.61%        0%      4.85%        0%        0%              0%      5.03%
Junior Subordinated                   $0        $0         $0        $0        $0         $10,000    $10,000           $9,880
 Debentures                            0%        0%         0%        0%        0%           9.62%      9.62%

</TABLE>


                                                                              57
<PAGE>   58
<TABLE>
<CAPTION>


At December 31, 1999:
                                                     CASH FLOWS YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------------------------------------------

(IN THOUSANDS)                      2000      2001       2002      2003      2004      THEREAFTER      TOTAL       FAIR VALUE
                                    ----      ----       ----      ----      ----      ----------      -----       ----------
<S>                              <C>       <C>        <C>       <C>       <C>            <C>        <C>              <C>
INTEREST EARNING ASSETS:


Loans
 Fixed Rate                      $72,799   $56,732    $44,355   $39,384   $29,611        $113,876   $356,757         $351,748
  Average Rate                      8.27%     8.31%      8.37%     8.12%     8.11%           7.81%      8.11%
 Variable Rate                  $115,287   $15,410    $ 9,977   $ 9,999   $ 9,721        $148,576   $308,970         $312,220
  Average Rate                      8.53%     8.04%      8.52%     8.49%     8.45%           7.92%      8.21%

Investment Securities           $199,211   $26,837    $28,451   $95,932   $76,903        $299,084   $726,952         $674,002
 Average Rate                       6.68%     7.52%      6.92%     6.62%     7.04%           7.07%      6.87%
Fed Funds & Int Bearing             $584                                                                $584             $584
 Average Rate                      5.22%                                                               5.22%

INTEREST BEARING LIABILITIES:

Interest Bearing Demand         $137,352      $  0      $   0      $  0      $  0          $    0   $137,352         $137,352
 Average Rate                       3.08%        0%         0%        0%        0%              0%      3.08%
Savings Deposits                $327,422      $  0      $   0      $  0      $  0          $    0   $327,422         $327,422
 Average Rate                       3.36%        0%         0%        0%        0%              0%      3.36%
Time Deposits:
 Fixed Rate                     $177,018  $157,480    $21,694   $36,467    $5,262          $8,753  $ 406,674         $404,491
  Average Rate                      5.27%     5.80%      5.41%     6.04%     5.09%           5.25%      5.55%
 Variable Rate                   $30,264      $468         $0       $53        $0              $0    $30,785          $30,785
  Average Rate                      4.93%     4.72%         0%     4.51%        0%              0%      4.93%
Fixed-Rate Borrowings           $236,779        $0         $0   $60,000        $0              $0   $296,772         $292,296
 Average Rate                       5.61%        0%         0%     4.85%        0%              0%      5.46%
Variable Rate Borrowings         $62,664        $0         $0        $0        $0              $0    $62,664          $62,664
 Average Rate                       4.18%        0%         0%        0%        0%              0%      4.18%
Junior Subordinated                   $0        $0         $0        $0        $0         $10,000    $10,000           $9,146
 Debentures                            0%        0%         0%        0%        0%           9.62%      9.62%
</TABLE>

         Note: Cash flow information for loans does not include the allowance
for loans losses. Cash flow information for securities is stated at amortized
cost.




                                                                              58
<PAGE>   59
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








                                                   C O N T E N T S


<TABLE>
<CAPTION>
                                                                                                               Page
<S>                                                                                                           <C>

INDEPENDENT AUDITOR'S REPORT
     ON THE CONSOLIDATED FINANCIAL STATEMENTS                                                                    60

CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated balance sheets                                                                                 61
     Consolidated statements of income                                                                           62
     Consolidated statements of stockholders' equity                                                             63
     Consolidated statements of cash flows                                                                       64
     Notes to consolidated financial statements                                                               65-86

</TABLE>


                                                                              59
<PAGE>   60
                          INDEPENDENT AUDITOR'S REPORT




To the Board of Directors and Stockholders
Main Street Bancorp, Inc.
Reading, Pennsylvania


              We have audited the accompanying consolidated balance sheets of
Main Street Bancorp, Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.


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


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


                                  /s/ Beard Miller Company LLP
                                  ----------------------------

Reading, Pennsylvania
January 19, 2001



                                                                              60
<PAGE>   61
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

December 31,                                                                                    2000             1999
                                                                                          (In Thousands, Except Share Data)
                                                                                          ---------------------------------
<S>                                                                                        <C>              <C>
          ASSETS
Cash and due from banks                                                                    $       39,246   $      49,904
Interest-bearing deposits with banks                                                               23,784             114
Federal funds sold                                                                                      -             470
Securities available for sale                                                                     365,043         438,173
Securities held to maturity, fair value 2000 $ 163,969; 1999 $ 235,829                            168,022         261,785
Loans receivable, net of allowance for loan losses 2000 $ 9,671; 1999 $ 7,002                     828,676         658,725
Mortgage loans held for sale                                                                            -           4,854
Due from mortgage investors                                                                         1,640           4,957
Premises and equipment, net                                                                        36,109          36,477
Accrued interest receivable and other assets                                                       33,624          41,288
                                                                                           ------------------------------
          Total assets                                                                     $    1,496,144   $   1,496,747
                                                                                           ==============================
    LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Deposits:
       Non-interest bearing                                                                $      152,817   $     122,283
       Interest bearing                                                                         1,157,507         902,233
                                                                                           ------------------------------
          Total deposits                                                                        1,310,324       1,024,516

    Accrued interest payable and other liabilities                                                  9,707          24,019
    Other borrowed funds                                                                           18,676         274,434
    Long-term debt                                                                                 60,000          85,000
    Guaranteed preferred beneficial interest in Company's
       subordinated debentures                                                                     10,000          10,000
                                                                                           ------------------------------
          Total liabilities                                                                     1,408,707       1,417,969
                                                                                           ------------------------------
Stockholders' equity:
    Preferred stock, par value $ 10.00 per share; authorized and unissued
       5,000,000 shares                                                                                 -               -
    Common stock, par value $ 1.00 per share; authorized 50,000,000 shares; issued and
       outstanding 2000 10,470,380 shares; 1999 10,449,657 shares                                  10,470          10,450
    Surplus                                                                                        64,670          64,548
    Retained earnings                                                                              13,484          21,326
    Accumulated other comprehensive loss                                                           (1,187)        (17,546)
                                                                                          -------------------------------
          Total stockholders' equity                                                               87,437          78,778
                                                                                          -------------------------------
          Total liabilities and stockholders' equity                                       $    1,496,144   $   1,496,747
                                                                                          ===============================
</TABLE>


See Notes to Consolidated Financial Statements.




                                                                              61
<PAGE>   62
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

Years Ended December 31,                                                              2000           1999            1998
                                                                                    (In Thousands, Except Per Share Data)
                                                                                    -------------------------------------
<S>                                                                          <C>              <C>            <C>
Interest income:
    Loans receivable, including fees                                         $       64,291   $     49,332   $     44,544
    Interest and dividends on securities:
       Taxable                                                                       25,756         21,942         15,545
       Tax-exempt                                                                    15,154         14,558          5,351
    Other                                                                               106             57            279
                                                                                    -------------------------------------
          Total interest income                                                     105,307         85,889         65,719
                                                                                    -------------------------------------

Interest expense:
    Deposits                                                                         49,221         34,489         27,268
    Other borrowed funds                                                             11,575          9,899          2,490
    Long-term debt                                                                    4,791          5,114          3,506
                                                                                    -------------------------------------

          Total interest expense                                                     65,587         49,502         33,264
                                                                                    -------------------------------------

          Net interest income                                                        39,720         36,387         32,455

Provision for loan losses                                                             4,625          1,217          2,210
                                                                                    -------------------------------------

          Net interest income after provision for loan losses                        35,095         35,170         30,245
                                                                                    -------------------------------------

Other income:
    Income from fiduciary activities                                                    952          1,113            966
    Customer service fees                                                             7,758          3,724          2,591
    Mortgage banking activities                                                         699          1,333          2,017
    Net realized gains (losses) on sales of securities                               (7,030)           (96)         4,329
    Other                                                                             1,433            746            398
                                                                                    -------------------------------------

          Total other income                                                          3,812          6,820         10,301
                                                                                    -------------------------------------

Other expenses:
    Salaries and employee benefits                                                   19,956         16,803         12,353
    Special charges                                                                   6,918          2,027              -
    Merger costs                                                                          -              -          1,963
    Occupancy                                                                         5,157          4,084          2,081
    Equipment depreciation and maintenance                                            3,223          2,430          1,563
    Data processing and MAC fees                                                      3,033          1,809          1,184
    Advertising                                                                       2,713          2,508          1,236
    Office supplies and expenses                                                      2,190          2,035          1,281
    Professional fees                                                                 1,450            778            846
    Other expenses                                                                    4,150          4,143          2,585
                                                                                    -------------------------------------

          Total other expenses                                                       48,790         36,617         25,092
                                                                                    -------------------------------------

          Income (loss) before income taxes (benefits)                               (9,883)         5,373         15,454

Federal income taxes (benefits)                                                      (7,008)        (2,574)         3,711
                                                                                    -------------------------------------
          Net income (loss)                                                  $       (2,875)  $      7,947   $     11,743
                                                                                    =====================================
Basic earnings (loss) per share                                              $        (0.27)  $       0.76   $       1.13
                                                                                    =====================================

Diluted earnings (loss) per share                                            $        (0.27)  $       0.76   $       1.12
                                                                                    =====================================

</TABLE>

See Notes to Consolidated Financial Statements.




