SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

[X]  Annual report  pursuant to section 13 or 15 (d) of the Securities  Exchange
     Act of 1934 For the fiscal year ended September 30, 2001, OR

[_]  Transition  report  pursuant  to  section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

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

Commission File No. 0-27606

                           WHG Bancshares Corporation
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

           Maryland                                              52-1953867
-------------------------------                              -------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

1505 York Road, Lutherville, Maryland                               21093
-------------------------------------                             ---------
(Address of Principal Executive Offices)                          (Zip Code)

Issuer's Telephone Number, Including Area Code:                (410) 583-8700
                                                               --------------

Securities registered under Section 12(b) of the Exchange Act:        None
                                                                      ----
Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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    .
                                                                      ---   ---
         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year:   $11,734,000.

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant,  based on the average bid and asked price of the registrant's
Common Stock on December 1, 2001, was $11.4 million.

         As of December 1, 2001,  there were  issued and  outstanding  1,285,050
shares of the registrant's Common Stock.

         Transitional Small Business Disclosure Format (check one): YES    NO X
                                                                       ---   ---

                    DOCUMENTS INCORPORATED BY REFERENCE. NONE

<PAGE>
                                     PART I

         WHG Bancshares  Corporation  (the  "Registrant"  or "Company") may from
time to  time  make  written  or oral  "forward-looking  statements",  including
statements  contained in the Company's  filings with the Securities and Exchange
Commission  (including  this  annual  report  on Form  10-KSB  and the  exhibits
thereto),  in its reports to  stockholders  and in other  communications  by the
Company,  which  are made in good  faith by the  Company  pursuant  to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the board of  governors of the
federal  reserve  system,   inflation,   interest  rates,  market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes;  acquisitions;  changes in consumer spending
and  saving  habits;  and the  success  of the  Company  at  managing  the risks
resulting from these factors.

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

Item 1.  Description of Business
--------------------------------

General

         The Company is the holding  company for Heritage  Savings Bank,  F.S.B.
(the "Bank") and as a unitary  savings and loan holding company is generally not
restricted in the types of business  activities in which it may engage  provided
that the Bank  retains  a  specified  amount of its  assets  in  housing-related
investments.  The Company conducts no significant  business or operations of its
own other than holding all of the  outstanding  stock of the Bank.  As a result,
references to the Registrant or Company  generally  refer to the Bank unless the
context indicates otherwise.

         The Bank is a federally  chartered stock savings bank  headquartered in
Lutherville, Maryland and is subject to examination and comprehensive regulation
by the Office of Thrift Supervision ("OTS") and its deposits have been federally
insured by the Savings Association Insurance Fund ("SAIF"). The Bank is a member
of and owns  capital  stock in the Federal  Home Loan Bank  ("FHLB") of Atlanta,
which is one of the 12 regional banks in the FHLB System.

                                        1
<PAGE>

         The Bank  operates a  traditional  savings  bank  business,  attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in loans secured by single-family
residential real estate.

Competition

         The Company is one of many  financial  institutions  serving its market
area which consists of the Baltimore,  Maryland  metropolitan area that includes
Baltimore City and its five  surrounding  counties,  Baltimore  County,  Harford
County, Howard County,  Carroll County, and Anne Arundel County. The competition
for deposit  products comes from other insured  financial  institutions  such as
commercial banks, thrift  institutions,  credit unions, and multi-state regional
banks in the Company's market area.  Deposit  competition also includes a number
of insurance  products  sold by local  agents and  investment  products  such as
mutual  funds and other  securities  sold by local and  regional  brokers.  Loan
competition varies depending upon market conditions and comes from other insured
financial  institutions such as commercial banks,  thrift  institutions,  credit
unions, multi-state regional banks, and mortgage bankers.

Lending Activities

         Loan Portfolio  Data. The following table sets forth the composition of
the Registrant's loan portfolio in dollar amounts by type of loan and in percent
of the respective portfolios at the dates indicated:

                                                      At September 30,
                                              ----------------------------------
                                                      2001             2000
                                              ----------------  ----------------
                                                   $        %       $        %
                                              --------   -----  --------  ------
                                                    (Dollars in thousands)
Mortgage loans:
Residential mortgage loans:
  One-to four family ........................   72,731    62.9    72,225   71.9
  Multi-family...............................    6,157     5.3     3,832    3.8
Commercial...................................   16,398    14.2     9,916    9.9
Construction.................................    8,446     7.3     6,592    6.5
                                              --------   -----   -------  -----
       Total mortgage loans..................  103,732    89.7    92,565   92.1
                                                         -----            -----
Consumer and other loans:
  Consumer...................................    6,185     5.3     5,961    5.9
  Land/lot...................................      670      .6       210     .2
  Commercial lines of credit.................    4,993     4.3     1,597    1.6
  Commercial loans secured by lease
      receivables............................       49      .1       171     .2
                                              --------   -----   -------  -----
       Total consumer and other loans........   11,897    10.3     7,939    7.9
                                              --------   -----   -------  -----
             Total loans.....................  115,629   100.0%  100,504  100.0%
                                                         =====            =====
Less:
  Undisbursed portion of loans in process....   (3,933)           (2,125)
  Deferred loan origination fees.............     (537)             (473)
  Allowance for loan losses..................     (408)             (395)
  Unamortized discount.......................     (476)             (601)
  Other......................................        -                (1)
                                              --------          --------
Total loans, net............................. $110,275          $ 96,909
                                              ========          ========

                                        2
<PAGE>

Loan Maturity Tables

         The  following   table  sets  forth  the  estimated   maturity  of  the
Registrant's  loan  portfolio at September 30, 2001.  The table does not include
prepayments  or  scheduled  principal  repayments.   Prepayments  and  scheduled
principal repayments on loans totaled $10.3 million for the year ended September
30,  2001.  Adjustable-rate  mortgage  loans  are  shown  as  maturing  based on
contractual maturities.

<TABLE>
<CAPTION>
                                                          Due after
                                             Due within  1 through   Due after
                                               1 year     5 years     5 years       Total
                                               ------     -------     -------       -----
                                                                (In thousands)
<S>                                          <C>        <C>          <C>         <C>
One-to-four family residential and
    multi-family...........................   $   93     $ 3,580      $75,215     $ 78,888
Commercial real estate loans and land/lot..      206       5,890       10,972       17,068
Construction...............................    8,116          --          330        8,446
Consumer...................................      655       1,089        4,441        6,185
Commercial lines of credit.................      530       4,463           --        4,993
Commercial loans secured by lease
  finance receivables......................       20          29           --           49
                                              ------     -------      -------     --------
                                              $9,620     $15,051      $90,958     $115,629
                                              ======     =======      =======     ========
</TABLE>

         The  following  table  sets  forth  the  dollar  amount of all loans at
September 30, 2001 due after September 30, 2002, which have fixed interest rates
and floating or adjustable interest rates.

<TABLE>
<CAPTION>
                                                                      Floating or
                                                    Fixed Rates     Adjustable Rates     Total
                                                    -----------     ----------------     -----
                                                                    (In thousands)
<S>                                                  <C>                <C>          <C>
One-to-four family residential and
    multi-family .................................     $60,396            $18,399      $ 78,795
Commercial real estate loans and land/lot.........      15,124              1,738        16,862
Construction......................................         330                 --           330
Consumer..........................................       1,880              3,650         5,530
Commercial lines of credit and commercial loans
    secured by lease finance receivables..........         134              4,358         4,492
                                                       -------            -------      --------
    Total.........................................     $77,864            $28,145      $106,009
                                                       =======            =======      ========
</TABLE>

         One- to Four-Family Residential Loans. The Registrant's primary lending
activity consists of the origination of one- to four-family residential mortgage
loans secured by property located in the  Registrant's  primary market area. The
Registrant generally  originates one- to four-family  residential mortgage loans
in amounts up to 80% of the lesser of the  appraised  value or selling  price of
the  mortgaged  property  without  requiring  mortgage  insurance.   In  certain
instances,  the Registrant will originate a mortgage loan in an amount up to 95%
of the lesser of the appraised  value or selling price of a mortgaged  property,
however,  mortgage  insurance  for the  borrower is  required.  A mortgage  loan
originated by the Registrant, whether fixed- or adjustable-rate, can have a term
of up to 30 years.

                                        3
<PAGE>

         The Registrant requires for all adjustable-rate mortgage loans that the
borrower   qualify  at  the  current  fully  indexed  rate.   The   Registrant's
adjustable-rate mortgage loans provide for periodic interest rate adjustments of
plus or minus 2% with a maximum  adjustment  over the term of the loan to 12.75%
and a  minimum  adjustment  to  6%,  except  during  the  first  year  following
origination.  Adjustable-rate  mortgage loans typically  reprice every year, and
provide for terms of up to 30 years with most loans  having  terms of between 15
and 30  years.  Mortgage  loans  originated  and held by the  Registrant  in its
portfolio  generally  include  due-on-sale  clauses which provide the Registrant
with the contractual  right to deem the loan  immediately due and payable in the
event  that  the  borrower  transfers  ownership  of the  property  without  the
Registrant consent.

         The Registrant offers  adjustable-rate  mortgage loans using the weekly
average yield on U.S. Treasury securities adjusted to a constant maturity of one
year. Interest rates charged on mortgage loans are competitively priced based on
market conditions and the Registrant's cost of funds.  Generally,  the Company's
standard underwriting guidelines for mortgage loans conform to FHLMC guidelines.
It is the current  policy of the  Registrant to remain a portfolio  lender.  The
Registrant typically charges a 0% to 1% origination or commitment fee.

         Adjustable-rate  mortgage  loans  decrease  the risks  associated  with
changes in interest rates by more closely reflecting these changes,  but involve
other risks because as interest rates increase,  the underlying  payments by the
borrower increase,  thus increasing the potential for default. At the same time,
the  marketability  of the underlying  collateral  may be adversely  affected by
higher interest  rates.  Upward  adjustment of the contractual  interest rate is
also limited by the adjustable-rate mortgage loan documents, thereby potentially
limiting their  effectiveness  during periods of rising  interest  rates.  These
risks have not had an adverse effect on the Registrant.

         Multi-Family  Real Estate Loans.  These loans are primarily  secured by
apartment houses, located in the Registrant's primary market area. Loans secured
by multi-family property may be originated in amounts up to 75% of the appraised
value with either fixed or  adjustable  rates of interest.  Fixed rate  interest
loans have maturities  generally of up to 25 years,  with principal and interest
payments  calculated on a 25 year  amortization  period.  Adjustable  rate loans
typically have a 5 to 25 year amortization period, with a fixed rate of interest
for the first five years,  with repricing  following every five years after that
initial fixed period.

         Multi-family real estate lending entails  significant  additional risks
compared to residential  property  lending.  These loans typically involve large
loan balances to single borrowers or groups of related borrowers.  The repayment
of these loans  typically is dependent on the  successful  operation of the real
estate project securing the loan.  These risks can be significantly  affected by
adverse conditions in the economy.

         Commercial  Real  Estate  Loans.   Commercial  loan  portfolio  consist
primarily of loans secured by real estate, such as church loans and small office
building loans. Loans secured by commercial property may be in amounts up to 75%
of the  appraised  value for a  maximum  term of 25  years.  Commercial  lending
entails  significant  additional  risks when compared  with one- to  four-family
residential lending. For example, commercial loans typically involve larger loan
balances to single borrowers or

                                        4
<PAGE>

groups of related  borrowers,  the payment experience on such loans typically is
dependent  on the  successful  operation  of the  project and these risks can be
significantly  impacted by the cash flow of the  borrowers and supply and demand
conditions in the market for commercial office, retail and warehouse space.

         Construction  Loans.  Construction  loans are made on a long term basis
and are classified as  construction/permanent  loans.  Approximately  95% of the
Registrant's   construction   loan   portfolio  is  for  the   construction   of
single-family residential property to the individuals who will be the owners and
occupants upon  completion of  construction.  These  construction  loans usually
require no  principal  payments  during the first six  months,  after  which the
payments are set at an amount that will  amortize over the term of the permanent
loan.  The  terms,   including  interest  rate,  of  single  family  residential
construction  loans are the same as those for a loan to purchase or  refinance a
previously  constructed  single family residence.  The maximum loan to value for
other  construction  loans is  dependent  on the type of  property  that will be
constructed.

         Consumer  Loans.  Consumer  loans includes home equity lines of credit.
Home equity  lines of credit loans are  primarily  secured by one-to four family
residential  mortgage  loans.  The loans generally have terms of 15 to 30 years,
some of which  are at fixed  rates  and some of which  have  rates  that  adjust
periodically.  Home  equity  lines  of  credit  are  subject  to a 80%  combined
loan-to-value  limitation,  including  any  outstanding  mortgages or liens.  At
September  30,  2001,  home equity  lines of credit  totaled $3.7 million of the
consumer loan portfolio.

         Other consumer loans primarily consist of automobile loans, boat loans,
and share  loans.  Loans  secured by vehicles  are  financed  for terms up to 60
months.  Share  loans are secured by deposits of the bank are granted in amounts
of up to 90% of the deposited amount.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         Loan Approval Authority and Underwriting. All loans must be approved by
the Registrant's  loan committee and all loans over $500,000 must be approved by
the Registrant's Board of Directors or the Executive Committee.  Upon receipt of
a completed loan  application  from a prospective  borrower,  a credit report is
generally  ordered,  income and certain  other  information  is verified and, if
necessary,  additional financial information is requested.  An appraisal from an
independent fee appraiser of the real estate intended to be used as security for
the proposed loan is obtained. The Registrant makes construction/permanent loans
on individual properties.  Funds advanced during the construction phase are held
in a  loan-in-process  account  and  disbursed  based  upon  various  stages  of
completion in accordance  with the results of inspection  reports that are based
upon physical inspection of the construction by a loan officer.  For real estate
loans, the Registrant requires title insurance.  Borrowers must also obtain fire
and casualty  insurance  (for loans on property  located in a flood zone,  flood
insurance is required) prior to the closing of the loan.

                                        5
<PAGE>

         Loan  Commitments.   The  Registrant  issues  written   commitments  to
prospective  borrowers  on  all  approved  real  estate  loans.  Generally,  the
commitment  requires  acceptance  within  15 days of the  date of  issuance.  At
September 30, 2001,  the  Registrant  had $15.2 million of  commitments to cover
originations  and $3.9  million  in  undisbursed  funds  for  loans in  process.
Management  believes that virtually all of the Registrant's  commitments will be
funded.

Non-Performing and Problem Assets

         Loan  Delinquencies.  If a loan continues in a delinquent status for 90
days past due and no repayment plan is in effect,  the account is turned over to
an attorney for  foreclosure.  Management  meets  regularly  to  determine  when
foreclosure  proceedings  should be initiated  and the borrower is notified when
foreclosure has been commenced.

         Loans  are  generally  placed  on a  non-accrual  status  when the loan
becomes more than 90 days delinquent or when, in the opinion of management,  the
collection of additional  interest is doubtful.  Interest  accrued and unpaid at
the time a loan is placed on  non-accrual  status is  charged  against  interest
income.  Subsequent  interest  payments,  if  any,  are  either  applied  to the
outstanding  principal and interest  balance in accordance  with the contractual
terms of the loan.

         Non-Performing  Assets.  The  following  table sets  forth  information
regarding  non-accrual  loans,  real estate owned, and certain other repossessed
assets and loans. Interest income that would have been recorded and collected on
loans  accounted  for on a  non-accrual  basis under the original  terms of such
loans  was  $19,000  for the year  ended  September  30,  2001.  As of the dates
indicated,   the   Registrant   had  no  loans   categorized  as  troubled  debt
restructuring or impaired loans.