                                                                              62
<PAGE>   63
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


Years Ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>

                                                                                                           Accumulated
                                                     Shares Of                                                Other
                                                       Common       Common                   Retained     Comprehensive
                                                       Stock        Stock       Surplus      Earnings     Income (Loss)     Total
                                                     -----------------------------------------------------------------------------
                                                                            (In Thousands, Except Share Data)
<S>                                                  <C>           <C>        <C>           <C>            <C>           <C>
Balance, December 31, 1997                           9,639,808     $ 9,640    $  49,985     $  26,721      $  2,374      $  88,720
    Comprehensive income:                                                                                                ---------
       Net income                                            -           -            -        11,743             -         11,743
       Change in net unrealized gains (losses) on
       securities available  for sale                        -           -            -             -        (1,211)        (1,211)
                                                                                                                             -----
          Total comprehensive income                                                                                        10,532
                                                                                                                            ------
    Issuance of common stock upon exercise of
       stock options                                    38,520          38          304             -             -            342
    Issuance of common stock in connection with a
       7% stock dividend                               679,072         679       13,412       (14,120)            -            (29)
    Cash dividends declared, $ 0.49 per share                -           -            -        (5,117)            -         (5,117)
    Pre-merger stock transactions of
pooled entities                                         31,043          31          433             -             -            464
                                                     -----------------------------------------------------------------------------
Balance, December 31, 1998                          10,388,443      10,388       64,134        19,227         1,163         94,912
    Comprehensive income:                                                                                                   ------
       Net income                                            -           -            -         7,947             -          7,947
       Change in net unrealized gains (losses)
       on securities available for sale                      -           -            -             -       (18,709)       (18,709)
                                                                                                                            ------
          Total comprehensive loss                                                                                         (10,762)
                                                                                                                            ------
    Issuance of common stock upon exercise of
       stock options                                    61,214          62          414             -             -            476
    Cash dividends declared, $ 0.56 per share                -           -            -        (5,848)            -         (5,848)
                                                     -----------------------------------------------------------------------------

Balance, December 31, 1999                          10,449,657      10,450       64,548        21,326       (17,546)        78,778
    Comprehensive income:                                                                                                   ------
       Net loss                                              -           -            -        (2,875)            -         (2,875)
       Change in net unrealized gains (losses) on
       securities                                            -           -            -             -        16,359         16,359
                                                                                                                            ------
          Total comprehensive income (loss)                                                                                 13,484
                                                                                                                            ------
    Issuance of common stock upon exercise of
       stock options                                    20,723          20          122             -             -            142
    Cash dividends declared, $ 0.47 per share                -           -            -        (4,967)            -         (4,967)
                                                     -----------------------------------------------------------------------------

BALANCE, DECEMBER 31, 2000                          10,470,380    $ 10,470     $ 64,670      $ 13,484      $ (1,187)       $87,437
                                                    ==============================================================================
</TABLE>

See Notes to Consolidated Financial Statements.




                                                                              63
<PAGE>   64
<TABLE>
<CAPTION>

MAIN STREET BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,                                                            2000           1999           1998
                                                                                    -------------------------------------
                                                                                             (In Thousands)
<S>                                                                           <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                         $      (2,875)  $      7,947   $     11,743
    Adjustments to reconcile net income (loss) to net cash provided
       by operating activities:
       Provision for loan losses                                                      4,625          1,217          2,210
       Provision for depreciation and amortization                                    3,603          2,577          1,430
       Provision for deferred income taxes                                           (4,050)        (4,477)          (586)
       Net realized (gains) losses on sales of securities                             7,030             96         (4,329)
       (Gain) loss on disposal of equipment and other assets                           (201)            49            114
       Proceeds from sale of mortgage loans                                          63,916         86,772        113,746
       Net gains on mortgage loans                                                     (304)          (749)        (1,536)
       Mortgage loans originated for sale                                           (58,758)       (85,808)      (117,279)
       Net amortization of securities premiums and discounts                           (973)          (326)         1,041
       (Increase) decrease in:
          Due from mortgage investors                                                 3,317          9,610         (9,142)
          Accrued interest receivable and other assets                                3,323        (10,414)        (2,201)
       Increase (decrease) in accrued interest payable and other liabilities         (3,824)        (1,135)        10,382
                                                                                    -------------------------------------
          Net cash provided by operating activities                                  14,829          5,359          5,593
                                                                                    -------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from sales of securities available for sale                            229,978         80,434         45,665
    Proceeds from maturities and calls of and principal repayments on
       securities available for sale                                                 12,716         30,728         84,660
    Proceeds from maturities and calls of securities held to maturity                    38            115          5,350
    Purchases of securities available for sale                                      (67,205)      (183,596)      (388,743)
    Purchases of securities held to maturity                                              -       (121,728)             -
    (Increase) decrease in interest-bearing deposits with banks                     (23,670)           222           (136)
    Decrease in federal funds sold                                                      470              -              -
    Loans made to customers, net of principal collected                            (175,725)      (126,547)       (57,767)
    Cash paid for purchase of mortgage company                                            -           (695)             -
    Proceeds from sales of equipment and other assets                                   786          1,191          1,047
    Purchases of premises and equipment                                              (4,099)       (13,245)       (15,641)
                                                                                    -------------------------------------
          Net cash used in investing activities                                     (26,711)      (333,121)      (325,565)
                                                                                    -------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in demand and savings deposits                                     132,305         89,760        131,734
    Net increase in time deposits                                                   161,524        116,206         60,056
    Sale of deposits, net                                                            (7,022)             -              -
    Net increase (decrease) in other borrowed funds                                (255,758)       188,362         55,764
    Proceeds from long-term debt                                                          -              -         85,000
    Principal payments on long-term debt                                            (25,000)       (50,000)        (4,450)
    Issuance of subordinated debentures                                                   -         10,000              -
    Proceeds from exercise of stock options                                             142            476            342
    Cash paid in lieu of fractional shares                                                -              -            (29)
    Pre-merger stock transactions of pooled entities                                      -              -            464
    Cash dividends paid                                                              (4,967)        (5,848)        (5,117)
                                                                                    -------------------------------------
          Net cash provided by financing activities                                   1,224        348,956        323,764
                                                                                    -------------------------------------
          Increase (decrease) in cash and due from banks                            (10,658)        21,194          3,792

Cash and due from banks:
    January 1                                                                        49,904         28,710         24,918
                                                                                    -------------------------------------
    December 31                                                               $      39,246   $     49,904   $     28,710
                                                                                    =====================================
</TABLE>

See Notes to Consolidated Financial Statements.



                                                                              64
<PAGE>   65
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

     The consolidated financial statements include the accounts of Main Street
     Bancorp, Inc. ("the Company") and its wholly-owned subsidiaries, Main
     Street Bank ("the Bank") and MBNK Investment Company. All significant
     intercompany accounts and transactions have been eliminated.

Nature of operations:

     The Bank operates under a state bank charter and provides full banking
     services. The Company and the Bank are subject to regulation by the
     Pennsylvania Department of Banking and the Federal Reserve Bank. The Bank
     operates under the Berks County Bank, Heritage Bank and Main Street Bank
     divisions. The areas served by the Bank are principally eastern
     Pennsylvania and sections of New Jersey.

Estimates:

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

Cash flows:

     For purposes of reporting cash flows, cash and due from banks includes cash
     on hand and amounts due from banks. Cash payments for interest totaled $
     68,021,000 in 2000, $ 45,545,000 in 1999 and $ 32,880,000 in 1998. Income
     taxes paid were $ 1,360,000 in 2000, $ 1,360,000 in 1999 and $ 4,680,000 in
     1998. Amounts transferred to foreclosed real estate were $ 1,149,000 in
     2000, $ 1,157,000 in 1999 and $ 1,086,000 in 1998.

Securities:

     Securities that management has both the positive intent and ability to hold
     to maturity are classified as securities held to maturity and are carried
     at cost, adjusted for amortization of premium or accretion of discount
     using the interest method. Securities that may be sold prior to maturity
     for asset/liability management purposes, or that may be sold in response to
     changes in interest rates, changes in prepayment risk, to increase
     regulatory capital or other similar factors, are classified as securities
     available for sale and carried at fair value with adjustments to fair
     value, after tax, reported in other comprehensive income. Management
     determines the appropriate classification of debt securities at the time of
     purchase and reevaluates such designation at each balance sheet date.

     Interest and dividends on securities, including the amortization of
     premiums and the accretion of discounts, calculated using the interest
     method, are reported in interest income. Gains and losses on the sale of
     securities are recorded on the trade date and are calculated using the
     specific identification method.

Loans receivable:

     Loans receivable that management has the intent and ability to hold for the
     foreseeable future or until maturity or payoff are stated at their
     outstanding unpaid principal balances, net of an allowance for loan losses
     and any deferred fees or costs. Interest income is accrued on the unpaid
     principal balance. Loan origination fees, net of certain direct origination
     costs, are deferred and recognized as an adjustment of the yield (interest
     income) of the related loans. The Bank is generally amortizing these
     amounts over the contractual life of the loan.

     The accrual of interest is generally discontinued when the contractual
     payment of principal or interest has become 90 days past due or management
     has serious doubts about further collectibility of principal or interest,
     even though the loan is currently performing. A loan may remain on accrual
     status if it is in the process of collection and is either guaranteed or
     well secured. When a loan is placed on nonaccrual status, unpaid interest
     credited to income in the current year is reversed and unpaid interest
     accrued in prior years is charged against the allowance for loan losses.
     Interest received on nonaccrual loans generally is either applied against
     principal or reported as interest income, according to management's
     judgment as to the collectibility of principal. Generally, loans are
     restored to accrual status when the obligation is brought current, has
     performed in accordance with the contractual terms for a reasonable period
     of time and the ultimate collectibility of the total contractual principal
     and interest is no longer in doubt.




                                                                              65
<PAGE>   66
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allowance for loan losses:

     The allowance for loan losses is established through provisions for loan
     losses charged against income. Loans deemed to be uncollectible are charged
     against the allowance for loan losses, and subsequent recoveries, if any,
     are credited to the allowance.

     The allowance for loan losses is maintained at a level considered adequate
     to provide for losses that can be reasonably anticipated. Management's
     periodic evaluation of the adequacy of the allowance is based on the known
     and inherent risks in the portfolio, adverse situations that may affect the
     borrower's ability to repay, the estimated value of any underlying
     collateral, composition of the loan portfolio, current economic conditions
     and other relevant factors. This evaluation is inherently subjective as it
     requires material estimates that may be susceptible to significant change,
     including the amounts and timing of future cash flows expected to be
     received on impaired loans.

     A loan is considered impaired when, based on current information and
     events, it is probable that the Bank will be unable to collect the
     scheduled payments of principal or interest when due according to the
     contractual terms of the loan agreement. Factors considered by management
     in determining impairment include payment status, collateral value and the
     probability of collecting scheduled principal and interest payments when
     due. Loans that experience insignificant payment delays and payment
     shortfalls generally are not classified as impaired. Management determines
     the significance of payment delays and payment shortfalls on a case-by-case
     basis, taking into consideration all of the circumstances surrounding the
     loan and the borrower, including the length of the delay, the reasons for
     the delay, the borrower's prior payment record and the amount of the
     shortfall in relation to the principal and interest owed. Impairment is
     measured on a loan by loan basis for commercial and construction loans by
     either the present value of expected future cash flows discounted at the
     loan's effective interest rate, the loan's obtainable market price or the
     fair value of the collateral if the loan is collateral dependent.

     Large groups of smaller balance homogeneous loans are collectively
     evaluated for impairment. Accordingly, the Bank does not separately
     identify individual consumer and residential loans for impairment
     disclosures.

Mortgage loans held for sale:

     Mortgage loans originated and intended for sale in the secondary market are
     carried at the lower of cost or estimated fair value. Net unrealized losses
     are recognized through a valuation allowance by corresponding charges in
     the statements of income. All sales are made without recourse.

Due from mortgage investors:

     The Bank performs underwriting and origination services for various
     mortgage investors. As part of this program, the Bank will temporarily fund
     the investors' mortgage commitments for periods generally ranging from
     three to forty-five days.

Premises and equipment:

     Premises and equipment are stated at cost less accumulated depreciation.
     Depreciation is computed on the straight-line and accelerated depreciation
     methods over the related assets estimated useful lives.

Foreclosed real estate:

     Foreclosed real estate, which is recorded in other assets, is comprised of
     property acquired through a foreclosure proceeding or acceptance of a
     deed-in-lieu of foreclosure and loans classified as in-substance
     foreclosure. A loan is classified as in-substance foreclosure when the Bank
     has taken possession of the collateral regardless of whether formal
     foreclosure proceedings take place.

     Foreclosed real estate is initially recorded at fair value, net of
     estimated selling costs at the date of foreclosure, establishing a new cost
     basis. After foreclosure, valuations are periodically performed by
     management and the assets are carried at the lower of cost or fair value,
     less estimated costs to sell. Revenues and expenses from operations, net
     realized gains and losses on sales and changes in the valuation allowance,
     are included in other expenses.

Other assets:

     Financing costs related to the issuance of the Company's subordinated
     debentures are being amortized over the life of the debentures and are
     included in other assets.



                                                                              66
<PAGE>   67
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising costs:

     The Bank follows the policy of charging the costs of advertising to expense
     as incurred.

Income taxes:

     Deferred taxes are provided on the liability method whereby deferred tax
     assets are recognized for deductible temporary differences and deferred tax
     liabilities are recognized for taxable temporary differences. Temporary
     differences are the differences between the reported amounts of assets and
     liabilities and their tax basis. Deferred tax assets are reduced by a
     valuation allowance when, in the opinion of management, it is more likely
     than not that some portion of the deferred tax assets will not be realized.
     Deferred tax assets and liabilities are adjusted for the effects of changes
     in tax laws and rates on the date of enactment. The Company and its
     subsidiaries file a consolidated federal income tax return.

Earnings per common share:

     Basic earnings per share represents income available to common stockholders
     divided by the weighted-average number of common shares outstanding during
     the period. Diluted earnings per share reflects additional common shares
     that would have been outstanding if dilutive potential common shares had
     been issued, as well as any adjustment to income that would result from the
     assumed issuance. Potential common shares that may be issued by the Company
     relate solely to outstanding stock options, and are determined using the
     treasury stock method. All per share amounts have been adjusted to give
     retroactive effect to stock dividends declared.

Stock options:

     Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
     Stock-Based Compensation," contains a fair value-based method for valuing
     stock-based compensation that entities may use, which measures compensation
     cost at the grant date based on the fair value of the award. Compensation
     is then recognized over the service period, which is usually the vesting
     period. Alternatively, the standard permits entities to continue accounting
     for employee stock options and similar equity instruments under Accounting
     Principles Board (APB) Opinion 25, "Accounting for Stock Issued to
     Employees." Entities that continue to account for stock options using APB
     Opinion 25 are required to make pro forma disclosures of net income and
     earnings per share, as if the fair value-based method of accounting defined
     in SFAS No. 123 had been applied. The Company has elected to account for
     its employee stock option plans under APB Opinion 25. Accordingly, no
     compensation cost has been recognized in the statement of income for
     options granted.

Derivative instruments:

     In June 1998, the Financial Accounting Standards Board issued Statement No.
     133 (as amended by Statement Nos. 137 and 138), "Accounting for Derivative
     Instruments and Hedging Activities." This Statement and its amendments
     establishes accounting and reporting standards for derivative instruments
     and hedging activities, including certain derivative instruments embedded
     in other contracts, and requires that a company recognize all derivatives
     as assets or liabilities in the balance sheet and measure them at fair
     value. The Statement requires that changes in the fair value of derivative
     be recorded each period in current earnings or other comprehensive income,
     depending on whether a derivative is designated as part of a hedge
     transaction and, if it is the type of hedge transaction. The Company chose
     to adopt the Statement as of October 1, 2000 and, as permitted by the
     Statement, the Company transferred securities with an amortized cost of
     approximately $ 102,100,000 and net unrealized losses of approximately $
     4,900,000 from held to maturity to available for sale. Other than the
     transfer of securities, the adoption of the Statement had no material
     effect on the Company's financial statements.

Off-balance sheet financial instruments:

     In the ordinary course of business, the Bank has entered into off-balance
     sheet financial instruments consisting of commitments to extend credit,
     letters of credit and commitments to sell loans. Such financial instruments
     are recorded in the consolidated balance sheets when they are funded.

Trust assets:

     Assets held in a fiduciary capacity for customers are not included in the
     consolidated financial statements since such items are not assets of the
     Bank. Trust income is recorded on the accrual method.




                                                                              67
<PAGE>   68
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Segment reporting:

     The Company's banking subsidiary acts as an independent community financial
     services provider, and offers traditional banking and related financial
     services to individual, business and government customers. Through its
     branch and automated teller machine network, the Bank offers a full array
     of commercial and retail financial services, including the taking of time,
     savings and demand deposits; the making of commercial, consumer and
     mortgage loans; and the providing of other financial services. The Bank
     also performs personal, corporate, pension and fiduciary services through
     its Trust Department.

     Management does not separately allocate expenses, including the cost of
     funding loan demand, between the commercial, retail, trust and mortgage
     banking operations of the Company, nor its subsidiaries. As such, discrete
     financial information is not available and segment reporting would not be
     meaningful.

New accounting standard:

     In September 2000, the Financial Accounting Standards Board issued
     Statement No. 140, "Accounting for Transfers and Servicing of Financial
     Assets and Extinguishments of Liabilities." This Statement replaces SFAS
     No. 125 of the same name. It revises the standards of securitizations and
     other transfers of financial assets and collateral and requires certain
     disclosures, but carries over most of the provisions of SFAS No. 125
     without reconsideration. SFAS No. 140 is effective for transfers and
     servicing of financial assets and extinguishments of liabilities occurring
     after March 31, 2001. The statement is effective for recognition and
     reclassification of collateral and for disclosures relating to
     securitization transactions and collateral for fiscal years ending after
     December 15, 2000. This Statement is to be applied prospectively with
     certain exceptions. Other than these exceptions, earlier or retroactive
     application of its accounting provision is not permitted. The adoption of
     the Statement is not expected to have a significant impact on the Company.