                                        6
<PAGE>

                                                                At September 30
                                                                ---------------
                                                                   2001    2000
                                                                   ----    ----
                                                          (Dollars in thousands)

Loans accounted for on a non-accrual basis:
Mortgage loans:
  One-to-four family real estate ............................... $  250  $  187
  Home equity lines of credit ..................................     --      15
  Commercial ...................................................     --      --
Non-mortgage loans:
  Consumer .....................................................     50      42
  Commercial loan secured by lease financed receivables ........     --      --
                                                                 ------  ------
Total non-accrual loans ........................................    300     244
Accruing loans which are contractually past due 90 days or more:
Mortgage loans:
  Permanent loans secured by one-to-four family real estate ....     --      --
  Commercial ...................................................      2      14
Non-mortgage loans:
  Consumer .....................................................     --      --
                                                                 ------  ------
Total accruing loans greater than 90 days past due .............      2      14
                                                                 ------  ------
Total non-performing loans ..................................... $  302  $  258
                                                                 ======  ======
Foreclosed real estate .........................................     --      --
                                                                 ======  ======
Total non-performing assets .................................... $  302  $  258
                                                                 ======  ======
Total non-accrual and accrual loans to net loans ...............    .27%    .27%
                                                                 ======  ======
Allowance for loan losses to total non-performing loans,
  including loans contractually past due 90 days or more ....... 135.10% 153.10%
                                                                 ======  ======
Total non-accrual and accruing loans greater than
  90 days past due to total assets .............................    .18%    .16%
                                                                 ======  ======
Total non-performing assets to total assets ....................    .18%    .16%
                                                                 ======  ======

         Classified Assets. OTS regulations provide for a classification  system
for problem assets of insured  institutions.  Under this classification  system,
problem  assets  of  insured   institutions  are  classified  as  "substandard,"
"doubtful," or "loss." An asset is considered  substandard if it is inadequately
protected by the current net worth and paying  capacity of the obligor or of the
collateral  pledged,  if any.  Substandard assets include those characterized by
the "distinct possibility" that the insured institution will sustain "some loss"
if the deficiencies are not corrected. Assets classified as doubtful have all of
the  weaknesses  inherent  in  those  classified  substandard,  with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable  and  improbable."  Assets  classified as loss are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
may be designated  "special mention" because of potential weakness that does not
currently warrant classification in one of the aforementioned categories.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem assets as loss, it is required either to establish a specific  allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's  determination as to the classification of its
assets and the amount of its  valuation  allowances  is subject to review by the
OTS, which may order the establishment of additional general or

                                        7
<PAGE>

specific loss  allowances.  A portion of general loss allowances  established to
cover possible  losses  related to assets  classified as substandard or doubtful
may be  included in  determining  an  institution's  regulatory  capital,  while
specific  valuation  allowances  for loan  losses  generally  do not  qualify as
regulatory capital.

         The following table sets forth the  Registrant's  classified  assets in
accordance with its classification system.


                                   At September 30, 2001
                                   ---------------------
                                      (In Thousands)

Special Mention                            $2,194
Substandard                                   252
Doubtful                                       --
Loss                                           --
                                           ------
                                           $2,446
                                           ======

         Allowances for Loan Losses.  It is  management's  policy to provide for
losses on unidentified loans in its loan portfolio.  A provision for loan losses
is charged to operations based on management's evaluation of the losses that may
be incurred in the Registrant's loan portfolio. Such evaluation,  which includes
a review of all loans of which full collectibility of interest and principal may
not be reasonably assured, considers the Registrant's past loan loss experience,
known and inherent risks in the portfolio,  adverse  situations  that may affect
the borrower's ability to repay,  estimated value of any underlying  collateral,
any existing guarantees,  past performance of the loan, available  documentation
for the loan,  legal  impediments  to  collection,  financial  condition  of the
borrower, and current economic conditions.

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

                                        8
<PAGE>

         The  following  table  sets  forth  information  with  respect  to  the
Registrant's allowance for loan losses at the dates indicated:

                                                         At September 30,
                                                     -------------------------
                                                        2001            2000
                                                     ---------       ---------
                                                        (Dollars in Thousands)

Total loans outstanding ........................     $ 110,275       $  96,909
                                                     =========       =========
Average loans outstanding ......................     $ 110,815       $  94,549
                                                     =========       =========

Allowance balances (at beginning of period) ....     $     395       $     345
Provision ......................................            30             120
Net (charge-offs) recoveries:
  Residential ..................................            --             (68)
  Commercial real estate .......................            --              --
  Consumer .....................................           (17)             (2)
                                                     ---------       ---------
Allowance balance (at end of period) ...........     $     408       $     395
                                                     =========       =========
Allowance for loan losses as a percent
  of total loans outstanding ...................           .37%            .41%
                                                     =========       =========
Net loans charged off as a percent of
  average loans outstanding ....................           .02%            .07%
                                                     =========       =========

Analysis of the Allowance for Loan Losses

         The  following  table sets forth the  allocation  of the  allowance  by
category,  which  management  believes can be allocated  only on an  approximate
basis.  The  allocation  of the  allowance to each  category is not  necessarily
indicative  of future loss and does not  restrict  the use of the  allowance  to
absorb losses in any category.

<TABLE>
<CAPTION>

                                     -------------------------------------------------
                                                     At September 30,
                                            2001                     2000
                                     -------------------------  ----------------------
                                                % of Loans in            % of Loans in
                                                Each Category            Each Category
                                     Amount     To Total Loans  Amount   To Total Loans
                                     ------     --------------  ------   --------------
                                                  (Dollars in thousands)
<S>                               <C>             <C>        <C>          <C>
Real estate:
  Residential mortgage...............$ 182           68.2%      $ 187        75.7%
  Commercial real estate.............   91           14.2          99         9.9
  Construction ......................   55            7.3          65         6.5
  Commercial lines of credit.........   25            4.3          16         1.6
  Land/lot...........................    2             .6           2          .2
Consumer.............................   52            5.3          23         5.9
Commercial loans secured by lease
  finance receivables................    1             .1           3          .2
                                     -----         ------       -----       ------
                                     $ 408         100.00%      $ 395       100.00%
                                     =====         ======       =====       ======
</TABLE>


                                        9
<PAGE>

Return On Equity And Assets Ratios

                                                        At Or For The Years
                                                        Ended September 30,
                                                      ------------------------
                                                        2001            2000
                                                        ----            ----

Average equity to average asset................        10.02%           9.61%

Return on average equity.......................         2.48            5.30

Return on average assets.......................          .25             .51

Dividend payout ratio..........................       105.88           52.94

Investment Activities

         The  Registrant  is required  under federal  regulations  to maintain a
sufficient amount of liquid assets which may be invested in specified short-term
securities and certain other investments. However, the OTS does not prescribe to
a minimum  amount or a percentage of liquid  assets.  The level of liquid assets
varies depending upon several factors,  including:  (i) the yields on investment
alternatives,  (ii) management's judgment as to the attractiveness of the yields
then available in relation to other  opportunities,  (iii) expectation of future
yield levels, and (iv) management's  projections as to the short-term demand for
funds  to  be  used  in  loan  origination  and  other  activities.   Investment
securities,  including mortgage-backed securities, are classified at the time of
purchase,  based upon management's  intentions and abilities, as securities held
to maturity or securities  available for sale. Debt securities acquired with the
intent and ability to hold to maturity  are  classified  as held to maturity and
are stated at cost and adjusted  for  amortization  of premium and  accretion of
discount,  which are  computed  using the level yield method and  recognized  as
adjustments  of interest  income.  All other debt  securities  are classified as
available for sale to serve principally as a source of liquidity.

         Current  regulatory  and  accounting  guidelines  regarding  investment
securities  (including  mortgage  backed  securities)  require the Registrant to
categorize  securities as "held to maturity," "available for sale" or "trading."
As of September 30, 2001, the  Registrant had securities  classified as "held to
maturity"  and  "available  for sale" in the amount of $12.0  million  and $18.6
million, respectively, and had no securities classified as "trading." Securities
classified as "available for sale" are reported for financial reporting purposes
at the fair  market  value with net  changes in the market  value from period to
period included as a separate  component of stockholders'  equity, net of income
taxes. At September 30, 2001, the Registrant's available for sale securities had
an amortized cost of $18.6 million and market value of $18.6 million. Changes in
the  market  value of  securities  available  for sale do not  affect  Company's
income.  In addition,  changes in the market value of  securities  available for
sale do not affect the Bank's regulatory capital requirements or its loan-to-one
borrower limit.

         At September 30, 2001, the  Registrant's  investment  portfolio  policy
allowed investments in instruments such as: (i) U.S. Treasury obligations,  (ii)
U.S.  federal  agency or federally  sponsored  agency  obligations,  (iii) local
municipal   obligations,   (iv)   mortgage-backed   securities,   (v)   banker's
acceptances,  (vi) certificates of deposit, and (vii) investment grade corporate
bonds,  and commercial  paper.  The Board of Directors may authorize  additional
investments.

                                       10
<PAGE>

         As a source of liquidity and to supplement its lending activities,  the
Registrant   has   invested   in   residential    mortgage-backed    securities.
Mortgage-backed  securities can serve as collateral for borrowings and,  through
repayments,  as a source of liquidity.  Mortgage-backed  securities  represent a
participation  interest in a pool of  single-family  or other type of mortgages.
Principal  and  interest  payments  are passed  from the  mortgage  originators,
through  intermediaries  (generally  quasi-governmental  agencies) that pool and
repackage the participation  interests in the form of securities,  to investors,
like the Registrant. The quasi-governmental  agencies, which include Ginnie Mae,
Freddie Mac and Fannie Mae,  guarantee  the payment of principal and interest to
investors.

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying  pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage  loans.  Mortgage-backed  securities are generally  referred to as
mortgage participation certificates or pass-through  certificates.  The interest
rate risk  characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable  rate) and the prepayment  risk, are passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying  mortgages.  Expected  maturities will differ from contractual
maturities due to scheduled  repayments and because borrowers may have the right
to  call  or  prepay   obligations   with  or  without   prepayment   penalties.
Mortgage-backed securities issued by Ginnie Mae, Freddie Mac and Fannie Mae make
up a majority of the pass-through certificates market.

         Investment Portfolio. The following table sets forth the carrying value
of the Registrant's  investment  securities  portfolio,  short term investments,
FHLB stock and mortgage-backed securities at the dates indicated.

                                                      At September 30,
                                                     -----------------
                                                       2001      2000
                                                     -------   -------
                                                      (In thousands)

Investment Securities Available For Sale:
Equity investments ...............................   $   309   $   354
FHLB bonds .......................................    15,086    16,093
Freddie Mac bonds ................................     3,250     2,992
                                                     -------   -------
   Total Investment Securities Available For Sale     18,645    19,439
                                                     -------   -------

Investment Securities Held to Maturity:
Fannie Mae bonds .................................   $ 2,750   $ 2,750
FHLB bonds .......................................     7,750    11,300
Freddie Mac bonds ................................     1,500     1,600
                                                     -------   -------
   Total Investment Securities Held To Maturity ..    12,000    15,650
                                                     -------   -------

Interest-bearing deposits in other banks .........   $ 2,169   $   510
Federal funds sold ...............................     1,183     3,764
Mortgage-backed securities held to maturity ......    13,998    16,451
FHLB stock .......................................     1,450     1,450
                                                     -------   -------
                                                      18,800    22,175
                                                     -------   -------
                                                     $49,445   $57,264
                                                     =======   =======

                                       11
<PAGE>

         The  following  table sets forth  information  regarding  the scheduled
maturities,  carrying  values,  market value and weighted average yields for the
Registrant's   investment  securities  portfolio  at  September  30,  2001.  The
following  table  does not take into  consideration  the  effects  of  scheduled
repayments or the effects of possible prepayments.

<TABLE>
<CAPTION>
                                                  More than One to  More than Five to     More than             Total
                               One Year or Less       Five Years        Ten Years         Ten Years      Investment Securities
                              ------------------  ----------------- ----------------- ----------------  ------------------------
                              Carrying   Average  Carrying  Average Carrying  Average Carrying Average  Carrying Average  Market
                               Value      Yield     Value    Yield   Value     Yield   Value    Yield    Value    Yield   Value
                               -----      -----     -----    -----   -----     -----   -----    -----    -----    -----   -----
                                                (Dollars in thousands)

<S>                          <C>         <C>     <C>        <C>    <C>       <C>     <C>       <C>     <C>       <C>    <C>
Investment Securities
Available For Sale:
  Equity investments........  $   --        --%   $   --      --%   $   --      --%   $   309   3.31%   $   309   3.31%  $   309
  FHLB bonds................      --        --        --      --        --      --     15,086   6.75     15,086   6.75    15,086
  Freddie Mac bonds.........      --        --        --      --        --      --      3,250   6.62      3,250   6.62     3,250

Investment Securities
 Held to Maturity:
  Fannie Mae bonds..........      --        --        --      --        --      --      2,750   6.78      2,750   6.78     2,763
  FHLB bonds................      --        --        --      --       250    7.25      7,500   6.72      7,750   6.74     7,795
  Freddie Mac bonds.........      --        --        --      --        --      --      1,500   6.59      1,500   6.59     1,500

Interest-bearing
  deposits in other banks...   2,169      3.28        --      --        --      --         --     --      2,169   3.28     2,169
Federal funds sold..........   1,183      2.87        --      --        --      --         --     --      1,183   2.87     1,183
Mortgage-backed
  securities held
  to maturity...............      --        --        17    7.46       113    7.64     13,868   6.44     13,998   6.45    14,279
FHLB stock..................      --        --        --      --        --      --      1,450   6.81      1,450   6.81     1,450
                              ------              ------            ------            -------           -------          -------
  Total.....................  $3,352      3.13%   $   17     .46%   $  363    7.37%   $45,713   6.62%   $49,445   6.38%  $49,784
                              ======      ====    ======    ====    ======    ====    =======   ====    =======   ====   =======
</TABLE>

                                       12
<PAGE>

Sources of Funds

         General.  Deposits are the major  external  source of the  Registrant's
funds for lending and other investment  purposes.  The Registrant  derives funds
from  amortization  and  prepayment  of  loans  and,  to a much  lesser  extent,
maturities of investment securities, borrowings,  mortgage-backed securities and
operations.  Scheduled loan principal  repayments are a relatively stable source
of  funds,   while  deposit  inflows  and  outflows  and  loan  prepayments  are
significantly influenced by general interest rates and market conditions.

         Deposits.  Consumer and commercial  deposits are attracted  principally
from within the  Registrant's's  primary  market area  through the offering of a
selection of deposit  instruments  including  regular  savings  accounts,  money
market accounts,  and term certificate accounts.  The Registrant also offers IRA
accounts.  Deposit account terms vary according to the minimum balance required,
the time period the funds must remain on deposit,  and the interest rate,  among
other factors. At September 30, 2001, the Registrant had no brokered accounts.

         Certificates  of Deposit.  The following  table indicates the amount of
the  Registrant's  certificates of deposit of $100,000 or more by time remaining
until maturity as of September 30, 2001.


                                                        Certificates
                                                         of Deposits
                                                         -----------
Maturity Period                                        (In thousands)
Within three months.............................            $   418
Three through six months........................              2,136
Six through twelve months.......................              1,323
Over twelve months..............................              6,869
                                                            -------
                                                            $10,746
                                                            =======

Borrowings

         The  Registrant  may  obtain  advances  from  the  FHLB of  Atlanta  to
supplement its supply of lendable  funds.  Advances from the FHLB of Atlanta are
typically  secured by a pledge of the Registrant's  stock in the FHLB of Atlanta
and a portion of the Registrant's first mortgage loans and certain other assets.
Each  FHLB  credit  program  has its own  interest  rate,  which may be fixed or
variable, and range of maturities.  The Registrant, if the need arises, may also
access the Federal  Reserve Bank  discount  window to  supplement  its supply of
lendable funds and to meet deposit withdrawal requirements.  The following table
sets forth the maximum  month-end  balance and the average balance of short-term
FHLB advances for the periods indicated.

                                       13
<PAGE>


                                                        During the Year Ended
                                                             September 30,
                                                        -----------------------
                                                         2001            2000
                                                         ----            ----
                                                           (In thousands)
Maximum amount of short-term borrowings
outstanding at any month end:
  Advances from Federal Home Loan Bank................ $4,750          $2,500
Approximate average short-term borrowings
  outstanding with respect to:
  Advances from Federal Home Loan Bank................ $  875         $   542
  Approximate weighted average rate paid on:
  Advances from Federal Home Loan Bank................   3.98%           7.02%


Employees

         At September 30, 2001,  the Registrant had 29 full-time and 7 part-time
employees.  None of the Registrant 's employees are  represented by a collective
bargaining  group.  The  Registrant  believes  that  its  relationship  with its
employees is good.

Regulation

         Set forth below is a brief  description of certain laws which relate to
the regulation of the Company and the Bank. The description  does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.

Regulation of the Company

         General.  The  Company is a unitary  savings and loan  holding  company
subject to regulatory  oversight by the OTS. As such, the Company is required to
register  and  file  reports  with  the OTS and is  subject  to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Company and its non-savings association  subsidiaries,  should such subsidiaries
be  formed,  which  authority  also  permits  the OTS to  restrict  or  prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.  This  regulation  and  oversight  is  intended  primarily  for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Company.

         As a unitary savings and loan holding company, the Company generally is
not  subject  to  any  restrictions  on  its  business  activities.   While  the
Gramm-Leach-Bliley Act (the "GLB Act"), enacted in November 2001, terminated the
"unitary  thrift  holding  company"  exemption from activity  restrictions  on a
prospective basis, the Company enjoys -grandfathered status under this provision
of the GLB Act because it acquired  the Bank prior to May 4, 2001.  As a result,
the Company's  freedom from activity  restrictions as a unitary savings and loan
holding company were not affected by the GLB Act.  However,  if the Company were
to acquire control of an additional savings association, its business activities
would be subject to restriction under the Home Owners' Loan Act. Furthermore, if
the Company were in the future to sell control of the Bank to any other company,
such company would not succeed to the Company's  grandfathered  status under the
GLB Act and would be subject to the same activity restrictions. The continuation
of the Company's exemption from restrictions on business activities as a unitary
savings and loan  holding  company is also  subject to the  Company's  continued
compliance  with the Qualified  Thrift Lender ("QTL") test. See "- Regulation of
the Bank - Qualified Thrift Lender Test."

                                       14
<PAGE>

Regulation of the Bank

         General.  Set forth below is a brief  description  of certain laws that
relate to the  regulation of the Bank.  The  description  does not purport to be
complete and is qualified  in its entirety by reference to  applicable  laws and
regulations.  As a federally chartered,  SAIF-insured  savings association,  the
Bank is  subject  to  extensive  regulation  by the OTS  and the  FDIC.  Lending
activities and other  investments must comply with various federal statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.

         The OTS,  regularly  examines  the Bank and  prepares  reports  for the
consideration  of the Bank's  Board of Directors  on any  deficiencies  that are
found in the Bank's operations.  The Bank's relationship with its depositors and
borrowers  is also  regulated  to a great  extent  by  federal  and  state  law,
especially in such matters as the ownership of savings accounts and the form and
content of the Bank's mortgage documents.

         The Bank must file reports with the OTS  concerning  its activities and
financial  condition,  in addition to obtaining  regulatory  approvals  prior to
entering into certain transactions such as mergers with or acquisitions of other
savings   institutions.   This   regulation   and   supervision   establishes  a
comprehensive  framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. The regulatory
structure  also  gives  the  regulatory   authorities  extensive  discretion  in
connection with their  supervisory  and  enforcement  activities and examination
policies,  including  policies with respect to the  classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.

         Insurance of Deposit  Accounts.  The deposit  accounts held by the Bank
are insured by the SAIF to a maximum of  $100,000  for each  insured  member (as
defined by law and  regulation).  Insurance of deposits may be terminated by the
FDIC  upon a finding  that the  institution  has  engaged  in unsafe or  unsound
practices,  is in an unsafe or unsound  condition to continue  operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.

         The Bank is required to pay insurance premiums based on a percentage of
its insured  deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC has set the deposit insurance assessment rates for SAIF-member institutions
for the  first  six  months  of 2001 at 0% to .027% of  insured  deposits  on an
annualized basis, with the assessment rate for most savings  institutions set at
0%. In addition,  all FDIC-insured  institutions are required to pay assessments
to the FDIC at an annual  rate of  approximately  .0212% of insured  deposits to
fund interest payments on bonds issued by the Financing Corporation ("FICO"), an
agency of the Federal government  established to recapitalize the predecessor to
the SAIF. These assessments will continue until the FICO bonds mature in 2017.

         Loans to One  Borrower.  A savings  association  may not make a loan or
extend  credit to a single or related group of borrowers in excess of 15% of the
associations's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of the unimpaired capital and surplus, under certain circumstances.
At September 30, 2001, the Registrant's  lending limit for loans to one borrower
was  approximately  $2,362,000 and had no outstanding  commitments that exceeded
the loans to one borrower limit at the time originated or committed.

                                       15
<PAGE>

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets for savings  institutions  that receive the highest  supervisory
rating for safety and  soundness and 4% of total  adjusted  assets for all other
thrifts,  and (3) risk-based capital equal to 8% of total risk-weighted  assets.
At September 30, 2001, the Bank was in compliance  with its  regulatory  capital
requirements.

         For  purposes  of the OTS  capital  regulations,  tangible  capital  is
defined as core  capital  less all  intangible  assets,  less  certain  mortgage
servicing  rights and less  certain  investments.  Core,  or Tier 1,  capital is
defined as common stockholders' equity,  noncumulative perpetual preferred stock
and minority  interests  in the equity  accounts of  consolidated  subsidiaries,
certain  nonwithdrawable   accounts  and  pledged  deposits  of  mutual  savings
associations and qualifying supervisory goodwill, less nonqualifying  intangible
assets, certain mortgage servicing rights and certain investments.

         The risk-based capital standard for savings  institutions  requires the
maintenance  of  total  risk-based  capital  of  8%  of  risk-weighted   assets.
Risk-based  capital  equals  the  sum of core  and  supplementary  capital.  The
components  of  supplementary  capital  include,  among other items,  cumulative
perpetual preferred stock,  perpetual  subordinated debt, mandatory  convertible
subordinated  debt,  intermediate-term  preferred  stock,  the  portion  of  the
allowance for loan losses not designated for specific loan losses, and up to 45%
of unrealized gains on equity securities.  The portion of the allowance for loan
and lease losses includable in supplementary  capital is limited to a maximum of
1.25% of risk-weighted assets. Overall, supplementary capital is limited to 100%
of core capital. A savings  association must calculate its risk-weighted  assets
by multiplying each asset and off-balance  sheet item by various risk factors as
determined  by the OTS,  which  range  from 0% for  cash to 100% for  delinquent
loans,  property  acquired  through  foreclosure,  commercial  loans,  and other
assets.

         In addition to the above  regulatory  capital  requirements,  the OTS's
prompt corrective action regulation  classifies savings  associations by capital
levels and provides that the OTS will take various corrective actions, including
imposing significant operational restrictions,  against any thrift that fails to
meet  the  regulation's  capital  standards.  Under  this  regulation,  a  "well
capitalized"  savings  association  is one that has a total  risk-based  capital
ratio of at least 10%, a Tier 1  risk-based  capital  ratio of at least 6% and a
leverage  capital  ratio  of 5%,  and is not  subject  to any  capital  order or
directive.  A thrift is deemed  "adequately  capitalized"  category  if it has a
total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio
of at least 4%, and a leverage capital ratio of at least 4%.  Institutions  with
lower  capital  levels  are  deemed  to  be  "undercapitalized,"  "significantly
undercapitalized" or "critically  undercapitalized,"  depending on their capital
levels. A thrift that falls within any of the three undercapitalized  categories
is subject to severe  regulatory  sanctions under the prompt  corrective  action
regulation.   At  September  30,  2001,   the  Bank  was   classified  as  "well
capitalized."

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

         A savings  association,  such as the Bank,  that is a  subsidiary  of a
savings and loan holding company,  must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and need only file a notice if the following  conditions  are met:
(1) they are eligible for

                                       16
<PAGE>

expedited  treatment  under OTS  regulations,  (2) they would remain  adequately
capitalized   after  the   distribution,   (3)  the  annual  amount  of  capital
distribution  does not exceed net income for that year to date added to retained
net income for the two preceding years, and (4) the capital  distribution  would
not violate any  agreements  between the OTS and the savings  association or any
OTS regulations. Any other situation would require an application to the OTS.

         The OTS may disapprove an application or notice if the proposed capital
distribution   would:  (i)  make  the  savings   association   undercapitalized,
significantly  undercapitalized,  or  critically  undercapitalized;  (ii)  raise
safety  or  soundness  concerns;  or (iii)  violate  a  statue,  regulation,  or
agreement  with  the OTS (or  with  the  FDIC),  or a  condition  imposed  in an
OTS-approved application or notice. Further, a federal savings association, like
the  Bank,  cannot  distribute   regulatory  capital  that  is  needed  for  its
liquidation account.

         Qualified Thrift Lender Test.  Federal savings  institutions  must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal  Revenue Code by maintaining at least 60% of its total assets
in specified types of assets,  including cash,  certain  government  securities,
loans  secured  by and  other  assets  related  to  residential  real  property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by  maintaining at
least 65% of its "portfolio  assets" in  certain"Qualified  Thrift  Investments"
(defined  to include  residential  mortgages  and  related  equity  investments,
certain  mortgage-related  securities,  small business loans,  student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the  statutory QTL test,  portfolio  assets are defined as total assets minus
intangible assets,  property used by the institution in conducting its business,
and liquid  assets  equal to 10% of total  assets.  A savings  institution  must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months.  A failure to qualify  as a QTL would  result in a number of  sanctions,
including certain operating restrictions. At September 30, 2001, the Bank was in
compliance  with its QTL  requirement,  with  76.7% of its  assets  invested  in
Qualified Thrift Investments.

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Atlanta,  which is one of 12 regional FHLBs that  administers the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of Atlanta in an amount equal to the greater of 1% of its aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the  beginning  of each year or 5% of the  Bank's  advances  from the  FHLB.  At
September 30, 2001, the Bank was in compliance with this requirement.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction  accounts (primarily  checking,  NOW, and Super
NOW checking accounts) and non-personal time deposits.  The balances  maintained
to meet the reserve  requirements  imposed by the Federal  Reserve  Board may be
used to satisfy  the  liquidity  requirements  that are  imposed by the OTS.  At
September 30, 2001, the Bank was in compliance  with these Federal Reserve Board
requirements.

                                       17
<PAGE>

Item 2. Description of Property
-------------------------------

         (a) Properties.

         The Registrant operates from its main office and four branch offices.


Location                                                 Leased or Owned
--------                                                 ---------------

MAIN OFFICE:
  1505 York Road
  Lutherville, Maryland   21093                               Owned

HAMILTON OFFICE:
  4228 Harford Road
  Baltimore, Maryland  21214                                  Owned

WOODLAWN OFFICE:
  Gwynn Oak Avenue and
  Windsor Mill Road                                       Leased until
  Baltimore, Maryland  21207                              January 2002

ELLICOTT CITY OFFICE:
  9416 Baltimore National Pike                            Leased until
  Ellicott City, Maryland  21042                           August 2020

GOLDEN RING OFFICE:
  8767 K Philadelphia Road                                Leased until
  Baltimore, Maryland  21237                                May 2006


         (b) Investment  Policies.  See "Item 1.  Business"  above for a general
description of the Registrant's  investment policies and any regulatory or Board
of Directors'  percentage of assets limitations  regarding certain  investments.
The Registrant's's  investments are primarily acquired to produce income, and to
a lesser extent, possible capital gain.

                  (1)    Investments in Real Estate or Interests in Real Estate.
See  "Item 1.  Business  -  Lending  Activities  and - Regulation," and "Item 2.
Description of Property."

                  (2)    Investments  in  Real  Estate  Mortgages.  See "Item 1.
Business - Lending Activities and - Regulation."

                  (3)    Investments  in  Securities  of or Interests in Persons
Primarily  Engaged in Real Estate  Activities.  See "Item 1.  Business - Lending
Activities and - Regulation."

         (c) Description of Real Estate and Operating Data. Not applicable.

                                       18
<PAGE>

Item 3.  Legal Proceedings
--------------------------

         There are various  claims and lawsuits in which the Company or the Bank
are  periodically  involved,  such as  claims  to  enforce  liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the Bank's business. In the opinion of management,  no material loss
is expected from any of such pending claims or lawsuits.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.

                                     PART II

Item  5.  Market for Common Equity and Related Stockholder Matters
------------------------------------------------------------------

         The  Registrant  common stock is traded on the Nasdaq  SmallCap  Market
under the  trading  symbol of  "WHGB",  and began  trading in April  1996,  upon
completion of the conversion of Heritage  Savings.  The following table reflects
high and low bid quotations. The quotations reflect inter-dealer prices, without
retail  mark-up,   mark-down,  or  commission,  and  may  not  represent  actual
transactions.

                                                                    Dividends
              Date                           High ($)    Low ($)    Declared ($)
              ----                           --------    -------    ------------
October 1, 1999 to December 31, 1999           9.03        7.13        .09
January 1, 2000 to March 31, 2000              7.87        6.37        .09
April 1, 2000 to June 30, 2000                 8.37        6.75        .09
July 1, 2000 to September 30, 2000             8.62        7.75        .09
October 1, 2000 to December 31, 2000           9.00        7.81        .09
January 1, 2001 to March 31, 2001             11.00        8.00        .09
April 1, 2001 to June 30, 2001                11.62       10.25        .09
July 1, 2001 to September 30, 2001            13.83       11.00        .09

The number of  shareholders  of record of common  stock as of November 30, 2001,
was  approximately  215. This does not reflect the number of persons or entities
who held stock in nominee or "street" name through various  brokerage  firms. At
November 30, 2001,  there were 1,285,050  shares  outstanding.  The Registrant's
ability to pay  dividends to  stockholders  is dependent  upon the  dividends it
receives from Heritage  Savings.  Heritage Savings may not declare or pay a cash
dividend  on any of its stock if the  effect of the  declaration  or  payment of
dividends  would  cause  their  regulatory  capital to be reduced  below (1) the
amount required for the liquidation  account  established in connection with the
conversion,  or (2) the regulatory capital requirements imposed by the Office of
Thrift Supervision.

                                       19
<PAGE>

Item 6.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


Forward-Looking Statements

         The Private  Securities  Litigation  Reform Act of 1995  contains  safe
harbor  provisions  regarding  forward-looking  statements.  When  used  in this
discussion, the words "believes", "anticipates",  "contemplates", "expects", and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties  which could cause
actual  results to differ  materially  from  those  projected.  Those  risks and
uncertainties  include changes in interest  rates,  the ability to control costs
and expenses,  year 2000 issues and general economic conditions.  WHG Bancshares
Corporation  undertakes  no  obligation  to publicly  release the results of any
revisions  to those  forward-looking  statements  which  may be made to  reflect
events or  circumstances  after the date hereof or to reflect the  occurrence of
unanticipated events.

         Since we conduct no  significant  business other than owning all of the
common stock of Heritage Savings Bank, F.S.B.  ("Heritage Savings"),  references
in  this  discussion  to  "we,"  "us,"  and  "our,"  refer  collectively  to WHG
Bancshares Corporation and Heritage Savings.

Overview

         We are a unitary  savings and loan  holding  company and own all of the
stock of Heritage  Savings Bank,  F.S.B.  ("Heritage  Savings").  We principally
operate  through  five  branch  offices  located  throughout  Baltimore  County,
Baltimore City and Howard County, Maryland.

         For the fiscal year ended  September  30, 2001,  we earned  $406,000 or
$.33 per diluted  share as compared to $800,000,  or $.68 per diluted  share for
the fiscal year ended  September 30, 2000.  The decline in net income for fiscal
2001 as compared to fiscal 2000 was  primarily  due to a $189,000  non-recurring
expense from the  termination of our pension plan during the fourth quarter 2001
as well as the  continued  decline in net  interest  income.  For the year ended
September 30, 2001, net interest income compression continued during fiscal 2001
as a result of the  continued  reduction  by the  Federal  Reserve of short term
interest rates and the effect of higher  interest rates paid on  certificates of
deposit  originated  during fiscal 2000. Our balance sheet structure  includes a
high  percentage  of  short  term  interest-earning  assets.  Accordingly,   the
continued  decline in short term  interest  rates has  resulted in lower  yields
earned in 2001 on interest earnings assets. Additionally,  assets increased $4.3
million  over last year to $164.2  million.  Our net loans  outstanding  grew by
13.8% reflecting strong  performance by our loan production staff. Asset quality
continues  to remain  excellent.  See  "Financial  Condition"  and  "Results  of
Operations".

                                       20
<PAGE>

Management of Interest Rate Risk and Market Risk

          Because the majority of our assets and  liabilities  are  sensitive to
changes in interest rates,  our most significant form of market risk is interest
rate risk,  or changes in interest  rates.  We are  vulnerable to an increase in
interest  rates to the extent that our  interest-bearing  liabilities  mature or
reprice more rapidly than our  interest-earning  assets.  Our lending activities
have historically  emphasized the origination of long-term,  adjustable rate and
fixed rate loans  secured by  single-family  residences.  The primary  source of
funds has been  deposits with  substantially  shorter  maturities.  While having
interest-bearing  liabilities that reprice more frequently than interest-earning
assets  is  generally  beneficial  to net  interest  income  during a period  of
declining interest rates, this type of an asset/liability  mismatch is generally
detrimental during periods of rising interest rates.

         We have established an asset/liability  committee which consists of our
department supervisors, our President and the Chairman of our Board of Directors
and one outside Director.  The committee meets on a monthly basis to review loan
and  deposit  pricing  and  production  volumes,  interest  rate risk  analysis,
liquidity  and  borrowing  needs,  and a variety of other  assets and  liability
management topics. On behalf of the committee, the Chairman reports to our Board
of Directors.

         To reduce the effect of interest  rate changes on net interest  income,
we have  adopted  various  strategies  to enable us to improve  the  matching of
interest-earning asset maturities to interest-bearing  liability maturities. The
principal elements of these strategies include seeking to:

o    originate  one-to four  residential  mortgage  loans with  adjustable  rate
     features or fixed rate loans with short maturities;

o    lengthen the maturities of our liabilities  when it would be cost effective
     through the pricing and  promotion of longer term  certificates  of deposit
     and utilization of FHLB advances;

o    attract low cost checking and  transaction  accounts  which tend to be less
     interest rate sensitive when interest rates rise;

o    maintain  interest-  bearing  deposits,  federal funds and U.S.  government
     securities with short to intermediate terms to maturities; and

o    maintain an investment  portfolio that provides a stable cash flow, thereby
     providing investable funds in varying interest rate cycles.