2
MERGER

The consolidated financial statements give retroactive effect to the pooling of
interests merger of BCB Financial Services Corporation (BCB) and Heritage
Bancorp, Inc. (Heritage) as more fully described below. As a result, the
consolidated statements of income, stockholders' equity and cash flows for the
year ended December 31, 1998 are presented as if the combining companies had
been consolidated since January 1, 1998.

On May 1, 1998, the Company was formed upon the completion of the merger between
BCB and Heritage. The Company issued approximately 9,680,000 shares of common
stock to the stockholders of BCB and Heritage. BCB stockholders received 1.3335
shares of the Company's common stock for each outstanding share and Heritage
stockholders received 1.05 shares of the Company's common stock for each
outstanding share. Cash was paid for fractional share interests. The merger was
accounted for as a pooling of interests by the Company. Merger costs of
approximately $ 1,963,000, consisting primarily of professional fees and related
transaction costs, were expensed in connection with the merger.

The results of operations of the separate entities for periods prior to the
combination are as follows:
<TABLE>
<CAPTION>

                                                                                       BCB         Heritage      Combined
                                                                                   ----------------------------------------
                                                                                                (In Thousands)
    <S>                                                                            <C>           <C>           <C>

    For the period from January 1, 1998 to May 1, 1998:
         Net interest income                                                       $     4,849   $     5,450   $     10,299
         Net income                                                                        899         1,646          2,545


</TABLE>


                                                                              68
<PAGE>   69
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




3
SPECIAL CHARGES

On November 17, 1999, the Bank purchased 100% of the stock of a mortgage company
in Virginia for approximately $ 1,500,000. In April 2000, the Company announced
a plan to restructure the Company, which included plans to close the mortgage
company. On May 12, 2000, the Company ceased the operations of the mortgage
company and recorded the related exit costs, which included the write-off of
goodwill and accruals related to satisfaction of contractual obligations,
severance and other employee related matters.

In addition, the Company's restructuring plans included closing or selling
branch locations, closing certain loan offices and the termination of employment
agreements for certain executives. On December 8, 2000, the Company sold the
assets and approximately $ 8,000,000 of deposits of a branch location to another
financial institution. The Company recognized a gain of approximately $ 585,000
on this transaction which is included in other income.

For the year ended December 31, 2000, special charges and accruals related to
the Company's restructuring plans are as follows:
<TABLE>
<CAPTION>

                                                                                                                Remaining
                                                                 Special                                      Liability As Of
                                                                 Charges           Non-Cash           Cash     December 31,
                                                                 Incurred         Writedowns        Payments       2000
                                                               ---------------------------------------------------------
                                                                                     (In Thousands)
    <S>                                                        <C>           <C>             <C>           <C>
    Severance and employee related obligations                 $     3,711   $           -   $        774  $       2,937
    Exit costs related to mortgage company                           2,027             750            263          1,014
    Other                                                            1,180               3            248            929
                                                               ---------------------------------------------------------
                                                               $     6,918             753          1,285  $       4,880
                                                               =========================================================
</TABLE>

Other special charges consist primarily of costs associated with the closing of
certain loan offices and related professional fees.

Special charges for the year ended December 31, 1999 consisted of severance
obligations from change in control provisions for former Heritage officers
totaling $ 2,027,000.






                                                                              69
<PAGE>   70
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




4
SECURITIES

The amortized cost and approximate fair value of securities at December 31 were
as follows:
<TABLE>
<CAPTION>

                                                                                     GROSS           GROSS
                                                                    AMORTIZED      UNREALIZED     UNREALIZED         FAIR
                                                                      COST           GAINS          LOSSES          VALUE
                                                                ----------------------------------------------------------
                                                                                       (In Thousands)
    <S>                                                         <C>            <C>             <C>            <C>
    AVAILABLE FOR SALE SECURITIES:
         DECEMBER 31, 2000:
             U.S. Government agencies and
              corporations                                      $     89,300   $       2,413   $       (213)  $     91,500
             States and political subdivisions                       196,903           1,681         (4,030)       194,554
             Other securities                                         19,077              71           (263)        18,885
             Mortgage-backed and asset-backed securities              59,874             492           (262)        60,104
                                                                ----------------------------------------------------------
                                                                $    365,154   $       4,657   $     (4,768)  $    365,043
                                                                ==========================================================
         DECEMBER 31, 1999:
             U.S. Treasury securities                           $     29,464   $           -   $       (209)  $     29,255
             U.S. Government agencies and corporations               130,251               -         (7,870)       122,381
             States and political subdivisions                       190,937             611        (16,840)       174,708
             Other securities                                         46,945               -           (270)        46,675
             Mortgage-backed and asset-backed securities
                                                                      67,570             312         (2,728)        65,154
                                                                ----------------------------------------------------------
                                                                $    465,167   $         923   $    (27,917)  $    438,173
                                                                ==========================================================
    HELD TO MATURITY SECURITIES:
         DECEMBER 31, 2000:
             U.S. Government agencies and
               corporations                                     $    121,658   $           -   $     (4,308)  $    117,350
             States and political subdivisions                        37,193               7           (898)        36,302
             Mortgage-backed and asset-backed
               securities                                              9,171           1,146              -         10,317
                                                                ----------------------------------------------------------
                                                                $    168,022   $       1,153   $     (5,206)  $    163,969
                                                                ==========================================================
         DECEMBER 31, 1999:
             U.S. Government agencies and
                corporations                                    $    121,657   $           -   $    (12,194)  $    109,463
             States and political subdivisions                       139,505               -        (13,721)       125,784
             Mortgage-backed and asset-backed
                securities                                               598               -            (41)           557
             Other                                                        25               -              -             25
                                                                ----------------------------------------------------------
                                                                $    261,785   $           -   $    (25,956)  $    235,829
                                                                ==========================================================
</TABLE>

Other available for sale securities are principally comprised of equity
securities in Pennsylvania community banks, Federal Home Loan Bank and Federal
Reserve Bank stock.






                                                                              70
<PAGE>   71
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




4
SECURITIES (CONTINUED)

During 2000 the Company transferred securities with an amortized cost of
approximately $ 10,860,000 from available for sale to held to maturity. These
securities were transferred at fair value at the date of transfer, which was $
1,688,000 less than amortized cost. The difference of $ 1,114,000, net of taxes
of $ 574,000, was reflected in accumulated other comprehensive income and is
being amortized over the remaining contractual life of the respective
securities. The Company also transferred securities with an amortized cost of
approximately $ 97,824,000 from available for sale to held to maturity in 1999.
The amortized cost approximated the fair market value, therefore, there was no
adjustment to other comprehensive income for the 1999 transfer.

The amortized cost and fair value of securities as of December 31, 2000, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because the securities may be called or prepaid with or
without any penalties.

<TABLE>
<CAPTION>

                                                                     AVAILABLE FOR SALE              HELD TO MATURITY
                                                                ----------------------------------------------------------
                                                                AMORTIZED COST       FAIR      AMORTIZED COST       FAIR
                                                                                     VALUE                          VALUE
                                                                ----------------------------------------------------------
                                                                                       (IN THOUSANDS)
<S>                                                             <C>            <C>             <C>            <C>
    Due in one year or less                                     $          -   $           -   $          -   $          -
    Due after one year through five years                             15,000          15,360              -              -
    Due after five years through ten years                            60,700          62,730              -              -
    Due after ten years                                              210,503         207,964        158,851        153,652
    Mortgage-backed and asset-backed securities                       59,874          60,104          9,171         10,317
    Other securities                                                  19,077          18,885              -              -
                                                                ----------------------------------------------------------
                                                                $    365,154   $     365,043   $    168,022   $    163,969
                                                                ==========================================================
</TABLE>

Gross gains of $ 964,000 and gross losses of $ 7,994,000 were realized on the
sales of available for sale securities in 2000. Gross gains of $ 398,000 and
gross losses of $ 494,000 were realized on the sales of available for sale
securities in 1999. Gross gains of $ 5,121,000 and gross losses of $ 792,000
were realized on the sales of available for sale securities in 1998.

Securities with an amortized cost of $ 193,816,000 and $ 432,515,000 at December
31, 2000 and 1999, respectively, were pledged as collateral on public deposits
and for other purposes as required or permitted by law.





                                                                              71
<PAGE>   72
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




5
LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

The components of loans receivable at December 31, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>

                                                                                                  2000            1999
                                                                                             -----------------------------
                                                                                                     (In Thousands)
<S>                                                                                          <C>             <C>
    Commercial                                                                               $     433,365   $     337,751
    Mortgage                                                                                       196,313         182,137
    Consumer                                                                                       120,651          92,764
    Construction                                                                                    87,576          52,251
                                                                                             -----------------------------

                                                                                                   837,905         664,903
    Less:
         Allowance for loan losses                                                                   9,671           7,002
         Net deferred loan fees and (costs)                                                           (442)           (824)
                                                                                             -----------------------------
                                                                                             $     828,676   $     658,725
                                                                                             =============================
</TABLE>

Changes in the allowance for loan losses for the years ended December 31, 2000,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                                                         2000         1999          1998
                                                                                      -------------------------------------
                                                                                                  (In Thousands)

    <S>                                                                               <C>          <C>          <C>
    Balance, beginning                                                                $    7,002   $    7,222   $     5,738
         Provision for loan losses                                                         4,625        1,217         2,210
         Loans charged off                                                                (2,355)      (1,962)         (949)
         Recoveries                                                                          399          525           223
                                                                                      -------------------------------------
    Balance, ending                                                                   $    9,671   $    7,002   $     7,222
                                                                                      =====================================
</TABLE>

Total impaired loans at December 31, 2000 and 1999 were $4,288,000 and
$2,857,000, respectively. Impaired loans not requiring an allowance for loan
losses were $2,001,000 and $1,500,000 at December 31, 2000 and 1999,
respectively. Impaired loans requiring an allowance for loan losses were
$2,287,000 and $1,357,000 at December 31, 2000 and 1999, respectively. At
December 31, 2000 and 1999, the related allowance for loan losses associated
with those loans was $832,000 and $900,000, respectively. For the years ended
December 31, 2000, 1999 and 1998, average impaired loans were $4,233,000,
$4,100,000 and $5,387,000, respectively. Interest income on impaired loans of
$120,000, $83,000 and $86,000 was recognized for cash payments received in 2000,
1999 and 1998, respectively.