         We have made a  significant  effort to maintain our level of lower cost
deposits as a method of enhancing profitability.  In the past year, our level of
demand  deposits has  increased  significantly.  At September  30, 2001,  we had
approximately  $31.3  million,  or 25.1%,  of our deposits in low-cost  savings,
checking and money market accounts.  These deposits have traditionally  remained
relatively stable and are expected to be only moderately affected in a period of
rising  interest  rates.  This  stability has enabled us to offset the impact of
rising rates in other deposit accounts.

                                       21
<PAGE>

Net Portfolio Value

          Exposure  to  interest   rate  risk  is  actively   monitored  by  our
management.  Our  objective is to maintain a consistent  level of  profitability
within  acceptable  risk tolerances  across a broad range of potential  interest
rate  environments.  We use the OTS Net Portfolio Value ("NPV") Model to monitor
our exposure to interest rate risk,  which  calculates  changes in net portfolio
value.  Reports  generated from assumptions  provided and modified by management
are reviewed by the  Asset/Liability  Management  Committee  and reported to the
Board of Directors monthly. The Interest Rate Sensitivity of Net Portfolio Value
Report  shows the degree to which  balance  sheet  line items and net  portfolio
value  are  potentially  affected  by a 100 to 300  basis  point  (1/100th  of a
percentage  point)  upward and downward  parallel  shift (shock) in the Treasury
yield curve.

         The following  table  represents our NPV at September 30, 2001. The NPV
was calculated by the OTS, based upon information we provided to the OTS.


        Changes                  NPV
        in Rate                  Ratio(1)                Change(2)
        -------                  --------                ---------

        +300 bp                   .96%                     -858

        +200 bp                  3.97%                     -557

        +100 bp                  6.87%                     -267

           0 bp                  9.54%                        0 bp

        -100 bp                 10.66%                      112

        -200 bp                 11.02%                      148

        -300 bp                   N/A (3)                   N/A (3)

(1)  Calculated as the estimated NPV divided by present value of assets.
(2)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.
(3)  No calculation was available from the OTS for the -300 bp scenario  because
     of the abnormally low prevailing interest rate environment.

         These calculations indicate that our NPV could be adversely affected by
increases  in interest  rates but could be  favorably  affected by  decreases in
interest rates.  In addition,  we may be deemed to have more than a normal level
of interest rate risk under applicable regulatory capital requirements.

                                       22
<PAGE>

         Computations  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates,  prepayments and deposit  run-offs and should not be relied upon
as  indicative  of actual  results.  Certain  shortcomings  are inherent in such
computations.  Although certain assets and liabilities may have similar maturity
or periods  of  repricing  they may react at  different  times and in  different
degrees to changes in the market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while rates on other types of assets and  liabilities  may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features which restrict changes in interest rates on a
short  term  basis and over the life of the  asset.  In the event of a change in
interest  rates,   prepayments  and  early   withdrawal   levels  could  deviate
significantly  from  those  assumed  in making  calculations  set  forth  above.
Additionally,  an  increased  credit  risk may  result  as the  ability  of many
borrowers to service  their debt may  decrease in the event of an interest  rate
increase.

 Financial Condition

         At September 30, 2001, our assets  increased $4.3 million,  or 2.7%, to
$164.2  million from $159.9  million at September  30,  2000.  This  increase in
fiscal  2001 was  primarily  due to an  increase  in loans  receivable  of $13.4
million,  that was off-set by decreases in federal  funds sold of $2.6  million,
other  investments  held  to  maturity  of  $3.7  million  and  mortgage  backed
securities of $2.5 million.

         New loan originations  outpaced loan repayments by $13.4 million due to
successful  marketing  efforts in the commercial  lending area. Due to declining
interest  rates for  fiscal  2001,  $3.7  million of other  investments  held to
maturity  were called and were not  replaced.  The $2.5  million  decline in the
mortgage backed securities portfolio was also attributed to lower interest rates
that accelerated principal  repayments.  Federal funds were used in part to fund
the increase in loan originations.

         At September 30, 2001, our deposits increased by $4.9 million,  or 4.1%
to $124.9  million from $120.0  million at September 30, 2000.  Our $4.6 million
increase in demand  deposits was driven by market and interest rate  volatility,
which in turn increased customer demand for insured liquid investments.

         Our net worth  increased by $1.4 million,  or 9.0%, to $16.9 million at
September  30, 2001 from $15.5  million at  September  30,  2000.  The  increase
reflects a $1.1 million market value recovery in accumulated other comprehensive
income,  fiscal 2001's net income of $.4 million and non-cash  compensation from
stock-based  bonus and benefit plans of $.3 million,  partially offset by common
stock dividends of $.4 million. As market interest rates fell, the market values
of our investments  available for sale portfolio,  principally debt instruments,
rose. Because of interest rate volatility,  accumulated other comprehensive loss
and stockholders'  equity could materially fluctuate for each interim period and
year-end period.

                                       23
<PAGE>

Results of Operations

Net Income

         For September 30, 2001, net income decreased $394,000, to $406,000 from
$800,000 for the 2000 fiscal year. See "Overview".

Net Interest Income

         Net interest income decreased by approximately $283,000 to $3.8 million
for fiscal 2001 from $4.1 for fiscal 2000.  The interest  rate spread,  which is
the  difference  between  the yield on average  interest-earning  assets and the
percentage cost of average interest-bearing liabilities, declined in fiscal 2001
to 2.01% from 2.27% for fiscal  2000.  The  decrease in interest  rate spread is
primarily  the  result  of  increases  in the  average  cost  of  funds  paid on
certificates  of deposit  that  renewed or opened in  calendar  2000 a period of
rising interest rates. In addition,  fiscal 2001's  borrowings  interest expense
reflects a full year's impact of longer term FHLB  advances  drawn in mid-fiscal
2000 and the recall of lower costing FHLB advances in fiscal 2001.

Interest Income

         Total interest income increased $397,000,  or 3.5%, to $11.6 million in
fiscal  2001  from  $11.2  million  in  fiscal  2000.  Interest  income on loans
increased  by  approximately  $487,000 to $7.7 million for fiscal 2001 from $7.2
million  for fiscal  2000.  The  increase  was due to an increase in the average
dollar  amount  of  loans  outstanding  in  fiscal  2001  over  fiscal  2000  of
approximately  $6.3  million.  The average  yield on loans  remained  relatively
unchanged at 7.67% for fiscal 2001  compared to 7.66% for fiscal 2000.  Although
fiscal 2001 was a period of falling interest rates, we were able to maintain our
average  yield on loans  because of our  continued  efforts  to  attract  higher
yielding  multi-family  and commercial real estate loans. At September 30, 2001,
multi-family  residential loans and commercial real estate loans comprised 20.5%
of the net loan balance as compared to 14.2% at September 30, 2000.

         Interest  and dividend  income on  investment  securities  decreased by
$32,000  to  $2,536,000  in fiscal  2001 from  $2,568,000  in fiscal  2000.  The
decrease was the result of a decrease in the average dollar amount of investment
securities at amortized cost of $610,000.

         Interest   income  on   mortgage   backed   securities   decreased   by
approximately  $125,000 to $985,000 for fiscal 2001 from  $1,110,000  for fiscal
2000.  The  decrease  resulted  from a decrease  of $1.9  million in the average
dollar amount invested.

         Other interest income  increased by $67,000 to $337,000 for fiscal 2001
from  $270,000  for fiscal  2000.  The  increase  was due to an  increase in the
average  dollar  amount  of  other  interest-   earning  assets,   predominantly
interest-bearing  deposits  in other  banks  and  federal  funds  sold,  of $1.7
million.  Proceeds from the investment calls were deposited in other banks until
such time they can be reinvested in loan  originations  or other higher yielding
investments. As the result of short-term market rate decreases, the yield on our
other interest-earning  assets decreased 82 basis points to 5.89% in fiscal 2001
from 6.71% in fiscal 2000, which partially offset the volume-related increase.

                                       24
<PAGE>

Interest Expense

         Total interest expense increased approximately $680,000 or 9.6% to $7.7
million in fiscal 2001 from $7.1  million in fiscal  2000.  Interest on deposits
increased by $730,000 to  $6,504,000  in fiscal 2001 from  $5,774,000  in fiscal
2000.  The  increase  was the result of an increase in the average  cost of time
deposits  combined with an increase of $6.9 million in the average dollar amount
outstanding  of  deposits.  The rate paid on time  deposits  increased  42 basis
points to 5.96% in fiscal 2001 from 5.54% in fiscal 2000.  During calendar 2000,
we used certificate of deposit  promotions in an effort to attract new deposits.
These certificates will begin to mature in December 2001.

         Interest  on  long-term  borrowings  decreased  $47,000,  or  3.7%,  to
$1,211,000 in fiscal 2001 from $1,258,000 in fiscal 2000. The decrease  resulted
from an $1.7  million  decrease  in average  borrowings  outstanding,  partially
offset by a 21 basis point increase in rates paid on total borrowings.  The rate
increase  reflects a full year's  impact of longer term FHLB  advances  drawn in
mid-fiscal 2000 and the recall of lower costing FHLB advances in fiscal 2001.

Average Balance Sheet

         The following table sets forth information relating to our consolidated
average balance sheet and reflects the average yield on assets and average costs
of  liabilities  at and for the  periods  indicated.  Such  yields and costs are
derived  by  dividing  income or  expense  by the  average  balance of assets or
liabilities,  respectively,  for the periods  presented.  Average  balances  are
derived from  month-end  balances.  Management  does not believe that the use of
month-end  balances  instead of daily  average  balances has caused any material
differences in the information presented.

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                                        Year Ended September 30,
                                                        -----------------------------------------------------------
                                                                   2001                             2000
                                                        --------------------------     ----------------------------
                                                                           Average                          Average
                                                        Average             Yield/     Average               Yield/
                                                        Balance  Interest    Cost      Balance    Interest    Cost
                                                        -------  --------    ----      -------    --------    ----
                                                                         (Dollars in Thousands)
<S>                                                 <C>        <C>         <C>       <C>         <C>        <C>
Interest-earnings assets:
  Loans receivable(1)..........................       $ 100,816  $ 7,729     7.67%     $94,549     $7,242     7.66%
  Investment securities(2).....................          36,946    2,536     6.86%      38,025      2,568     6.75%
  Mortgage-backed securities...................          15,317      985     6.43%      17,198      1,110     6.45%
  Other interest-earning assets(3).............           5,729      337     5.89%       4,020        270     6.71%
                                                       --------  -------              --------    -------
      Total interest-earning assets............        $158,808  $11,587     7.30%    $153,792    $11,190     7.28%
                                                                 =======                          =======
Non-interest-earning assets....................           4,672                          3,208
                                                       --------                       --------
      Total assets.............................        $163,480                       $157,000
                                                       ========                       ========
Interest-bearing liabilities:
  Demand deposits..............................        $ 30,120  $   849     2.82%    $ 27,113      $ 739     2.73%
  Time deposits................................          94,902    5,655     5.96%      90,955      5,035     5.54%
  Other liabilities(4).........................          21,484    1,246     5.80%      23,166      1,296     5.59%
                                                       --------  -------              --------    -------
      Total interest-bearing liabilities.......         146,506  $ 7,750     5.29%     141,234    $ 7,070     5.01%
                                                                 =======                          =======
Non-interest bearing liabilities...............             599                            685
                                                       --------                       --------
      Total liabilities........................         147,105                        141,919

Stockholders' equity...........................          16,375                         15,081
                                                       --------                       --------
      Total liabilities and stockholders'
        equity.................................        $163,480                       $157,000
                                                       ========                       ========
Net interest income............................                   $3,837                           $4,120
                                                                  ======                           ======
Interest rate spread(5)........................                              2.01%                            2.27%
                                                                           ======                           ======
Net yield on interest-earning assets(6)........                              2.42%                            2.68%
                                                                           ======                           ======
Ratio of  average  interest-earning  assets
  to average interest-bearing liabilities......                            108.40%                          108.89%
                                                                           ======                           ======
</TABLE>

(1)  Average balances include non-accrual loans.
(2)  Includes available for sale securities, other investments held to maturity,
     ground rents and FHLB stock.
(3)  Includes  Federal  Funds,  interest-bearing  deposits  in  other  financial
     institutions and interest-earning loans to affiliated corporations.
(4)  Includes FHLB advances and  interest-earning  advance payments by borrowers
     for taxes and insurance.
(5)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(6)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                       26
<PAGE>

Rate/Volume Analysis

         The following  table  analyzes the dollar amount of changes in interest
income and interest expense for major components of our interest-earning  assets
and interest-bearing liabilities. The table distinguishes between (i) changes in
net income  attributable  to volume  (changes in volume  multiplied by the prior
period's  interest rate),  (ii) changes in net interest  income  attributable to
rate (changes in interest rates  multiplied by the prior period's  volume),  and
(iii) changes in volume multiplied by changes in rates.

                                                   Year Ended September 30,
                                              ---------------------------------
                                                       2001 vs. 2000
                                              ---------------------------------
                                                    Increase (Decrease)
                                                           Due to
                                              ---------------------------------
                                                                 Rate/
                                              Volume    Rate     Volume    Rate
                                              ------    ----     ------    ----
                                                     (Dollars in Thousands)

Interest income:
  Loans receivable .........................   $ 478    $   9    $   0    $ 487
  Investment securities ....................     (43)      11        0      (32)
  Mortgage-backed securities ...............    (122)      (4)       0     (126)
  Other interest-earning assets ............     115      (33)     (14)      68
                                               -----    -----    -----    -----

      Total interest-earning assets ........     428      (17)     (14)     397

Interest expense:
  Deposits .................................     302      407       21      730
  Other liabilities(1) .....................     (94)      49       (5)     (50)
                                               -----    -----    -----    -----
      Total interest-bearing liabilities ...     208      456       16      680
                                               -----    -----    -----    -----

Net change in net interest income ..........   $ 220    $(473)   $ (30)   $(283)
                                               =====    =====    =====    =====


(1)  Includes interest on advances from the FHLB of Atlanta and advance payments
     by borrowers for taxes and insurance.

                                       27
<PAGE>

Results of Operations

Provision for Loan Losses

         The provision  for loan losses for fiscal 2001 was $30,000  compared to
$120,000 for fiscal 2000. For fiscal 2001 net charge-offs  were $17,000 compared
to $70,000 for fiscal 2000.  The  allowance  for loan losses is  maintained at a
level  that  represents  management's  best  estimates  of  losses  in the  loan
portfolio at the balance sheet date. However, there can be no assurance that the
allowance  for losses will be adequate to cover  losses which may be realized in
the future and that additional provisions for losses will not be required.

Non-Interest Income

         Total non-interest income for fiscal 2001 increased slightly,  1.4%, to
$147,000 from $145,000 for fiscal 2000.

Non-Interest Expense

         Total  non-interest  expense for fiscal  2001  increased  $449,000,  or
15.9%, to $3,274,000 compared to $2,825,000 in fiscal 2000. The increase was the
result of a $416,000  increase  in  salaries  and  related  expenses,  a $25,000
increase in occupancy  expense,  $13,000  increase in  depreciation of equipment
partially  offset by a $22,000  decrease in professional  services.  The rise in
salaries and related  expenses reflect a $189,000  pension  curtailment  expense
incurred due to the  termination of our defined benefit plan as of July 31, 2001
(see Note 10 to our consolidated financial statements), an additional commercial
loan  officer,   annual  staff  merit  increases,   and  increased   stock-based
compensation  following the appreciation of our common stock.  Occupancy expense
increased due to the lease commencement in January 2000 of the new Ellicott City
branch  location.  Depreciation  of  equipment  rose as a  result  of  purchased
equipment  for  the  relocated  Ellicott  City  branch.   Professional  services
decreased primarily due to the business  development  planning expenses incurred
during fiscal 2000.

Provision for Income Taxes

         Provision for income taxes decreased by approximately $245,000 or 47.1%
to $275,000  for fiscal 2001 from  $520,000  for fiscal  2000.  The decrease was
primarily the result of a decrease in pretax income. The effective tax rate rose
slightly to 40.4% for fiscal 2001 from 39.4% for fiscal 2000.

                                       28

<PAGE>

Liquidity and Capital Resources

          Management  believes it has ample cash flows and liquidity to meet its
loan  commitments of $15.2 million and unused lines of credit of $4.0 million at
September 30, 2001. We have the ability to reduce its  commitments  for new loan
originations,  adjust other cash outflows,  and borrow from the FHLB of Atlanta,
or others,  should the need arise. As of September 30, 2001, such borrowed funds
totaled $22.0 million.

          We are required under federal regulations to monitor certain levels of
liquid assets , which include certain United States  government  obligations and
other approved  investments.  Current  regulatory  regulations  require that our
subsidiary,  Heritage  Savings maintain liquid assets of not less than 4%. As of
September 30, 2001, Heritage Savings' regulatory liquidity was 37.11%.  Heritage
Savings is also  subject to federal  regulations  that  impose  certain  minimum
capital requirements. See Note 12 to our consolidated financial statements.

          Net cash  provided by operating  activities  was $440,000 and $822,000
for fiscal 2001 and 2000.  Cash flows from  operations in fiscal 2001  decreased
from  fiscal  2000 due to a  decrease  in net income  and an  increase  in other
assets, that were partially offset by a decrease in accrued interest receivable.

          Net cash used by  investment  activities  for fiscal 2001 totaled $4.8
million,  a decrease of $1.3 million from $6.1 million for fiscal 2000. Net cash
used during fiscal 2001 and fiscal 2000 was the result of continued  strong loan
origination  activity that exceeded principal  repayments.  In fiscal 2001, this
was  partially  offset by  approximately  $8.8  million  of our  investment  and
mortgage-backed securities that were called or repaid and were not replaced.

          Net cash provided by financing activities for fiscal 2001 totaled $2.5
million compared to $4.1 million in fiscal 2000. Net cash provided during fiscal
2001 resulted from an increase of net deposits of $4.9 million, partially offset
by $2.0 million  decrease in borrowings and dividends paid of $440,000.  The net
cash  provided  in fiscal  2000  resulted  from an  increase in deposits of $4.5
million, partially offset by dividends paid of $431,000.

          We monitor projected  liquidity needs and determine the levels desired
based upon our  commitments  to make loans and our  ability to  generate  funds.
Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  adverse  publicity  relating to the savings
and loan industry and similar matters.

                                       29

<PAGE>

Item  7.  Financial Statements

<PAGE>
                            Anderson Associates, LLP

                          Certified Public Accountants
                                7621 Fitch Lane
                           Baltimore, Maryland 21236
                                  410-882-8050



                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------



To the Stockholders and Board of Directors
WHG Bancshares Corporation
Lutherville, Maryland

        We have audited the  consolidated  statements of financial  condition of
WHG Bancshares Corporation and Subsidiary as of September 30, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years in the two year period ended September 30, 2001.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

        We conducted our audits in accordance with auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  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 WHG
Bancshares  Corporation  and  Subsidiary at September 30, 2001 and 2000, and the
consolidated  results of its operations and cash flows for each of the two years
in the two year period ended  September 30, 2001, in conformity  with accounting
principles generally accepted in the United States of America.



                                                     /s/Anderson Associates, LLP

November 7, 2001
Baltimore, Maryland

                                       30
<PAGE>

                    WHG BANCSHARES CORPORATION AND SUBSIDIARY
                    -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------
<TABLE>
<CAPTION>
                                                                               September 30,
                                                                ------------------------------------
                                                                        2001                2000
                                                                ---------------       --------------
<S>                                                           <C>                   <C>
        Assets
        ------
Cash                                                               $    711,509         $  1,720,707
Interest bearing deposits in other banks                              2,168,790              509,570
Federal funds sold                                                    1,183,000            3,764,000
Investments available for sale (Note 2)                              18,644,744           19,439,212
Other investments held to maturity (Note 3)                          12,000,000           15,650,000
Mortgage backed securities (Note 4)                                  13,997,566           16,451,148
Loans receivable - net (Note 5)                                     110,275,237           96,909,448
Accrued interest receivable - loans                                     507,291              446,343
                            - investments                               731,841              773,864
                            - mortgage backed securities                 75,184               88,548
Premises and equipment - net (Note 7)                                 1,379,141            1,253,765
Federal Home Loan Bank of Atlanta stock, at cost (Note 6)             1,450,000            1,450,000
Deferred income taxes (Note 13)                                         329,818              936,589
Prepaid and refundable income taxes                                      36,899              107,471
Other assets                                                            748,177              415,037
                                                                   ------------         ------------
Total assets                                                       $164,239,197         $159,915,702
                                                                   ============         ============
     Liabilities and Stockholders' Equity
     ------------------------------------

Liabilities
-----------
   Checks outstanding in excess of bank balance                    $     18,868         $          -
   Deposits (Note 8)                                                124,938,953          120,044,864
   Borrowings (Note 9)                                               22,000,000           24,000,000
   Advance payments by borrowers for taxes and insurance                 77,724               70,711
   Income taxes payable (Note 13)                                        27,059               31,874
   Other liabilities                                                    277,765              317,623
                                                                   ------------         ------------
Total liabilities                                                   147,340,369          144,465,072

Commitments and contingencies (Notes 5, 7, 9 and 10)

Stockholders' Equity (Notes 11 and 12)
--------------------
   Common stock .10 par value; authorized 1,620,062
    shares; issued and outstanding 1,285,132 shares in
    2001 and 1,285,609 shares in 2000                                   128,513              128,561
   Additional paid-in capital                                         6,854,591            6,701,437
   Retained earnings (substantially restricted)                      10,267,594           10,301,365
   Accumulated other comprehensive income                                12,745           (1,134,125)
   Employee Stock Ownership Plan                                       (364,615)            (546,608)
                                                                   ------------         ------------
Total stockholders' equity                                           16,898,828           15,450,630
                                                                   ------------         ------------
Total liabilities and stockholders' equity                         $164,239,197         $159,915,702
                                                                   ============         ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.

                                       31
<PAGE>
                    WHG BANCSHARES CORPORATION AND SUBSIDIARY
                    -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------

                                                       Years Ended September 30,
                                                       -------------------------
                                                          2001          2000
                                                       -----------   -----------

Interest and fees on loans (Note 5)                    $ 7,729,211   $ 7,241,831
Interest and dividends on investment securities          2,535,888     2,568,055
Interest on mortgage backed securities                     984,529     1,110,107
Other interest income                                      337,275       269,772
                                                       -----------   -----------

Total interest income                                   11,586,903    11,189,765

Interest on deposits (Note 8)                            6,504,019     5,774,005
Interest on short-term borrowings                           34,825        37,731
Interest on long-term borrowings                         1,210,723     1,258,205
                                                       -----------   -----------
Total interest expense                                   7,749,567     7,069,941
                                                       -----------   -----------

Net interest income                                      3,837,336     4,119,824
Provision for loan losses (Note 5)                          30,000       120,000
                                                       -----------   -----------
Net interest income after provision for loan losses      3,807,336     3,999,824

Non-Interest Income
-------------------
   Gain on sale of investments                               1,144            --
   Fees and charges on loans                                26,159        31,853
   Fees on transaction accounts                             56,566        55,455
   Other income                                             63,194        57,998
                                                       -----------   -----------
Total non-interest income                                  147,063       145,306

Non-Interest Expenses
---------------------
   Salaries and related expenses                         2,140,802     1,724,099
   Occupancy                                               191,548       166,762
   SAIF deposit insurance premium                           23,602        34,952
   Depreciation of equipment                               113,459        99,553
   Advertising                                              78,000        79,629
   Data processing costs                                   114,930       112,226
   Professional services                                   180,332       202,171
   Loss on sale of repossessed assets                        3,928           786
   Other expenses                                          427,158       404,518
                                                       -----------   -----------
Total non-interest expenses                              3,273,759     2,824,696
                                                       -----------   -----------

Income before tax provision                                680,640     1,320,434
Provision for income taxes (Note 13)                       274,760       520,110
                                                       -----------   -----------

Net income                                             $   405,880   $   800,324
                                                       ===========   ===========
Basic earnings per share                               $       .34   $       .68
                                                       ===========   ===========
Diluted earnings per share                             $       .33   $       .68
                                                       ===========   ===========

The accompanying notes to consolidated financial statements
are an integral part of these statements.

                                      32
<PAGE>

                    WHG BANCSHARES CORPORATION AND SUBSIDIARY
                    -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------
                   FOR YEARS ENDED SEPTEMBER 30, 2001 AND 2000
                   -------------------------------------------

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                    Additional                       Other             Stock         Total
                                      Common         Paid-In        Retained      Comprehensive     Ownership     Stockholders'
                                      Stock          Capital        Earnings         Income            Plan          Equity
                                  ------------    ------------    ------------    ------------    ------------    ------------
<S>                              <C>             <C>             <C>             <C>             <C>             <C>

Balance - September 30, 1999      $    128,561    $  6,561,355    $  9,932,078    $   (973,504)   $   (731,825)   $ 14,916,665
Comprehensive Income
     Net Income                                                        800,324
     Unrealized holding
       losses on available for
       sale securities net of
       taxes of $101,062                                                              (160,621)
     Total comprehensive income                                                                                        639,703
Compensation under Stock Bonus
  Plan                                      --         136,072              --              --              --         136,072
Compensation under Stock-Based
  Benefit Plan                              --           4,010              --              --         185,217         189,227
Dividends declared ($.36 per share          --              --        (431,037)             --              --        (431,037)
                                  ------------    ------------  --------------  --------------  --------------  --------------

Balance - September 30, 2000           128,561       6,701,437      10,301,365      (1,134,125)       (546,608)     15,450,630
Comprehensive Income
     Net Income                             --              --         405,880              --              --              --
     Unrealized holding gains on
      available for sale
      securities net of taxes of
      $722,066                              --              --              --       1,147,553              --              --
     Reclassification adjustment
       for gains included in
       net income, net of tax
       of $461                              --              --              --            (683)             --              --
     Total comprehensive income                                                                                      1,552,750
Repurchase of common stock                 (48)         (4,960)             --              --              --          (5,008)
Compensation under Stock Bonus
  Plan                                      --         134,683              --              --              --         134,683
Compensation under Stock-Based
  Benefit Plan                              --          23,431              --              --         181,993         205,424
Dividends declared ($.36 per
  share)                                    --              --        (439,651)             --              --        (439,651)
                                  ------------    ------------    ------------    ------------    ------------    ------------

Balance - September 30, 2001      $    128,513    $  6,854,591    $ 10,267,594    $     12,745    $   (364,615)   $ 16,898,828
                                  ============    ============    ============    ============    ============    ============

</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

                                       33
<PAGE>

                    WHG BANCSHARES CORPORATION AND SUBSIDIARY
                    -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>

                                                                         Years Ended September 30,
                                                                            2001            2000
                                                                       ------------    ------------
<S>                                                                   <C>             <C>
Operating Activities
--------------------
     Net income before other comprehensive income                      $    405,880    $    800,324
     Loss on disposal of equipment                                            1,001               -
     Loss on sale of foreclosed and repossessed assets                        3,928             786
     Gain on sale of investment available for sale                           (1,144)              -
     Adjustments to Reconcile Net Income to Net
      Cash Provided by Operating Activities
      -------------------------------------
         Net accretion/amortization of premiums and discounts
          of mortgage backed securities                                       3,888           1,321
         Amortization of deferred loan fees                                 (71,348)       (109,467)
         Loan fees deferred                                                 135,910          62,447
     Decrease in discount on loans purchased                               (125,559)       (125,305)
         Amortization of discounts on investments available for sale           (182)           (183)
         Provision for loan losses                                           30,000         120,000
         Non-cash compensation under stock-based
          benefit plans                                                     340,107         325,299
         Increase in accrued interest receivable                             (5,561)       (174,464)
         Provision for depreciation                                         152,728         138,291
         (Increase) decrease in deferred income taxes                      (114,833)         16,856
         Decrease (increase) in prepaid income taxes                         70,572         (38,881)
         Increase in other assets                                          (340,456)       (156,405)
         (Decrease) increase in accrued interest payable                         (6)            246
         Decrease in income taxes payable                                    (4,815)        (17,415)
         Decrease in other liabilities                                      (39,858)        (21,038)
                                                                       ------------    ------------
              Net cash provided by operating activities                     440,252         822,412

Cash Flows from Investment Activities
-------------------------------------
     Proceeds from maturing interest bearing deposits                             -          95,000
     Proceeds from sales and maturities - available for sale              2,664,268               -
     Proceeds from maturing other investments                             3,650,000               -
     Principal collected on mortgage backed securities -
      held to maturity                                                    2,449,694       1,530,903
     Proceeds from sale of foreclosed real estate                                 -          12,317
     Proceeds from sale of repossessed assets                                 5,696               -
     Net increase in shorter term loans                                     (86,922)         (7,324)
     Longer term loans originated or acquired                           (23,546,300)    (22,459,738)
     Principal collected on longer term loans                            10,296,122      15,541,265
     Investment in premises and equipment                                  (279,105)       (553,529)
     Purchase of stock in Federal Home Loan Bank of Atlanta                       -        (250,000)
                                                                       ------------    ------------
              Net cash used by investment activities                     (4,846,547)     (6,091,106)

                                       34
</TABLE>
<PAGE>

                  WHG BANCSHARES CORPORATION AND SUBSIDIARY
                  -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

<TABLE>
<CAPTION>

                                                           Years Ended September 30,
                                                               2001           2000
                                                           -----------    -----------
<S>                                                      <C>            <C>
Cash Flows from Financing Activities
------------------------------------
     Net increase (decrease) in demand deposits, money
      market, passbook accounts and advances by
      borrowers for taxes and insurance                    $ 4,555,105    $  (822,461)
     Net increase in certificates of deposit                   346,003      5,319,840
     Increase in checks outstanding in excess
      of bank balance                                           18,868              -
     Net decrease in borrowings                             (2,000,000)             -
     Dividends on stock                                       (439,651)      (431,037)
     Stock repurchase                                           (5,008)             -
                                                           -----------    -----------
              Net cash provided by financing activities      2,475,317      4,066,342
                                                           -----------    -----------

Decrease in cash and cash equivalents                       (1,930,978)    (1,202,352)
Cash and cash equivalents at beginning of year               5,994,277      7,196,629
                                                           -----------    -----------

Cash and cash equivalents at end of year                   $ 4,063,299    $ 5,994,277
                                                           ===========    ===========

The following is a Summary of Cash and Cash Equivalents:
     Cash                                                  $   711,509    $ 1,720,707
     Interest bearing deposits in other banks                2,168,790        509,570
     Federal funds sold                                      1,183,000      3,764,000
                                                           -----------    -----------

Cash and cash equivalents                                  $ 4,063,299    $ 5,994,277
                                                           ===========    ===========
Supplemental Disclosure of Cash Flow Information:
     Cash paid during the year for:

         Interest                                          $ 7,816,396    $ 7,096,982
                                                           ===========    ===========

         Taxes                                             $   353,000    $   561,250
                                                           ===========    ===========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

                                       35

<PAGE>

                    WHG BANCSHARES CORPORATION AND SUBSIDIARY
                    -----------------------------------------
                              Lutherville, Maryland
                              ---------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                               SEPTEMBER 30, 2001
                               ------------------


Note 1 - Summary of Significant Accounting Policies
         ------------------------------------------

A.   Principles of Consolidation - The consolidated financial statements include
     the  accounts  of  WHG  Bancshares  Corporation  ("the  Company")  and  its
     wholly-owned  subsidiary,  Heritage  Savings Bank,  FSB ("the  Bank").  All
     intercompany   accounts  and  transactions  have  been  eliminated  in  the
     accompanying consolidated financial statements.

B.   Business - The Bank's primary business activity,  centered in the Baltimore
     metropolitan  area, is the  acceptance of deposits from the general  public
     and using the proceeds for investments and loan  originations.  The Bank is
     subject to  competition  from  other  financial  institutions.  The Bank is
     subject  to the  regulations  of certain  federal  agencies  and  undergoes
     periodic examinations by those regulatory authorities.

C.   Basis of Financial  Statement  Presentation  - The  consolidated  financial
     statements  have been prepared in  conformity  with  accounting  principles
     generally  accepted  in the United  States of  America.  In  preparing  the
     financial  statements,   management  is  required  to  make  estimates  and
     assumptions  that affect the reported  amounts of assets and liabilities as
     of the date of the  statement  of  financial  condition  and  revenues  and
     expenses for the period.  Actual  results could differ  significantly  from
     those estimates.  Material  estimates that are particularly  susceptible to
     significant  change in the  near-term  relate to the  determination  of the
     allowance for loan losses and the valuation of foreclosed real estate.  See
     Note H & I below for a discussion of the determination of that estimate.

D.   Federal Funds - Federal  funds sold are carried at cost which  approximates
     market.

E.   Investments -  Investments  classified as available for sale are carried at
     fair  value.  Investments  classified  as held to  maturity  are carried at
     amortized cost since  management has the ability and intent to hold them to
     maturity.  Amortization  of premiums  and  accretion  of  discounts  on all
     investment  purchases are computed using the straight-line  method over the
     life of debt instrument.

     Gains and losses on available for sale securities are determined  using the
     specific identification method.

                                       36
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------



Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------------------

F.   Mortgage  Backed  Securities - Mortgage  backed  securities  are carried at
     amortized cost since  management has the ability and intention to hold them
     to  maturity.  Amortization  of premiums  and  accretion  of  discounts  on
     purchases is computed using the interest method.

G.   Loans  Receivable - Net - Loans  receivable are stated at unpaid  principal
     balances,  less  undisbursed  portion  of  loans  in  process,  unamortized
     discounts  on  loans  purchased,  deferred  loan  origination  fees and the
     allowance for loan losses,  since  management has the ability and intention
     to hold them to maturity.

     Loans held for sale are  carried at the lower of cost or  estimated  market
     value,  determined  in the  aggregate.  In computing  cost,  deferred  loan
     origination  fees are deducted from the  principal  balances of the related
     loans. There were no loans held for sale at September 30, 2001 and 2000.