                                                                              72
<PAGE>   73
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




6
PREMISES AND EQUIPMENT

Components of premises and equipment at December 31, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>

                                                                                                       2000           1999
                                                                                                ---------------------------
                                                                                                       (In Thousands)
    <S>                                                                                         <C>            <C>
    Land                                                                                        $      3,713   $      3,783
    Building and improvements                                                                         27,793         26,024
    Furniture, fixtures and equipment                                                                 16,309         14,304
    Leasehold improvements                                                                             2,508          2,599
    Construction in progress                                                                             259          1,442
                                                                                                ---------------------------
                                                                                                      50,582         48,152
    Less accumulated depreciation                                                                     14,473         11,675
                                                                                                ---------------------------
                                                                                                $     36,109   $     36,477
                                                                                                ===========================
</TABLE>

Included in buildings and improvements above are approximately $9,000,000 and
$9,400,000 of leased property under capital leases as of December 31, 2000 and
1999, respectively.


7
DEPOSITS

The components of deposits at December 31, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>

                                                                                                   2000            1999
                                                                                                ---------------------------
                                                                                                      (In Thousands)
    <S>                                                                                       <C>            <C>
    Demand, non-interest bearing                                                              $    152,817   $    122,283
    Demand, interest bearing                                                                       158,075        137,352
    Savings                                                                                        404,723        327,422
    Time, $ 100,000 and over                                                                        99,974         61,740
    Time, other                                                                                    494,735        375,719
                                                                                                ---------------------------
                                                                                              $  1,310,324   $  1,024,516
                                                                                                ===========================
</TABLE>

At December 31, 2000, the scheduled maturities of time deposits are as follows
(in thousands):
<TABLE>
<CAPTION>

    <S>                                                                                                       <C>
    2001                                                                                                      $    384,615
    2002                                                                                                           154,720
    2003                                                                                                            39,078
    2004                                                                                                             4,762
    2005                                                                                                             3,776
    Thereafter                                                                                                       7,758
                                                                                                              ------------
                                                                                                              $    594,709
                                                                                                              ============
</TABLE>





                                                                              73
<PAGE>   74
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




8
OTHER BORROWED FUNDS AND LONG-TERM DEBT

Other borrowed funds:
     The Bank maintains U.S. Treasury tax and loan note option accounts for the
     deposit of withholding taxes, corporate income taxes and certain other
     payments to the federal government. Deposits are subject to withdrawal and
     are evidenced by an open-ended interest-bearing note. Borrowings under
     these note option accounts were $ 3,478,000 and $ 4,854,000 at December 31,
     2000 and 1999, respectively.

     The Bank enters into agreements with customers as part of its cash
     management services where the Bank sells securities to the customer
     overnight with the agreement to repurchase them at par. Securities sold
     under these agreements generally mature one day from the transaction date.
     The securities underlying all of these agreements were under the Bank's
     control. In addition, at December 31, 1999, the Bank had repurchase
     agreements with other institutions in the amount of $ 56,771,000.
     Securities sold under agreements to repurchase are summarized as follows
     (in thousands):
<TABLE>
<CAPTION>

                                                                                                  2000          1999
                                                                                              -------------------------
         <S>                                                                                  <C>           <C>
         Outstanding balance at December 31                                                   $    15,198   $    66,905
         Average balance during the year                                                           40,154        24,243
         Average interest rate during the year                                                       5.90%         4.99%
         Maximum month-end balance during the year                                                111,525        66,905
</TABLE>

     The Bank had other short-term borrowings from the Federal Home Loan Bank at
     December 31, 1999 in the amount of $ 202,675,000, which were due in 2000,
     at an average interest rate of 5.30%. There were no other short-term
     borrowings from the Federal Home Loan Bank at December 31, 2000.

Long-term debt:
     Long-term debt consisted of the following at December 31, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>

                                                                                                   2000          1999
                                                                                              -------------------------
         <S>                                                                                  <C>           <C>
         Notes with the Federal Home Loan Bank (FHLB):
              10 year/2 year term note due September 2008 at 4.62% fixed rate                 $         -   $    25,000
              10 year/5 year term note due November 2008 at 4.75% fixed rate                       10,000        10,000
              10 year/5 year term note due December 2008 at 4.92% fixed rate                       25,000        25,000
              10 year/5 year term note due December 2008 at 4.815% fixed rate                      25,000        25,000
                                                                                              -------------------------
                                                                                              $    60,000   $    85,000
                                                                                              =========================
</TABLE>

     These notes contain a convertible option which allows the FHLB, at
     quarterly intervals, to change the note to an adjustable-rate advance at
     three-month LIBOR (6.40% at December 31, 2000) plus 10 to 15 basis points.
     If the notes are converted, the option allows the Bank to put the funds
     back to the FHLB at no charge. The years/years refer to the maturity of the
     note and the term until the first convertible date.





                                                                              74
<PAGE>   75
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




8
OTHER BORROWED FUNDS AND LONG-TERM DEBT (CONTINUED)

Long-term debt (continued):
     The Bank's maximum borrowing capacity with the Federal Home Loan Bank is
     approximately $ 402,000,000 at December 31, 2000 of which $ 60,000,000 was
     outstanding. Advances from the Federal Home Loan Bank are secured by
     qualifying assets of the Bank.

Subordinated debentures:
     In December 1999, the Company issued $ 10,000,000 of 9.625% junior
     subordinated deferrable interest debentures (the debentures) to MBNK
     Capital Trust I (the Trust), a Delaware business trust, in which the
     Company owns all of the common equity. The debentures are the sole asset of
     the Trust. The Trust issued $ 10,000,000 preferred securities to investors.
     The Company's obligations under the debentures and related documents, taken
     together, constitute a full and unconditional guarantee by the Company of
     the Trust's obligations under the preferred securities. The preferred
     securities are redeemable by the Company on or after December 31, 2004, or
     earlier in the event of certain adverse tax, Investment Company Act, or
     bank regulatory developments. The preferred securities must be redeemed
     upon maturity of the debentures on December 31, 2029.


9
INCOME TAXES

The provision for federal income taxes (benefits) for the years ended December
31, 2000, 1999 and 1998 consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                           2000         1999          1998
                                                                                      --------------------------------------
    <S>                                                                               <C>          <C>          <C>
    Current                                                                           $   (2,958)  $    1,903   $     4,297
    Deferred                                                                              (4,050)      (4,477)         (586)
                                                                                      --------------------------------------
                  Provision for income taxes (benefits)                               $   (7,008)  $   (2,574)  $     3,711
                                                                                      ======================================
</TABLE>

A reconciliation of the statutory income tax to the income taxes (benefits) in
the consolidated statements of income for the years ended December 31, 2000,
1999 and 1998 is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                           2000         1999          1998
                                                                                      --------------------------------------
    <S>                                                                               <C>          <C>          <C>
    Federal income tax at statutory rate                                              $   (3,360)  $    1,827   $     5,254
    Tax-exempt interest                                                                   (4,304)      (5,026)       (1,891)
    Disallowance of interest expense                                                         559          596           270
    Other                                                                                     97           29            78
                                                                                      --------------------------------------
                                                                                     $   (7,008)  $   (2,574)  $     3,711
                                                                                      ======================================
</TABLE>

The income tax provision includes $ (2,390,000) in 2000, $ (33,000) in 1999 and
$ 1,472,000 in 1998 of income taxes (benefits) related to net realized
securities gains (losses).





                                                                              75
<PAGE>   76
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




9
INCOME TAXES (CONTINUED)

The net deferred tax asset consisted of the following components as of December
31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                                                          2000        1999
                                                                                                      ----------------------
                                                                                                           (In Thousands)
    <S>                                                                                              <C>         <C>
    Deferred tax assets:
         Allowance for loan losses                                                                   $    3,288  $     2,022
         Unrealized losses on securities                                                                    612        9,448
         Tax credit carryforwards                                                                         5,364        4,792
         Special charges                                                                                  1,724            -
         Interest on non-accrual loans                                                                      210          176
         Deferred compensation                                                                              185           45
         Other                                                                                              142           37
                                                                                                      ----------------------
                  Total deferred tax assets                                                              11,525       16,520
                                                                                                      ----------------------

    Deferred tax liabilities:
         Premises and equipment                                                                             526          662
         Prepaid expenses                                                                                     -           37
         Loan origination fees and costs                                                                    146          182
                                                                                                      ----------------------
                  Total deferred tax liabilities                                                            672          881
                                                                                                      ----------------------
                  Net deferred tax asset                                                              $  10,853  $    15,639
                                                                                                      ======================
</TABLE>

10
EMPLOYEE BENEFIT PLANS

The Company has a 401(k) plan with profit sharing provisions which covers
employees who meet the eligibility requirements of having worked 1,000 hours in
a plan year and have attained the age of 21. Participants are permitted to
contribute from 1% to 15% of compensation. The Company will match the
participant's contributions up to a maximum percentage. The expense related to
this plan was $ 842,000, $ 749,000 and $ 503,000 for the years ended December
31, 2000, 1999 and 1998, respectively.