     The Bank services  loans for others and pays the  participant  its share of
     the Bank's collections,  net of a stipulated  servicing fee. Loan servicing
     fees are credited to income when earned and servicing  costs are charged to
     expense as incurred.

H.   Allowance  for Loan  Losses - An  allowance  for loan  losses  is  provided
     through  charges to income in an amount that  management  believes  will be
     adequate to absorb losses on existing loans that may become  uncollectible,
     based on  evaluations  of the  collectibility  of loans and prior loan loss
     experience. The evaluations take into consideration such factors as changes
     in the nature and volume of the loan portfolio,  overall portfolio quality,
     review of specific problem loans, and current economic  conditions that may
     affect  the  borrowers'  ability  to pay.  Determining  the  amount  of the
     allowance for loan losses  requires the use of estimates  and  assumptions,
     which is permitted under generally accepted accounting  principles.  Actual
     results  could  differ  significantly  from  those  estimates.   Management
     believes the  allowance for losses on loans is adequate.  While  management
     uses available information to estimate losses on loans, future additions to
     the  allowances may be necessary  based on changes in economic  conditions,
     particularly  in the State of  Maryland.  In addition,  various  regulatory
     agencies,  as an integral part of their examination  process,  periodically
     review the Bank's allowances for losses on loans. Such agencies may require
     the Bank to recognize  additions to the allowances based on their judgments
     about information available to them at the time of their examination.

                                       37
<PAGE>
WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------------------

H.   Statement of Financial Accounting Standards ("SFAS") No. 114, as amended by
     SFAS No. 118,  addresses  the  accounting  by creditors  for  impairment of
     certain loans. It is generally applicable for all loans except large groups
     of smaller balance  homogeneous  loans that are collectively  evaluated for
     impairment,  including  residential mortgage loans and consumer installment
     loans.  It also  applies to all loans that are  restructured  in a troubled
     debt restructuring involving a modification of terms. SFAS No. 114 requires
     that  impaired  loans be measured  based on the  present  value of expected
     future cash flows discounted at the loan's  effective  interest rate, or at
     the loan's  observable  market price or the fair value of the collateral if
     the loan is collateral dependent. A loan is considered impaired when, based
     on current  information and events,  it is probable that a creditor will be
     unable to collect all amounts due according to the contractual terms of the
     loan agreement.

     Accrual of interest is  discontinued  on a loan when  management  believes,
     after considering  economic and business conditions and collection efforts,
     that the borrower's financial condition is such that collection of interest
     is doubtful.  When a payment is received on a loan on  non-accrual  status,
     the amount  received is allocated to principal  and interest in  accordance
     with the contractual terms of the loan.

     Loan  origination  fees and  certain  direct  loan  origination  costs  are
     deferred and are  recognized  by the interest  method over the  contractual
     life of the related loan as an adjustment of yield.

     Premiums and discounts on loans purchased are recognized in income over the
     estimated life of the related loans using the level yield method.

I.   Foreclosed Real Estate - Real estate acquired  through or in the process of
     foreclosure  is  recorded  at the lower of cost or fair  value.  Management
     periodically evaluates the recoverability of the carrying value of the real
     estate acquired through  foreclosure using estimates as described under the
     caption "Allowance for Loan Losses".  In the event of a subsequent decline,
     management provides an additional  allowance to reduce real estate acquired
     through  foreclosure to fair value less estimated  disposal cost.  Expenses
     incurred on  foreclosed  real estate  prior to  disposition  are charged to
     expense.  Gains on the sale of foreclosed  real estate are recognized  upon
     disposition of the property.

                                       38

<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------------------

J.   Premises and  Equipment - Premises and  equipment  are carried at cost less
     accumulated  depreciation.  Depreciation  and  amortization of premises and
     equipment are accumulated by the use of the  straight-line  method over the
     estimated  useful  lives of the  assets.  Additions  and  improvements  are
     capitalized,  and charges for repairs and  maintenance  are  expensed  when
     incurred. The related cost and accumulated depreciation are eliminated from
     the  accounts  when an asset is sold or retired and the  resultant  gain or
     loss is credited or charged to income.

K.   Defined  Benefit  Pension Plan - The Bank  accounts for its Pension Plan in
     accordance with Statement of Financial Accounting Standards No. 87. Funding
     is limited to amounts that are available  for deduction  under the Internal
     Revenue Code (See Note 10).

L.   Employee Stock Ownership Plan - The Company accounts for its Employee Stock
     Ownership  Plan ("ESOP") in accordance  with  Statement of Position 93-6 of
     the Accounting  Standards  Division of the American  Institute of Certified
     Public Accountants. (See Note 11)

M.   Stock-Based  Compensation  - SFAS  No.  123,  "Accounting  for  Stock-Based
     Compensation"  defines a "fair value  based  method" of  accounting  for an
     employee  stock option whereby  compensation  cost is measured at the grant
     date  based on the value of the award and is  recognized  over the  service
     period.  FASB encourages all entities to adopt the fair value based method,
     however, it will allow entities to continue the use of the "intrinsic value
     based method" prescribed by Accounting Principles Board ("APB") Opinion No.
     25. Management decided to continue using the "intrinsic value based method"
     as prescribed by APB Opinion No. 25.

N.   Income  Taxes  -  Deferred   income  taxes  are  recognized  for  temporary
     differences  between the financial  reporting basis and income tax basis of
     assets and liabilities  based on enacted tax rates expected to be in effect
     when such  amounts  are  realized  or  settled.  Deferred  tax  assets  are
     recognized  only to the  extent  that is more  likely  than not  that  such
     amounts will be realized based on consideration of available evidence.  The
     effect on deferred tax assets and  liabilities  of a change in tax rates is
     recognized in income in the period that includes the enactment date.

                                       39
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------------------

O.   Statement  of  Cash  Flows  - In the  statement  of cash  flows,  cash  and
     equivalents  include  cash,  Federal  Home Loan Bank of  Atlanta  overnight
     deposits,  federal  funds and  certificates  of  deposit  with an  original
     maturity date less than ninety days.

P.   Basic EPS is computed by dividing net income by the weighted average number
     of common shares  outstanding  for the  appropriate  period.  Unearned ESOP
     shares are not included in outstanding  shares.  Diluted EPS is computed by
     dividing net income by the weighted average shares  outstanding as adjusted
     for the dilutive effect of stock options and unvested stock awards based on
     the "treasury stock" method. Information relating to the calculation of net
     income  per  share  of  common  stock is  summarized  for the  years  ended
     September 30, as follows:

                                                         2001            2000
                                                      ----------      ----------

               Net income                             $  405,880      $  800,324
                                                      ==========      ==========
               Weighted Average Shares
                  Outstanding basic EPS                1,203,603       1,169,120
               Dilutive Items
                  Stock options                           22,320               -
                  Unvested stock awards                        -               -
                                                       ---------       ---------
               Adjusted weighted average shares
                used for dilutive EPS                  1,225,923       1,169,120
                                                       =========       =========

                                       40

<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 2 - Investments Available for Sale
         ------------------------------

         The amortized cost and fair values of investments available for sale at
are as follows:

                                        Gross         Gross
                         Amortized    Unrealized    Unrealized       Fair
                           Cost         Gains         Losses         Value
                        -----------   -----------   -----------   -----------
September 30, 2001
------------------
Equity investments      $   356,198   $         -   $    47,498   $   308,700
Federal Home Loan
 Bank Bonds              15,018,601        67,443             -    15,086,044
Federal Home Loan
 Mortgage Corporation
 Bonds                    3,249,181           819             -     3,250,000
                        -----------   -----------   -----------   -----------
                        $18,623,980   $    68,262   $    47,498   $18,644,744
                        ===========   ===========   ===========   ===========

September 30, 2000
------------------
Equity investments      $   544,324   $         -   $   190,690   $   353,634
Federal Home Loan
 Bank Bonds              17,493,485             -     1,400,174    16,093,311
Federal Home Loan
 Mortgage Corporation
  Bonds                   3,249,114             -       256,847     2,992,267
                        -----------   -----------   -----------   -----------
                        $21,286,923   $         -   $ 1,847,711   $19,439,212
                        ===========   ===========   ===========   ===========

         During the year ended September 30, 2001, the Company received proceeds
of $189,269 from the sale of investments that resulted in gross gains of $1,144.
During  the  year  ended  September  30,  2000,  the  Company  did not  sell any
investments.

         The equity  investments  have no stated maturity and all of the Federal
Home Loan Bank and Federal Home Loan  Mortgage  Corporation  Bonds have a stated
maturity date of ten years or more.

                                       41
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 3 - Other Investments - Held to Maturity
         ------------------------------------

         The amortized cost and fair values of other investments are as follows:

<TABLE>
<CAPTION>
                                             Gross         Gross
                              Amortized    Unrealized    Unrealized       Fair
                                Cost         Gains         Losses         Value
                             -----------   -----------   -----------   -----------
<S>                        <C>           <C>           <C>           <C>
September 30, 2001
------------------
Federal National Mortgage
 Association  Bonds          $ 2,750,000   $    13,250   $         -   $ 2,763,250
Federal Home Loan
 Bank Bonds                    7,750,000        44,500             -     7,794,500
Federal Home Loan Mortgage
  Corporation Bonds            1,500,000             -             -     1,500,000
                             -----------   -----------   -----------   -----------
                             $12,000,000   $    57,750   $         -   $12,057,750
                             ===========   ===========   ===========   ===========

September 30, 2000
------------------
Federal National Mortgage
 Association  Bonds          $ 2,750,000   $         -   $   199,337   $ 2,550,663
Federal Home Loan
 Bank Bonds                   11,300,000             -       835,326    10,464,674
Federal Home Loan Mortgage
  Corporation Bonds            1,600,000             -       129,206     1,470,794
                             -----------   -----------   -----------   -----------
                             $15,650,000   $         -   $ 1,163,869   $14,486,131
                             ===========   ===========   ===========   ===========
</TABLE>

         No gains or losses were realized  during the years ended  September 30,
2001 or 2000.

         The scheduled maturities of other investments at September 30, 2001:


                                           Amortized             Fair
                                             Cost                Value
                                          -----------          -----------
Due after five years through ten years    $   250,000          $   259,250
Due after ten years                        11,750,000           11,798,500
                                          -----------          -----------
                                          $12,000,000          $12,057,750
                                          ===========          ===========

                                       42
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 4 - Mortgage Backed Securities

         The amortized cost and fair value of mortgage backed  securities are as
follows:

<TABLE>
<CAPTION>
                                                   Gross         Gross
                                    Amortized    Unrealized    Unrealized       Fair
                                      Cost         Gains         Losses         Value
                                   -----------   -----------   -----------   -----------
<S>                              <C>           <C>           <C>           <C>
September 30, 2001
------------------
FHLMC participating certificates   $ 1,374,807   $    35,526   $        --   $ 1,410,333
GNMA participating certificates     11,937,052       244,661        13,966    12,167,747
FNMA participating certificates        685,707        15,412            --       701,119
                                   -----------   -----------   -----------   -----------
                                   $13,997,566   $   295,599   $    13,966   $14,279,199
                                   ===========   ===========   ===========   ===========

September 30, 2000
------------------
FHLMC participating certificates   $ 1,615,533   $        --   $    57,779   $ 1,557,754
GNMA participating certificates     14,087,170         2,868       555,278    13,534,760
FNMA participating certificates        748,445            --        26,550       721,895
                                   -----------   -----------   -----------   -----------
                                   $16,451,148   $     2,868   $   639,607   $15,814,409
                                   ===========   ===========   ===========   ===========
</TABLE>

         No gains or losses were realized  during the years ended  September 30,
2001 and 2000.

                                       43
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 5 - Loans Receivable
         ----------------

         Loans  receivable  at  September  30,  2001  and  2000  consist  of the
following:

                                                      2001             2000
                                                -------------    -------------
One to four family residential mortgage loans   $  72,731,246    $  72,225,058
Multifamily residential mortgage loans              6,157,341        3,832,379
Commercial mortgage loans                          16,398,224        9,915,566
Construction loans                                  8,446,000        6,592,205
Lines of credit                                     4,993,196        1,596,872
Home equity lines of credit                         3,650,485        2,868,228
Land/lot loans                                        669,957          210,302
Home improvement loans                                  2,163            3,443
Consumer loans                                      2,044,909        2,689,749
Share loans                                           487,415          399,212
Commercial loans secured by lease
 finance receivables                                   49,128          171,059
                                                -------------    -------------
                                                  115,630,064      100,504,073

Less - undisbursed portion of loans
           in process                              (3,933,433)      (2,124,623)
         - unamortized discount                      (476,148)        (601,230)
         - deferred loan origination fees            (537,146)        (472,584)
         - unearned insurance commissions                (500)            (976)
         - allowance for loan losses                 (407,600)        (395,212)
                                                -------------    -------------
                                                $ 110,275,237    $  96,909,448
                                                =============    =============

         The following is a summary of the allowance for loan losses:

                                                        September 30,
                                                ------------------------------
                                                     2001             2000
                                                -------------    -------------
Beginning balance                               $     395,212    $     344,907
Provision for loan losses                              30,000          120,000
Charge-offs                                           (17,612)         (69,695)
                                                -------------    -------------
Balance end                                     $     407,600    $     395,212
                                                =============    =============

                                       44
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 5 - Loans Receivable - Continued

         Residential  lending is generally  considered to involve less risk than
other forms of lending,  although payment experience on these loans is dependent
to some extent on economic and market  conditions  in the Bank's  lending  area.
Multifamily residential,  commercial, construction and other loan repayments are
generally dependent on the operations of the related properties or the financial
condition of its borrower or guarantor. Accordingly, repayment of such loans can
be more  susceptible  to adverse  conditions  in the real estate  market and the
regional economy.

         Substantially  all of the Bank's loans  receivable  are mortgage  loans
secured by residential  and  commercial  real estate  properties  located in the
State of Maryland.  Loans are extended  only after  evaluation  by management of
customers'  creditworthiness and other relevant factors on a case-by-case basis.
The Bank  generally  does not lend  more  than 95% of the  appraised  value of a
property and requires private mortgage  insurance on residential  mortgages with
loan-to-value  ratios in excess of 80%. In addition,  the Bank generally obtains
personal  guarantees of repayment from borrowers  and/or others for  multifamily
residential,  commercial  and  construction  loans and disburses the proceeds of
construction and similar loans only as work progresses on the related projects.

         There were no  impaired  loans as defined by SFAS No. 114 at  September
30, 2001 and 2000.  There was no interest  income  recognized on impaired  loans
during those periods.

         Non-accrual  loans  that  are not  subject  to SFAS No.  114 for  which
interest  has been  reduced  totaled  approximately  $300,176  and  $243,797  at
September 30, 2001 and 2000.

         Interest  income that would have been recorded under the original terms
of such loans and the interest actually recognized for the years ended September
30, are summarized below:

                                                     2001                 2000
                                                   -------              -------
Interest income that would have
been recognized                                    $22,912              $21,530
Interest income recognized                           4,405               13,477
                                                   -------              -------

Interest income not recognized                     $18,507              $ 8,053
                                                   =======              =======

                                       45
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 5 - Loans Receivable - Continued
         ----------------

         Loans outstanding to officers and directors and their affiliates of the
Bank at September 30, 2001 and 2000:

Balance At              Balance At                         Balance At
September    Loans      Principal     September   Loans    Principal  September
30, 2001     Made       Repayment     30, 2000    Made     Repayment  30, 1999
--------     ----       ---------     --------    ----     ---------  --------
$1,618,593  $194,473   $109,955     $1,534,075  $138,089   $121,277   $1,517,263

         Mortgage loans serviced for others are not included in the accompanying
statements of financial condition.  The unpaid principal balances of these loans
at September 30, are summarized as follows:

                                                     2001            2000
                                                  ----------      ----------
    Mortgage loan portfolios serviced for:
       Other investors                            $3,798,926      $5,238,440
                                                  ==========      ==========

         Custodial  Escrow balances  maintained in connection with the foregoing
loan servicings were approximately $12,550 and $17,544 at September 30, 2001 and
2000.

         Unless otherwise noted, the Bank requires  collateral or other security
to support financial instruments with off-balance-sheet credit risk.

Financial Instruments Whose Contract              Contract Amount
Amounts Represent Credit Risk                     At September 30,
                                         -----------------------------
                                             2001               2000
                                         -----------        ----------
Loan commitments                         $15,198,150        $  230,000
Unused lines of credit                     3,988,820         2,225,534

         Mortgage loan commitments not reflected in the  accompanying  financial
statements  at  September  30,  2001  are  for  fixed  rate  mortgages  totaling
$12,388,150  ranging from 6.25% to 8.25% and variable  rate  mortgages  totaling
$2,810,000 ranging from 6.25% to 6.70%.

         Mortgage loan commitments not reflected in the  accompanying  financial
statements at September 30, 2000 are for a fixed rate mortgage  totaling $50,000
at 9.0% and  variable  rate  mortgages  totaling  $180,000  ranging from 9.5% to
10.5%.