In May 1998, the Bank terminated a noncontributory pension plan covering
eligible employees. The plan assets in excess of the projected benefit
obligation were allocated to the plan's eligible participants and the prepaid
pension cost of $ 299,000 was charged to expense.





                                                                              76
<PAGE>   77
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




11
COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available for sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income (loss).

The components of other comprehensive income (loss) and related tax effects are
as follows:
<TABLE>
<CAPTION>

                                                                                           Years Ended December 31,
                                                                                        2000         1999         1998
                                                                                     --------------------------------------
                                                                                                (In Thousands)
   <S>                                                                               <C>         <C>           <C>
   Unrealized holding gains (losses) on available for sale
       securities                                                                    $    19,853 $   (28,966)  $      (589)
   Unrealized holding losses on securities transferred to held to
       maturity                                                                           (1,688)          -             -
   Reclassification adjustment for (gains) losses realized in income                       7,030          96        (1,236)
                                                                                     --------------------------------------
                 Net unrealized gains (losses)                                            25,195     (28,870)       (1,825)

   Tax effect                                                                              8,836     (10,161)         (614)
                                                                                     --------------------------------------
                 Net of tax amount                                                   $    16,359 $   (18,709)  $    (1,211)
                                                                                     ======================================
</TABLE>

12
STOCK OPTIONS AND GRANTS

The Company has various qualified and non-qualified stock option plans for
employees and non-employee directors. Approximately 865,000 shares of common
stock were made available for issuance under these plans. The option prices
under the plans are the fair market value of the common stock on the date the
options are granted and an option's maximum term is ten years. Options are
generally exercisable at the time they are granted up to two years after the
date of grant.

A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
<TABLE>
<CAPTION>

                                                            2000                     1999                     1998
                                                  ------------------------------------------------------------------------
                                                              WEIGHTED                 Weighted                 Weighted
                                                               AVERAGE                  Average                  Average
                                                              EXERCISE                 Exercise                 Exercise
                                                  OPTIONS       PRICE      Options       Price      Options       Price
                                                  ------------------------------------------------------------------------

    <S>                                           <C>        <C>            <C>       <C>            <C>       <C>
    Outstanding, beginning of year                 541,548   $    14.24     326,020   $    12.27     301,178   $      8.33
    Granted                                        263,769         8.11     330,000        15.35     106,268         19.43
    Exercised                                      (20,723)        6.86     (61,214)        7.67     (62,144)         7.26
    Forfeited                                     (185,909)       13.97     (53,258)       16.84     (19,282)         9.05
                                                  ------------------------------------------------------------------------
    Outstanding, end of year                       598,685   $    11.85     541,548   $    14.24     326,020   $     12.27
                                                  ========================================================================
    Exercisable at December 31, 2000               506,457   $    12.30
                                                  =====================
</TABLE>

Stock options outstanding at December 31, 2000 are exercisable at prices ranging
from $ 5.81 to $ 19.92 a share. The weighted-average remaining contractual life
of those options is approximately 8 years.




                                                                              77
<PAGE>   78
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




12
STOCK OPTIONS AND GRANTS (CONTINUED)

Had compensation cost for stock options granted in 2000, 1999 and 1998 been
determined based on the fair value at the grant dates consistent with the
provisions of SFAS No. 123, the Company's net income and earnings per share for
the years ended December 31, 2000, 1999 and 1998 would have been reduced to the
pro forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                                       2000          1999          1998
                                                                                   ----------------------------------------
    <S>                                                                            <C>           <C>           <C>
    Net income:
         As reported                                                               $    (2,875)  $     7,947   $     11,743
                                                                                   ========================================
         Pro forma                                                                 $    (3,278)  $     6,993   $     11,475
                                                                                   ========================================
    Basic earnings per share:
         As reported                                                               $     (0.27)  $      0.76   $       1.13
                                                                                   ========================================
         Pro forma                                                                 $     (0.31)  $      0.67   $       1.11
                                                                                   ========================================
    Diluted earnings per share:
         As reported                                                               $     (0.27)  $      0.76   $       1.12
                                                                                   ========================================
         Pro forma                                                                 $     (0.31)  $      0.67   $       1.09
                                                                                   ========================================
</TABLE>

The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions for 2000,
1999 and 1998, respectively: risk-free interest rate of 6.1%, 5.6% and 4.6%,
volatility .34, .23 and .26, dividend yield of 5.4%, 4.0% and 3.0%, and an
expected life of 7.0, 7.8 and 7.8 years. The weighted-average fair value of
options granted was $1.47 per share in 2000, $4.36 per share in 1999 and $5.07
per share in 1998.


13
COMMITMENTS AND CONTINGENCIES

Lease commitments and total rental expense:
     The Bank rents facilities under lease agreements which expire at various
     dates through 2024, and require various minimum annual rentals. The total
     minimum rental commitments at December 31, 2000 are as follows:

        During the year ending December 31 (in thousands):
<TABLE>
<CAPTION>

             <S>                                                                                                <C>
             2001                                                                                               $     1,385
             2002                                                                                                     1,418
             2003                                                                                                     1,419
             2004                                                                                                     1,324
             2005                                                                                                     1,007
             Later years                                                                                             20,247
                                                                                                                -----------
                                                                                                                $    26,800
                                                                                                                ===========
</TABLE>

     The total rental expense included in the income statements for the years
     ended December 31, 2000, 1999 and 1998 is $1,476,000, $1,254,000 and
     $388,000, respectively.





                                                                              78
<PAGE>   79
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




13
COMMITMENTS AND CONTINGENCIES (CONTINUED)

Contingencies:
     The Company is a defendant in various lawsuits wherein various amounts are
     claimed. In the opinion of the Company's management, these suits should not
     result in judgments which, in the aggregate, would have a material adverse
     effect on the Company's consolidated financial statements.


14
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and letters of
credit. Those instruments involve, to varying degrees, elements of credit risk
and interest rate risk in excess of the amount recognized in the balance sheets.

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

A summary of the contractual amount of the Bank's financial instrument
commitments at December 31, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                                       2000          1999
                                                                                                 --------------------------
    <S>                                                                                          <C>           <C>
    Commitments to grant loans                                                                   $    90,000   $     56,000
    Unfunded commitments under lines of credit                                                       169,000        113,000
    Outstanding letters of credit                                                                      5,000          9,000
</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.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of credit, is based on management's credit evaluation.
Collateral held varies but may include personal or commercial real estate,
accounts receivable, inventory and equipment.

Outstanding letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.


15
CONCENTRATION OF CREDIT RISK

The Bank grants commercial, residential and consumer loans to customers
primarily located in eastern Pennsylvania. The concentrations of credit by type
of loan are set forth in Note 5. Although the Bank has a diversified loan
portfolio, its debtors' ability to honor their contracts is influenced by the
region's economy.





                                                                              79
<PAGE>   80
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




16
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS

The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with their executive officers
and directors and their related interests on the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others. At December 31, 2000 and 1999, these persons were
indebted to the Bank for loans totaling $ 8,797,000 and $ 9,581,000,
respectively. During 2000, $ 3,184,000 of new loans were made, repayments
totaled $ 2,315,000 and other changes were $ 1,653,000. Other changes consisted
of loans to persons no longer affiliated with the Company as an executive
officer or director.


17
REGULATORY MATTERS AND STOCKHOLDERS' EQUITY

The Bank is required to maintain average reserve balances with the Federal
Reserve Bank or in vault cash. At December 31, 2000 and 1999, required reserves
were approximately $ 5,445,000 and $ 2,512,000, respectively.

The Company and its Bank subsidiary are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and its Bank subsidiary must meet specific capital guidelines that
involve quantitative measures of its assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the maintenance of minimum amounts and ratios (set forth below) of total
and Tier I capital (as defined in the regulations) to risk-weighted assets, and
of Tier I capital to average assets. Management believes, as of December 31,
2000, that the Company and its bank subsidiary meet all capital adequacy
requirements to which they are subject.

As of December 31, 2000, the most recent notification from the Bank's primary
regulator categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events since
that notification that management believes have changed the Bank's category.