                                       46
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 5 - Loans Receivable - Continued
         ----------------

         Lines of credit are loan  commitments to individuals  and companies and
have fixed  expiration  dates as long as there is no violation of any  condition
established  in  the  contract.   The  Bank  evaluates  each  customer's  credit
worthiness on a case-by-case basis.

         The credit risk involved in these financial  instruments is essentially
the same as that involved in extending loan  facilities to customers.  No amount
has been  recognized  in the  statement of financial  condition at September 30,
2001 as a liability for credit loss.

Note 6 - Investment in Federal Home Loan Bank of Atlanta Stock
         -----------------------------------------------------

         The Bank is  required to  maintain  an  investment  in the stock of the
Federal Home Loan Bank of Atlanta  ("FHLB") in an amount equal to at least 1% of
the unpaid principal balances of the Bank's  residential  mortgage loans or 1/20
of its outstanding advances from the FHLB,  whichever is greater.  Purchases and
sales of stock are made directly with the FHLB at par value.

Note 7 - Premises and Equipment
         ----------------------

         Premises and equipment at September 30, 2001 and 2000 are summarized by
major classification as follows:

                                                                 Useful Life
                                         2001           2000      in Years
                                    -----------     ----------   -----------
Land                                $   224,056    $   224,056        --
Office buildings                        688,159        602,549      5-50
Leasehold improvements                  500,726        375,728        20
Furniture, fixtures and equipment     1,055,471      1,097,057      3-20
                                    -----------     ----------
                                      2,468,412      2,299,390
   Accumulated depreciation          (1,089,271)    (1,045,625)
                                    -----------     ----------
                                    $ 1,379,141     $1,253,765
                                    ===========     ==========

                                       47
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 7 - Premises and Equipment - Continued
         ----------------------------------

         The provision for depreciation for the periods ended September 30, 2001
and 2000 was $153,251 and $138,291, respectively.

         The Bank has entered into several  operating leases for the premises of
its branch  offices.  Rental  expense  under  these  leases for the years  ended
September 30, 2001 and 2000 was $91,358 and $88,430,  respectively. At September
30, 2001,  the minimum rental  commitments  under  noncancellable  leases are as
follows:

        Year Ended September 30,                    Total
        ------------------------                    -----
                   2002                         $   83,635
                   2003                             82,435
                   2004                             84,835
                   2005                             88,615
                   2006                            105,995
                   Thereafter                    1,190,520
                                                ----------

                                                $1,636,035
                                                ==========

Note 8 - Deposits
         --------

         Deposits are summarized as follows at September 30:

                                         2001                    2000
                                 ---------------------  -----------------------
                                             Weighted-               Weighted-
                                              Average                 Average
Type of Account                    Amount      Rate        Amount       Rate
---------------                    ------      ----        ------       ----
NOW and money market
 accounts including
 non-interest bearing deposits
 of $47,140 in 2001 and
 $570,669 in 2000               $ 15,893,381    1.75%   $ 11,333,337    2.85%
Passbook savings                  15,417,999    3.05%     15,429,951    3.04%
Certificates of deposit           93,627,154    6.08%     93,281,151    6.00%
                                 124,938,534             120,044,439
Accrued interest                         419                     425
                                ------------            ------------
                                $124,938,953            $120,044,864
                                ============            ============

                                       48
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 8 - Deposits Continued
         --------

         The  aggregate  amount  of  certificates  of  deposit  with  a  minimum
denomination  of $100,000  was  approximately  $10,746,203  and  $10,139,329  at
September  30, 2001 and 2000.  Deposits in excess of $100,000 are not insured by
the Savings Association Insurance Fund.

                                                      2001              2000
                                                   -----------      -----------
                                                      Amount           Amount
                                                   -----------      -----------
    Certificates accounts mature as follows:
       One year or less                            $43,678,129      $43,312,986
       More than 1 year through 2 years             35,241,863       21,121,405
       More than 2 years through 3 years            11,013,738       18,282,972
       More than 3 years through 4 years             1,753,915        8,834,257
       More than 4 years through 5 years             1,927,190        1,729,531
       More than 5 years                                12,319                -
                                                   -----------      -----------
                                                   $93,627,154      $93,281,151
                                                   ===========      ===========

         Interest  expense on  deposits is  summarized  as follows for the years
ended September 30:

                                                      2001             2000
                                                  ------------      -----------
              Certificates                         $ 5,654,903      $ 5,035,598
              NOW and money market                     378,735          270,743
              Passbook                                 470,381          467,664
                                                  ------------      -----------
                                                  $  6,504,019      $ 5,774,005
                                                  ============      ===========

Note 9 - Borrowings
         ----------

         The Company's borrowings at September 30 are as follows:

                                                      2001            2000
                                                  -----------       -----------
    Short-term Federal Home Loan Bank advances    $  2,750,000$     $         -
    Long-term Federal Home Loan Bank advances       19,250,000       24,000,000
                                                  -----------       -----------
    Total                                         $22,000,000       $24,000,000
                                                  ===========       ===========

                                       49
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------



Note 9 - Borrowings - Continued
         ----------

         Federal  Home Loan Bank  advances at  September  30, 2001  consist of a
short term adjustable rate advance bearing  interest at 3.81% per annum and long
term fixed rate advances bearing interest at 4.89% to 6.33% per annum.

         Federal Home Loan Bank advances at September 30, 2000 consist of a long
term adjustable  rate advance bearing  interest at 6.78% per annum and long term
fixed rate advances bearing interest at 4.89% to 6.33% per annum.

         The Bank's stock in the Federal Home Loan Bank of Atlanta is pledged as
security for the loan and under a blanket floating lien security  agreement with
the  Federal  Home Loan Bank of  Atlanta,  the Bank is  required  to maintain as
collateral for its advances, qualified home mortgage loans in an amount equal to
175% of the advances.

         Aggregate  maturities  required on Federal  Home Loan Bank  advances at
September 30, 2001 are as follows:

                   September 30, 2002                    $ 2,750,000
                   September 30, 2004                      1,250,000
                   After September 30, 2006               18,000,000
                                                         -----------
                         Total                           $22,000,000
                                                         ===========

         At September  30, 2001 and 2000,  the Bank had a $5.0  million  secured
bank line of credit that is subject to termination at either party's discretion.
There were no borrowings  outstanding under this agreement at September 30, 2001
and 2000.

Note 10 - Pension Plan
          ------------

         During the year ended  September  30, 2001,  the Bank adopted a defined
contribution  pension plan that covers  substantially  all employees of the Bank
and incurred $11,500 of related  expense.  The basis for determining the funding
is 7.5% of compensation.

                                       50

<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
Lutherville, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001


Note 10 - Pension Plan - Continued
          ------------

         As of July 31, 2001,  the Bank  terminated,  pending IRS approval,  the
defined benefit pension plan.  This led to a pretax  curtailment  loss under the
provisions of Statement of Financial  Accounting  Standards No. 88,  "Employers'
Accounting for Settlements and curtailments of Defined Benefit Pension Plans and
for Termination Benefit" (SFAS 88), of $189,035 ($.16 per share).

         Substantially   all   employees   of  the  Bank  are   included   in  a
non-contributory  defined  benefit  pension  plan.  The Bank's policy is to fund
pension costs accrued. There were no unfunded or unamortized prior service costs
at September 30, 2001 and 2000.  The costs of funding this plan were $39,119 and
$35,585 for the years ended September 30, 2001 and 2000, respectively.

         The  following  table sets forth the plan's  related costs at September
30:

                                                   2001                 2000
                                                 --------             --------
              Service cost                      $  32,158             $ 29,253
              Interest cost                        61,897               66,023
              Actual return on plan assets        (34,314)             (67,994)
              Other components                    (23,710)               8,303
              Curtailment loss                    189,035                    -
                                                 --------             --------
              Net period pension costs           $225,066             $ 35,585
                                                 ========             ========

         The  following  table sets forth the plan's  funded status at September
30:

                                                             2001       2000
                                                          ---------   ---------
           Accumulated benefit obligation                 $ 243,874   $ 644,250
                                                          =========   =========

           Projected benefit obligation                     243,874   $ 901,668
           Fair value of plan assets as of September 30     268,842     863,662
           Plan assets in excess (deficit) of projected
            benefit obligation                               24,968     (38,006)
           Unrecognized net loss                                  -     244,507
           Unrecognized net transition obligation                 -       1,621
                                                          ---------   ---------
                  Prepaid pension cost                    $  24,968   $ 208,122
                                                          =========   =========

                                       51
<PAGE>


WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 10 - Pension Plan - Continued
          ------------

                                                         2001        2000
                                                     ---------    ---------
Reconciliation of Projected Benefit Obligation
----------------------------------------------
   Projected benefit obligation beginning of year    $ 901,668    $ 882,248
   Interest cost for the fiscal year                    61,897       66,023
   Service cost for the fiscal year                     32,158       29,253
   Benefit payments for the fiscal year               (666,309)     (71,375)
   Actuarial gain for the fiscal year                  (85,540)      (4,481)
                                                     ---------    ---------
   Projected benefit obligation as of September 30
    before settlement                                  243,874      901,668
   Effect of settlement                                      -            -
                                                     ---------    ---------
   Projected benefit obligation as of September 30
    after settlement                                 $ 243,874    $ 901,668
                                                     =========    =========

         The following interest rate assumptions were used for September 30:

                                                          2001         2000
                                                          ----         ----
   Weighted-average discount rate                         5.50%        7.75%
   Long term rate of return                               7.75%        8.00%
   Rate of compensation increase                             -%        5.00%

Note 11 - Common Stock and Stock Benefit Plans
          ------------------------------------

         In 1996, the Bank converted from a federally  chartered  mutual savings
bank to a federally  chartered  stock  savings  bank.  Simultaneously,  the Bank
consummated the formation of a new holding company, WHG Bancshares  Corporation,
of  which  the  Bank  is a  wholly-owned  subsidiary.  In  connection  with  the
conversion, the Company issued 1,620,062 shares of its common stock.

         The Bank has established an Employee Stock Ownership Plan ("ESOP"), and
acquired  129,604  shares of the  Company's  common  stock.  The Employee  Stock
Ownership Plan  purchased  30,616  additional  shares with the proceeds from the
special  distribution.  Funds used to acquire the initial  shares were  borrowed
from the  Company  by the ESOP  with a direct  loan from the  Company  requiring
annual payments of $129,604. During the fiscal year ended September 30, 1998 the
Company  assigned the loan to a third party.  During  February 1999, the Company
exercised its option to repurchase the loan.

                                       52
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 11- Common Stock and Stock Benefit Plans - Continued
         ------------------------------------------------

         The ESOP  holds  the  common  stock  in a Trust  for  allocation  among
participating employees.

         All  employees of the Bank who have  completed  one year of service and
attained the age of 21 are  eligible to  participate.  Participants  will become
100%  vested in their  accounts  after five  years of  service  with the Bank or
earlier upon death, disability or retirement.

         The ESOP is funded by contributions  made by the Bank in cash or common
stock  and  dividends  on the  shares  held in the  Trust.  The Bank  recognizes
compensation  expense as shares are  committed  for release from  collateral  at
their  current  market  price.  Dividends on allocated  shares are recorded as a
reduction of retained earnings and dividends on unallocated  shares are recorded
as a reduction of debt.  Compensation cost for the year ended September 30, 2001
and 2000 was $205,237 and $165,638, respectively.

         All ESOP shares  contain a "Put Option"  which  requires the Company to
repurchase  the share at the then fair market value subject to the  availability
of  retained  earnings.  The "Put  Option"  may be  exercised  within 60 days of
distribution  of the shares and then again  within 60 days after the fair market
value determination date of the next plan year. The current fair market value of
shares that have been allocated contain a "Put Option" of $1,063,257.

         The ESOP shares as of September 30 were as follows:

                                                           2001       2000
                                                         --------   --------
         Allocated shares                                  93,350     90,360
         Shares earned, but unallocated                     2,730      2,832
         Unearned shares                                   46,077     69,969

         Fair value of unearned shares at September 30   $524,822   $572,906

                                       53
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 11 - Common Stock and Stock Benefit Plans - Continued
          ------------------------------------------------

         The Company has a Stock Option Plan (the "Plan") whereby 183,058 shares
of common stock have been reserved for issuance under the Plan.  Options granted
under the Plan may be Incentive  Stock Options within the meaning of Section 422
of the Internal Revenue Code of 1986 as amended or Non-Incentive  Stock Options.
Options are  exercisable  in five  annual  installments  at the market  price of
common  stock at the date of grant.  The Options  must be  exercised  within ten
years from the date of grant.  During the year ended  September  30,  1997,  the
Company granted options to purchase  162,006 shares at a weighted  average price
of $13.30 per share.  Such  shares and fair value have been  adjusted to 183,058
shares  at a  weighted  average  price of  $11.77  for the  effect  of a special
distribution.  During the year ended  September  30, 2001,  the Company  granted
options to purchase 6,588 shares at a weighted average price of $8.125.

         The Company has a Stock  Option Plan (the "2000  Plan")  where  109,000
shares of common stock have been reserved for issuance  under the Plan.  Options
granted  under the Plan may be  Incentive  Stock  Options  within the meaning of
Section 422 of the  Internal  Revenue  Code of 1986 as amended or  Non-Incentive
Stock Options.  During the year ended  September 30, 2001,  the Company  granted
options to purchase  109,000  shares at a weighted  average  price of $8.125 per
share. Of the granted options,  70,040 are exercisable on the date of grant, the
remaining  options are  exercisable in three annual  installments  at the market
price of common stock at the date of grant. The Options must be exercised within
ten years from the date of grant.

         SFAS No. 123, "Accounting for Stock-Based  Compensation",  requires the
Company to make certain  disclosures  as if the fair value method of  accounting
had been applied to the Company's  stock option grants made  subsequent to 1994.
Accordingly,  the  Company  estimated  the grant date fair value of each  option
awarded in fiscal 2001 using the  Black-Scholes  Option  Pricing  model with the
following relevant assumptions:  dividend yield of 3.0%, risk-free interest rate
of 5.77% and expected lives of 10 years. The assumption for expected  volatility
was 35.16%.  Had 2001 compensation  cost been determined  including the weighted
average  estimate of fair value of each option  granted of $3.04,  the Company's
net income would be reduced to proforma amount of $253,010.  Proforma  earnings,
basic and diluted, per share would have been $.21 in fiscal 2001.

                                       54
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 11 - Common Stock and Stock Benefit Plans - Continued
          ------------------------------------------------

         The  following  table  summarizes  the  status  of and  changes  in the
Company's stock option plan during the past two years, as retroactively adjusted
for the Company's special distribution.

                                                                       Weighted
                                                                       Average
                                                                       Exercise
                                                            Shares      Price
                                                            ------      -----

        Outstanding at September 30, 1999                  180,752      11.78
        Forfeited options                                   (4,282)     11.71
                                                           -------
        Outstanding at September 30, 2000                  176,470      11.78
        Granted                                            115,588       8.125
                                                           -------
        Outstanding at September 30, 2001                  292,058      10.33
                                                           =======
        Exercisable at September 30, 2001                  213,404      10.58
                                                           =======

         The following  tables  summarize stock option  information at September
30, 2001:

                         Options Outstanding
--------------------------------------------------------------------------
   Range of        Number of      Weighted Average        Weighted Average
Exercise Price      Options       Contractual Life         Exercise Price
--------------      -------       ----------------         --------------

$8.125               115,588       9.13 years                 $  8.125
 11.17 - 12.10       176,470       5.03 years                   11.79
                     -------
 8.125 - 12.10       292,058       7.26 years                   10.33
                     =======

             Options Exercisable
--------------------------------------------------
   Range of        Number of      Weighted Average
Exercise Price      Options        Exercise Price
--------------      -------        --------------
$8.125                70,040       $  8.125
 11.17 - 12.10       143,364          11.78
                     -------
 8.125 - 12.10       213,404          10.58
                     =======

                                       55
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 11 - Common Stock and Stock Benefit Plans - Continued
          ------------------------------------------------

         The Company has  established a Management  Stock Bonus Plan (the "Stock
Bonus Plan" or "MSBP") to encourage  directors,  officers  and key  employees to
remain in the service of the Bank.  Up to 64,802  shares of common  stock may be
awarded under the terms of the Stock Bonus Plan.  Shares of common stock awarded
under  the plan  vest in five  annual  installments  at a rate of 20% each  year
following  the date of grant.  On October 8,  1996,  awards of 55,860  shares of
common stock were granted. On November 22, 1996, the Bank funded the purchase of
64,802  shares of its common  stock at a price of $13.62 to  provide  shares for
distribution under the Stock Bonus Plan.