                                                                              80
<PAGE>   81
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




17
REGULATORY MATTERS AND STOCKHOLDERS' EQUITY (CONTINUED)

The actual capital amounts and ratios are also presented in the table below:
<TABLE>
<CAPTION>

                                                                                                          To Be Well
                                                                                  For Capital          Capitalized Under
                                                                                    Adequacy           Prompt Corrective
                                                            Actual                  Purposes           Action Provisions
                                                       ------------------------------------------------------------------
                                                       Amount       Ratio       Amount      Ratio       Amount      Ratio
                                                       ------------------------------------------------------------------
                                                                            (Dollars In Thousands)
     <S>                                           <C>             <C>       <C>            <C>      <C>
     AS OF DECEMBER 31, 2000:
          Total capital (to risk weighted assets):
              Company                              $    105,334    11.18 %   $     75,374   8.00  %            N/A
              Bank                                      101,366    10.76           75,358   8.00     $     94,198  10.00 %
          Tier I capital (to risk weighted assets):
              Company                                    95,663    10.15           37,687   4.00               N/A
              Bank                                       91,695     9.73           37,679   4.00           56,519  6.00
          Tier I capital (to average assets):
              Company                                    95,633     6.46           59,249   4.00               N/A
              Bank                                       91,695     6.21           59,067   4.00           73,833  5.00

     AS OF DECEMBER 31, 1999:
          Total capital (to risk weighted assets):
              Company                              $    111,747    14.28 %   $     62,172   8.00  %            N/A
              Bank                                      104,435    13.41           62,320   8.00     $     77,899  10.00 %
          Tier I capital (to risk weighted assets):
              Company                                   104,746    13.38           31,086   4.00               N/A
              Bank                                       97,434    12.51           31,160   4.00           46,740  6.00
          Tier I capital (to average assets):
              Company                                   104,746     7.43           56,363   4.00               N/A
              Bank                                       97,434     6.94           56,142   4.00           70,178  5.00
</TABLE>

State and federal banking laws and regulations limit the amount of dividends
that may be paid by the Bank and the Company. Under an agreement with the
Company's regulatory agencies, the regulatory agencies must be notified of all
Company and Bank dividends and the dividends must be in compliance with
applicable laws and regulations or be approved by the regulatory agencies.
Additionally, any new indebtedness of the Company, or the purchase of treasury
stock by the Company, requires approval by the regulatory agencies. Under
Federal Reserve regulations, the Bank is limited as to the amount it may lend
affiliates, including the Company, unless such loans are collateralized by
specified obligations.



                                                                              81
<PAGE>   82
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




18
--------------------------------------------------------------------------------
EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                           2000            1999           1998
                                                         ---------------------------------------
                                                           (In Thousands, Except Per Share Data)

<S>                                                      <C>             <C>            <C>
Net income (loss) applicable to common stock             $ (2,875)       $  7,947       $ 11,743
                                                         =======================================
Weighted average common shares outstanding                 10,462          10,414         10,358
Effect of dilutive securities, stock options                   --              77            142
                                                         ---------------------------------------

Weighted average common shares outstanding used to
     calculate diluted earnings per share                  10,462          10,491         10,500
                                                         =======================================
Basic earnings (loss) per share                          $  (0.27)       $   0.76       $   1.13
                                                         =======================================
Diluted earnings (loss) per share                        $  (0.27)       $   0.76       $   1.12
                                                         =======================================
</TABLE>

19
--------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS

Management uses its best judgment in estimating the fair value of the Company's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates herein are not necessarily indicative of the amounts the Company
could have realized in a sales transaction on the dates indicated. The estimated
fair value amounts have been measured as of their respective year ends, and have
not been reevaluated or updated for purposes of these consolidated financial
statements subsequent to those respective dates. As such, the estimated fair
values of these financial instruments subsequent to the respective reporting
dates may be different than the amounts reported at each year end.

The following information should not be interpreted as an estimate of the fair
value of the entire Company since a fair value calculation is only provided for
a limited portion of the Company's assets and liabilities. Due to a wide range
of valuation techniques and the degree of subjectivity used in making the
estimates, comparisons between the Company's disclosures and those of other
companies may not be meaningful. The following methods and assumptions were used
to estimate the fair values of the Company's financial instruments at December
31, 2000 and 1999:

    Cash, federal funds sold and interest-bearing deposits with banks:
       The carrying amounts reported in the balance sheet for cash and
       short-term instruments approximate those assets' fair values.

    Securities:
       Fair values for securities are based on quoted market prices, where
       available. If quoted market prices are not available, fair values are
       based on quoted market prices of comparable securities.


                                                                              82
<PAGE>   83
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




19
--------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

    Loans receivable:
       For variable-rate loans that reprice frequently and with no significant
       change in credit risk, fair values are based on carrying values. The fair
       values for fixed rate loans are estimated using discounted cash flow
       analyses, using interest rates currently being offered for loans with
       similar terms to borrowers of similar credit quality.

    Mortgage loans held for sale:
       The fair values of the Company's mortgages held for sale are based on
       quoted market prices of similar loans sold.

    Due from mortgage investors:
       The carrying amounts of due from mortgage investors approximate their
       fair values.

    Accrued interest receivable:
       The carrying amounts of accrued interest receivable approximate its fair
       value.

    Deposit liabilities:
       The fair value of demand deposits, savings accounts and certain money
       market accounts is the amount payable on demand at the reporting date.
       The carrying amounts for variable-rate fixed-term money market accounts
       and certificates of deposits approximate their fair values at the
       reporting date. The fair value of fixed-rate certificates of deposit is
       estimated using a discounted cash flow calculation that applies interest
       rates currently being offered for deposits of similar remaining
       maturities.

    Accrued interest payable:
       The carrying amounts of accrued interest payable approximate its fair
       value.

    Other borrowed funds:
       The carrying amounts of short-term borrowings approximate their fair
       values.

    Long-term debt and subordinated debentures:
       The fair values of the Company's long-term debt and subordinated
       debentures are estimated using discounted cash flow analyses, based on
       the Company's current incremental borrowing rates for similar types of
       borrowing arrangements.

    Off-balance sheet instruments:
       The fair values of the Company's commitments to extend credit and
       outstanding letters of credit are estimated using the fees currently
       charged to enter into similar agreements, taking into account the
       remaining terms of the agreements and the counterparties' credit
       standing.


                                                                              83
<PAGE>   84
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




19
--------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The estimated fair value of the Company's financial instruments at December 31,
2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                                 2000                                1999
                                                      --------------------------------------------------------------
                                                        CARRYING        ESTIMATED     Carrying            Estimated
                                                         AMOUNT         FAIR VALUE     Amount             Fair Value
                                                      --------------------------------------------------------------
                                                                              (In Thousands)
<S>                                                   <C>              <C>              <C>              <C>
Financial Assets:
    Cash and due from banks                           $   39,246       $   39,246       $   49,904       $   49,904
    Interest-bearing deposits with banks                  23,784           23,784              114              114
    Federal funds sold                                        --               --              470              470
    Securities available for sale                        365,043          365,043          438,173          438,173
    Securities held to maturity                          168,022          163,969          261,785          235,829
    Loans receivable, net                                828,676          820,068          658,725          656,966
    Mortgage loans held for sale                              --               --            4,854            4,854
    Due from mortgage investors                            1,640            1,640            4,957            4,957
    Accrued interest receivable                           13,381           13,381           13,970           13,970

Financial Liabilities:
    Deposits                                           1,310,324        1,312,234        1,024,516        1,022,333
    Accrued interest payable                               4,254            4,254            6,688            6,688
    Other borrowed funds                                  18,676           18,676          274,434          274,434
    Long-term debt                                        60,000           56,277           85,000           80,526
    Guaranteed preferred beneficial interest in
    Company's subordinated debentures                     10,000            9,880           10,000            9,146

Off-Balance Sheet Financial Instruments:
    Commitments to extend credit                              --               --               --               --
    Outstanding letters of credit                             --               --               --               --
</TABLE>


                                                                              84
<PAGE>   85
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




20
--------------------------------------------------------------------------------
PARENT COMPANY ONLY FINANCIAL INFORMATION

                                 BALANCE SHEETS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,                                                                                      2000           1999
----------------------------------------------------------------------------------------------------------------------------
                                                                                                     (In Thousands)
<S>                                                                                           <C>            <C>
              ASSETS

Cash                                                                                          $        249   $      1,875
Investment in subsidiaries:
     Banking subsidiary                                                                             93,468         83,702
     Non-banking subsidiary                                                                          1,744          1,629
Other assets                                                                                         2,701          2,517
                                                                                             -------------------------------

                                                                                              $     98,162   $     89,723
                                                                                             ===============================
     LIABILITIES AND STOCKHOLDERS' EQUITY

Guaranteed preferred beneficial interest in Company's subordinated debentures                 $     10,000   $     10,000
Other liabilities                                                                                      725            945
                                                                                             -------------------------------

                                                                                                    10,725         10,945

Stockholders' equity                                                                                87,437         78,778
                                                                                             -------------------------------

                                                                                              $     98,162   $     89,723
                                                                                             ===============================
</TABLE>


                              STATEMENTS OF INCOME

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,                                                         2000             1999           1998
----------------------------------------------------------------------------------------------------------------------------
                                                                                            (In Thousands)
<S>                                                                         <C>              <C>             <C>
Dividend income:
     Banking subsidiary                                                     $       4,327    $       7,500   $      3,550
     Non-banking subsidiary                                                            50               --          4,900
Interest and dividend income                                                           60              181            474
Interest expense                                                                     (962)             (61)            --
Other income                                                                          195              127            870
Other expenses                                                                       (398)            (385)        (3,247)
                                                                           -------------------------------------------------

              Income before income tax benefits and equity in
                  undistributed net income (loss) of subsidiaries                   3,272            7,362          6,547

Income tax benefits                                                                  (379)              (4)          (532)
                                                                           -------------------------------------------------

              Income before equity in undistributed net
                  income (loss) of subsidiaries                                     3,651            7,366          7,079
                                                                           -------------------------------------------------

Equity in undistributed net income (loss):
     Banking subsidiary                                                            (6,542)             537          6,464
     Non-banking subsidiary                                                            16               44         (1,800)
                                                                           -------------------------------------------------

                                                                                   (6,526)             581          4,664
                                                                           -------------------------------------------------

              Net income (loss)                                             $      (2,875)   $       7,947   $     11,743
                                                                           =================================================
</TABLE>


                                                                              85
<PAGE>   86
MAIN STREET BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




20
--------------------------------------------------------------------------------
PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)

                            STATEMENTS OF CASH FLOWS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,                                                           2000           1999           1998
----------------------------------------------------------------------------------------------------------------------------
                                                                                             (In Thousands)
<S>                                                                           <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                                        $      (2,875)  $      7,947   $     11,743
     Undistributed net income (loss) of subsidiaries                                  6,526           (581)        (4,664)
     Other                                                                             (402)          (611)        (1,831)
                                                                             -----------------------------------------------

              Net cash provided by operating activities                               3,249          6,755          5,248
                                                                             -----------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Sales of securities available for sale                                              --             --            100
     Additional investments in subsidiaries                                             (50)       (13,000)        (5,000)
                                                                             -----------------------------------------------

              Net cash used in investing activities                                     (50)       (13,000)        (4,900)
                                                                             -----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Pre-merger stock transactions of pooled entities                                    --             --            464
     Guaranteed preferred beneficial interest in Company's subordinated
         debentures                                                                      --         10,000             --
     Proceeds from exercise of stock options                                            142            476            342
     Cash payment for fractional shares in connection with dividend                      --             --            (29)
     Cash dividends                                                                  (4,967)        (5,848)        (5,117)
                                                                             -----------------------------------------------

              Net cash provided by (used in) financing activities                    (4,825)         4,628         (4,340)
                                                                             -----------------------------------------------

              Net decrease in cash                                                   (1,626)        (1,617)        (3,992)

Cash:
     Beginning                                                                        1,875          3,492          7,484
                                                                             -----------------------------------------------

     Ending                                                                   $         249   $      1,875   $      3,492
                                                                             ===============================================
</TABLE>


                                                                              86
<PAGE>   87
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information relating to the directors and executive officers is
incorporated herein by reference to the Company's definitive Proxy Statement to
be used in connection with the Company's 2001 Annual Meeting of Shareholders
(the "Proxy Statement"). Pursuant to Securities and Exchange Commission
regulations, the Company is required to identify the names of persons who failed
to file or filed a late report required under Section 16(a) of the Exchange Act
of 1934, as amended. Generally, the reporting regulations under Section 16(a)
require directors and executive officers to report changes in their ownership in
the Company's stock. Based on the Company's review of copies of such reports
received or written representations from certain directors and executive
officers, the Company believes that, during the fiscal year ended December 31,
2000, all Section 16(a) filing requirements applicable to its executive
officers, directors and control persons were complied with, with the exception
of a Form 4 required to be filed by Mr. Ehrlich in connection with the purchase
of common stock acquired through the exercise of stock options, which was filed
late.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this Item is incorporated herein by
reference to the Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated herein by
reference to the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated herein by
reference to the Proxy Statement.


                                                                              87
<PAGE>   88
                                     PART IV

ITEM 14.  EXHIBITS


a.(1)  Exhibits

         The following exhibits are filed herewith or incorporated by reference
herein as part of this Annual Report:

         3.1      Articles of Incorporation of Main Street Bancorp, Inc.,
                  incorporated herein by reference to Exhibit 3.1 of the
                  Registration Statement No. 333-44697 on Form S-4 of the
                  registrant.

         3.2      Bylaws of Main Street Bancorp, Inc., as amended.

         10.1     Executive Employment Agreement, dated August 13, 1999, among
                  Main Street Bancorp, Inc., Main Street Bank and Richard A.
                  Ketner, incorporated herein by reference to Exhibit 10.3 of
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1999.


         10.2     Deferred Compensation Agreement, dated October 14, 1999 by and
                  between Main Street Bancorp, Inc., and Richard A. Ketner,
                  incorporated herein by reference to Exhibit 10.8 of the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1999.

         10.3     Executive Employment Agreement, dated November 1, 2000, by and
                  among Main Street Bancorp, Inc., Main Street Bank and Brian M.
                  Hartline, President and Chief Executive Officer, incorporated
                  herein by reference to Exhibit 10.4 of the Company's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 2000.

         10.4     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Andrew
                  J. Rothermel, Executive Vice President and General Counsel.


                                                                              88
<PAGE>   89
         10.5     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Robert
                  J. Smik, Executive Vice President and Chief of Operations.

         10.6     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Robert
                  A. Kuehl, Executive Vice President and Chief Financial
                  Officer.

         21.1     List of Subsidiaries of the Company, included herein.

         23.1     Consent of Beard Miller Company LLP, independent auditors.



a.(2) Financial Statement Schedules

                   None.

a.(3) Reports on Form 8-K

                  (1)      On October 30, 2000, the Company filed a Current
                           Report on Form 8-K, dated October 24, 2000, to report
                           information under item 5. No financial statements
                           were filed with the Current Report.

                  (2)      On November 17, 2000, the Company filed a Current
                           Report on Form 8-K, dated November 14, 2000, to
                           report information under item 5. The Company's third
                           quarter financial statements were filed as part of
                           the Current Report.


                                                                              89
<PAGE>   90
                                                     SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                     MAIN STREET BANCORP, INC.

                                                     By:/s/Brian M. Hartline
                                                        ------------------------
                                                        Brian M. Hartline
                                                        President and CEO

March 27, 2001

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

<TABLE>
<CAPTION>
      Signature                          Title                   Date
      ---------                          -----                   ----
<S>                                 <C>                        <C>
/s/Brian M. Hartline                Director, President        March 27, 2001
-----------------------------       and CEO (Principal
Brian M. Hartline                   Executive Officer)


/s/Robert A. Kuehl                  Executive V.P./            March 27, 2001
-----------------------------       CFO (Principal
Robert A. Kuehl                     Financial Officer)


/s/Donna L. Rickert                 Sr. V.P./Controller        March 27, 2001
-----------------------------       (Principal Accounting
Donna L. Rickert, C.P.A.            Officer)


/s/                                 Chairman of the Board      March 27, 2001
-----------------------------       and Director
Ezekial S. Ketchum



/s/Albert L. Evans, Jr.             Vice Chairman and          March 27, 2001
-----------------------------       Director
Albert L. Evans, Jr.



/s/Richard D. Biever                Director                   March 27, 2001
-----------------------------
Biever, Richard D.


/s/Richard T. Fenstermacher         Director                   March 27, 2001
-----------------------------
Richard T. Fenstermacher


/s/Ivan H. Gordon                   Director                   March 27, 2001
-----------------------------
Ivan H. Gordon
</TABLE>


                                                                              90
<PAGE>   91
<TABLE>
<S>                                 <C>                        <C>
/s/Frederick A. Gosch               Director                   March 27, 2001
-----------------------------
Frederick A. Gosch


/s/Jeffrey W. Hayes                 Director                   March 27, 2001
-----------------------------
Jeffrey W. Hayes


/s/Alfred B. Mast                   Director                   March 27, 2001
-----------------------------
Alfred B. Mast


/s/Wesley R. Pace                   Director                   March 27, 2001
-----------------------------
Wesley R. Pace

/s/Raman V. Patel                   Director                   March 27, 2001
-----------------------------
Raman V. Patel


/s/Floyd S. Weber                   Director                   March 27, 2001
-----------------------------
Floyd S. Weber
</TABLE>


                                                                              91
<PAGE>   92
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    Exhibit
    Number
    -------

<S>               <C>
         3.1      Articles of Incorporation of Main Street Bancorp, Inc.,
                  incorporated herein by reference to Exhibit 3.1 of the
                  Registration Statement No. 333-44697 on Form S-4 of the
                  registrant.

         3.2      Bylaws of Main Street Bancorp, Inc., as amended.

         10.1     Executive Employment Agreement, dated August 13, 1999, among
                  Main Street Bancorp, Inc., Main Street Bank and Richard A.
                  Ketner, incorporated herein by reference to Exhibit 10.3 of
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1999.

         10.2     Deferred Compensation Agreement, dated October 14, 1999 by and
                  between Main Street Bancorp, Inc., and Richard A. Ketner,
                  incorporated herein by reference to Exhibit 10.8 of the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1999.

         10.3     Executive Employment Agreement, dated November 1, 2000, by and
                  among Main Street Bancorp, Inc., Main Street Bank and Brian M.
                  Hartline, President and Chief Executive Officer, incorporated
                  herein by reference to Exhibit 10.4 of the Company's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 2000.

         10.4     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Andrew
                  J. Rothermel, Executive Vice President and General Counsel.

         10.5     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Robert
                  J. Smik, Executive Vice President and Chief of Operations.


         10.6     Executive Employment Agreement, dated November 1, 2000 by and
                  among Main Street Bancorp, Inc., Main Street Bank and Robert
                  A. Kuehl, Executive Vice President and Chief Financial
                  Officer.

         21.1     List of Subsidiaries of the Company, included herein.

         23.1     Consent of Beard Miller Company LLP, independent auditors,
                  included herein.
</TABLE>


                                                                              92