Note 12 - Retained Earnings
          -----------------

         The  Bank  is  subject  to  various  regulatory  capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate   certain   mandatory,   and  possible   additional
discretionary,  actions by the  regulators  that,  if  undertaken,  could have a
direct  material  effect  on the  Bank's  financial  statements.  Under  capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Bank  must  meet  specific  capital  guidelines  that  involve  quantitative
measures of the Bank's assets, liabilities,  and certain off-balance sheet items
as calculated under regulatory accounting practices.  The Bank's capital amounts
and classifications 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 Bank to maintain  minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the regulations) and
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management  believes,  as of September 30, 2001,  that the
Bank meets all capital adequacy requirements to which it is subject.

         As of September 30, 2001, the most recent  notification from the Office
of  Thrift  Supervision  categorized  the  Bank as well  capitalized  under  the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized the Bank must maintain minimum total risk-based,  Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management  believes have changed the Bank's
category. The Bank's actual capital amounts and ratios are also presented in the
table.

                                       56
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 12 - Retained Earnings - Continued
          -----------------------------

<TABLE>
<CAPTION>
                                                                               To Be Well
                                                                           Capitalized Under
                                                     For Capital           Prompt Corrective
                                Actual            Adequacy Purposes        Action Provisions
                         -------------------      -----------------        -----------------
                           Amount         %        Amount        %          Amount        %
                         ----------     ----      ---------     ---        ---------    ----
 <S>                   <C>              <C>     <C>            <C>      <C>
September 30, 2001
------------------
 Tangible (1)           $15,572,000      9.5%    $2,451,690     1.5%     $       N/A     N/A%
 Tier I capital (2)      15,572,000     18.4%           N/A     N/A%       5,081,940     6.0%
 Core (1)                15,572,000      9.5%     6,537,840     4.0%       8,172,300     5.0%
 Risk-weighted (2)       15,891,000     18.8%     6,775,920     8.0%       8,469,900    10.0%

September 30, 2000
------------------
 Tangible (1)           $14,770,000      9.2%    $2,410,410     1.5%     $       N/A     N/A%
 Tier I capital (2)      14,770,000     20.3%           N/A     N/A%       4,374,300     6.0%
 Core (1)                14,770,000      9.2%     6,427,760     4.0%       8,034,700     5.0%
 Risk-weighted (2)       15,089,000     20.7%     5,832,400     8.0%       7,290,500    10.0%
</TABLE>

        (1)  To adjusted total assets.
        (2)  To risk-weighted assets.

Note 13- Income Taxes

                   The income tax provision consists of the following:

                                                      For Years Ended
                                                        September 30,
                                                -----------------------------
                                                  2001                  2000
                                                --------             --------
              Current
              -------
                 Federal                        $312,301             $400,469
                 State                            77,292              102,785
                                                --------             --------
                                                 389,593              503,254

              Deferred
              --------
                 Federal                         (94,020)              13,802
                 State                           (20,813)               3,054
                                                --------             --------
                                                (114,833)              16,856
                                                --------             --------

                                                $274,760             $520,110
                                                ========             ========

                                       57
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 13 - Income Taxes - Continued
          ------------

         The amount  computed by applying the statutory  federal income tax rate
to income  before  taxes  differs  from the  taxes  provided  for the  following
reasons:

                                             Years Ended September 30,
                                      ------------------------------------------
                                             2001                    2000
                                      ---------------------  -------------------
                                                   Percent               Percent
                                                  of Pretax            of Pretax
                                      Amount       Income      Amount    Income
                                      ------       ------      ------    ------
Tax at statutory rate               $231,418        34.00    $448,948     34.00
Increases (Decreases)
 Resulting From
 --------------
   State income tax net of
    federal income tax benefit        37,276         5.48      69,854      5.29
   Other                               6,066          .90       1,308       .10
                                    --------        -----    --------     -----
                                    $274,760        40.38    $520,110     39.39
                                    ========        =====    ========     =====

         The tax effects of temporary  differences that give rise to significant
portions of the deferred tax assets and  deferred tax  liabilities  at September
30, 2001 and 2000 are presented below:

                                            2001         2000
                                          --------    ---------
Deferred Tax Assets:
   Deferred loan origination fees         $207,115   $  182,512
   Allowance for loan losses               157,415      152,631
   Reserve for uncollected interest          7,147        1,948
   ESOP contribution                         8,331        8,331
   Net unrealized holding losses              --        713,586
   Other                                    49,302       64,752
                                           -------    ---------
      Total gross deferred tax assets      429,310    1,123,760
                                           =======    =========

                                       58
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 13 - Income Taxes - Continued
          ------------

                                                 2001       2000
                                             --------   --------
Deferred Tax Liabilities:
   Tax reserve for bad debts in excess of
    base year amount                         $      -   $ 24,964
   Federal Home Loan Bank of Atlanta stock
    dividends                                  56,965     56,965
   Depreciation                                24,865     24,865
   Pension plan                                 9,643     80,377
   Net unrealized holding gains                 8,019          -
                                             --------   --------
      Total gross deferred tax liabilities     99,492    187,171
                                             --------   --------
            Net deferred tax assets          $329,818   $936,589
                                             ========   ========

         Qualified thrift lenders such as the Bank are not required to provide a
deferred tax  liability  for bad debt  reserves  for tax purposes  that arose in
fiscal years  beginning  before December 31, 1987. Such bad debt reserve for the
Bank  amounted  to  approximately  $2,022,261  with  an  income  tax  effect  of
approximately $780,997 at September 30, 2001. This bad debt reserve would become
taxable if certain conditions are met by the Bank.

         The  Company  and its  Subsidiary  file their  income tax  returns on a
fiscal year basis.

Note 14 - Disclosure About Fair Value of Financial Instruments
          ----------------------------------------------------

         The  estimated  fair  values of the Bank's  financial  instruments  are
summarized  below.  The fair values of a significant  portion of these financial
instruments are estimates  derived using present value techniques  prescribed by
the FASB and may not be indicative of the net realizable or liquidation  values.
Also, the calculation of estimated fair values is based on market  conditions at
a specific point in time and may not reflect current or future fair values.

                                       59
<PAGE>

WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 14 - Disclosure About Fair Value of Financial Instruments - Continued
          ----------------------------------------------------------------

         The carrying  amount is a  reasonable  estimate of fair value for cash,
federal funds, interest-bearing deposits in other banks and securities purchased
under  agreements to resell due to the short-term  nature of these  investments.
Fair  value is based  upon  market  prices  quoted  by  dealers  for  investment
securities and mortgage backed  securities.  The carrying amount of Federal Home
Loan  Bank of  Atlanta  stock is a  reasonable  estimate  of fair  value.  Loans
receivable were discounted  using a single discount rate,  comparing the current
rates at which  similar  loans would be made to borrowers  with  similar  credit
ratings  and for the same  remaining  maturities,  except  for  adjustable  rate
mortgages which were considered to be at market rates. These rates were used for
each  aggregated  category  of  loans  as  reported  on  the  Office  of  Thrift
Supervision  Quarterly  Report.  The fair  value  of  demand  deposits,  savings
accounts  and money  market  deposits  is the  amount  payable  on demand at the
reporting  date.  The fair value of  fixed-maturity  certificates  of deposit is
estimated  using the rates  currently  offered on deposits of similar  remaining
maturities.

         The Bank is a party to financial  instruments  with  off-balance  sheet
risk in the normal  course of business,  including  loan  commitments.  The loan
commitments  were a blended  rate based on the relative  risk of the  properties
involved and the lines of credit are at adjustable rates.

         The estimated fair values of the Bank's  financial  instruments  are as
follows:

<TABLE>
<CAPTION>
                                  September 30, 2001            September 30, 2000
                              --------------------------    ---------------------------
                                 Carrying     Estimated       Carrying       Estimated
                                  Value       Fair Value       Value        Fair Value
                                  -----       ----------       -----        ----------
<S>                         <C>            <C>            <C>            <C>
Financial Assets
----------------
   Cash, interest bearing
    deposits in other banks
    and federal funds         $  4,063,299   $  4,063,299   $  5,994,277   $  5,994,277
   Investments available
    for sale                    18,644,744     18,644,744     19,439,212     19,439,212
   Other investment
    securities held to
    maturity                    12,000,000     12,057,750     15,650,000     14,486,131
   Mortgage backed
    Securities                  13,997,566     14,279,199     16,451,148     15,814,409
   Loans receivable - net      110,275,237    111,374,000     96,909,448     91,809,000
   Federal Home Loan
    Bank of Atlanta stock        1,450,000      1,450,000      1,450,000      1,450,000
</TABLE>

                                       60
<PAGE>


WHG BANCSHARES CORPORATION AND SUBSIDIARY
-----------------------------------------
Lutherville, Maryland
---------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 2001
------------------


Note 14 - Disclosure About Fair Value of Financial Instruments - Continued
          ----------------------------------------------------------------


                            September 30, 2001           September 30, 2000
                       ---------------------------   ---------------------------
                         Carrying       Estimated      Carrying      Estimated
                           Value        Fair Value       Value       Fair Value
                       ------------   ------------   ------------   ------------
Financial Liabilities
   Deposits            $124,938,953   $126,100,000   $120,044,864   $120,114,000
   Commitments                    -     15,198,150              -        230,000
   Borrowings            22,000,000     22,844,000     24,000,000     22,994,000


Note 15 - Recent Accounting Pronouncements
          --------------------------------

         In June 2001, the Financial  Accounting Standards Board ("FASB") issued
Statements of Financial  Accounting  Standards  No. 141 "Business  Combinations"
("SFAS 141") and No. 142  "Goodwill  and Other  Intangible  Assets"  (SFAS 142")
which are effective  July 1, 2001 and September 1, 2002,  respectively,  for the
Company.  SFAS 141 requires  that the purchase  method of accounting be used for
all  business  combinations  initiated  after  June 30,  2001.  Under  SFAS 142,
amortization  of  goodwill,   including   goodwill  recorded  in  past  business
combinations,  will discontinue upon adoption of this standard. All goodwill and
intangible  assets  will  be  tested  for  impairment  in  accordance  with  the
provisions of the Statement.

         In August 2001, FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived  Assets".  This Statement  supersedes SFAS No. 121 and
APB Opinion No. 30. SFAS No. 144 retains the fundamental  provisions of SFAS No.
121 for (a) recognition and measurement of impairment of long-lived assets to be
held and used and (b)  measurement  of  long-lived  assets to be  disposed of by
sale. SFAS No. 144 also requires reporting of discontinued operations separately
from  continuing  operations  and extends  that  reporting  to a component of an
entity that either has been disposed of or is  classified as held for sale.  The
Statement  also  eliminates  the  exception to  consolidation  for a temporarily
controlled subsidiary.

                                       61

<PAGE>

Item 8.  Changes  in  and  Disagreements  with  Accountants  On  Accounting  and
--------------------------------------------------------------------------------
         Financial Disclosure.
         ---------------------

         Not applicable.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
        with Section 16(a) of the Exchange Act.
        ---------------------------------------

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

         Section 16(a) of the  Securities  and Exchange Act of 1934, as amended,
requires  the  Company's  directors  and  executive  officers to file reports of
ownership  and changes in ownership of their  equity  securities  of the Company
with the  Securities  and  Exchange  Commission  and to furnish the Company with
copies  of  such  reports.  Due to an  administrative  error,  Directors  Chase,
Francis,  Lauterbach,  Lufburrow,  McCormick,  Muhly, and Stewart failed to file
timely a Form 4 to  report  one  transaction.  All of the other  filings  by the
Company's  directors and  executive  officers were made on a timely basis during
the 2001 fiscal year. Other than as disclosed under Item 11, Security  Ownership
of Certain  Beneficial  Owners and  Management,  the Company is not aware of any
beneficial owners of more than 10% of its common stock.

Board of Directors

         Each  member  of the  board of  directors  has been a  director  of the
Company since its incorporation on March 29, 1996.

         Philip W.  Chase,  Jr.,  83, is the  retired  Chairman of the Board and
President of Chase, Fitzgerald & Co. Inc., located in Baltimore, Maryland.

         Herbert A.  Davis,  76, is the  President  and Owner of  Herbert  Davis
Associates,  a real estate  brokerage and development firm located in Baltimore,
Maryland.

         Urban P.  Francis,  Jr., 75, is retired  from Urban  Francis  Inc.,  an
electrical contracting company in Baltimore,  Maryland. Mr. Francis is currently
the majority stockholder of U and M, Inc.

         D. Edward Lauterbach,  Jr., 77, is the retired President of H.U. Dove &
Co., Inc., an insurance company located in Baltimore,  Maryland.  Mr. Lauterbach
continues to be a consultant to H.U. Dove & Co., Inc.

         John E.  Lufburrow,  76, is Chairman of the Board of  Directors  of the
Company and the Bank. Mr. Lufburrow  preceded Ms. Stewart as President and Chief
Executive Officer of the Bank. Mr. Lufburrow has been employed by the Bank since
1950.

                                       62
<PAGE>

         Hugh P.  McCormick,  81,  retired in 1982 from McCormick & Co., Inc., a
manufacturer  and importer of spices and  flavorings.  Prior to retirement,  Mr.
McCormick  served as the  Corporate  Assistant  Secretary  and the Director of a
division of McCormick & Co., Inc. He also served as President of a subsidiary of
McCormick & Co., Inc. of Baltimore County.

         Edwin C. Muhly,  Jr., 71, is the retired  President and Chief Executive
Officer of Muhly's Bakery located in Baltimore, Maryland.

         Peggy J. Stewart,  65, is the President and Chief Executive  Officer of
the Company and the Bank. Ms. Stewart has been employed by the Bank since 1953.

Executive Officers Who Are Not Directors:

         Daniel J. Gallagher,  45, is Executive Vice President,  Chief Financial
Officer, and Senior Compliance Officer of the Company and the Bank. From 1993 to
1997, Mr. Gallagher was employed by Liberty Federal Savings and Loan Association
in  Baltimore,  Maryland,  during which time he also served as president of that
institution.  From 1985 to 1993,  Mr.  Gallagher was employed by First  National
Bank of Maryland.

         Diana L. Rohrback, 50, is Vice President and Corporate Secretary of the
Company and the Bank. Ms. Rohrback has been employed by the Bank since 1969.

         Robin L. Taylor,  41, is Controller  for the Company and the Bank.  Ms.
Taylor is a certified public  accountant and has been employed by the Bank since
1978.

Item 10.  Executive Compensation
--------------------------------

Director Compensation

         In the fiscal year ended September 30, 2001, each non-employee Director
and the Chairman of the Board of Directors of the Bank received a monthly fee of
$700, regardless of attendance,  and $300 for each meeting attended. Each member
of the Compensation and Benefits Committee and the member of the Asset/Liability
Committee  received an additional $300 for attendance at each meeting  attended.
Each  non-employee  director who is a member of the Loan  Committee is each paid
$100 for the first loan reviewed and $25 for each additional loan reviewed.  For
the fiscal year ended  September  30, 2001,  total fees paid to  Directors  were
approximately $106,000.

         On January 16, 2001, upon stockholder ratification, Ms. Stewart and Mr.
Lufburrow  were awarded  options to purchase  25,000  shares of Common Stock and
each of the non-employee directors were awarded options to purchase 4,950 shares
of Common Stock. The options awarded to Ms. Stewart and Mr. Lufburrow were fully
exercisable on the date of grant. Options awarded to the non-employee  directors
are  exercisable at the rate of 331/3% per year commencing on November 13, 2001.
The exercise  price of the options for all directors is the fair market value of
the stock on the date of grant.

                                       63
<PAGE>

         During the fiscal year ended  1999,  the Bank  implemented  a change in
control  severance  plan with the directors of the Bank.  The plan provides that
following a change in control of the Bank and the termination of the services of
the directors  (or within 18 months after the change in control),  the directors
will receive their current board compensation, at the time of termination, for a
period of 18 months.

Executive Compensation

         Summary Compensation Table. The following table sets forth the cash and
non-cash  compensation  awarded to or earned by the chief executive officer.  No
other executive officer of either the Bank or the Company had a salary and bonus
during the three years ended  September  30, 2001,  that  exceeded  $100,000 for
services rendered in all capacities to the Bank or the Company.

<TABLE>
<CAPTION>
                                                                        Long Term Compensation
                                    Annual Compensation                         Awards
                               ------------------------------------   ---------------------------
                                                                      Restricted     Securities
Name and              Fiscal                          Other Annual       Stock       Underlying       All Other
Principal Position     Year    Salary($)    Bonus($)   Compensation     Award($)   Options (#)(2)    Compensation($)
------------------     ----    ---------    --------   ------------   ----------   --------------    ---------------
<S>                  <C>     <C>           <C>          <C>          <C>           <C>             <C>
Peggy J. Stewart       2001    160,000       5,769         --              --          25,000          45,820(3)
President and CEO      2000    150,000      10,154         --              --              --          48,620
                       1999    132,000       9,231         --         174,150(1)       45,765          44,796
</TABLE>

(1)      Represents awards of 12,960 shares of Common Stock under the MSBP based
         upon the value of such  stock of  $13.4375  per share as of the date of
         such award.  Such stock awards  become  non-forfeitable  at the rate of
         2,592 shares per year  commencing on October 8, 1997.  Dividend  rights
         associated  with such stock are  accrued and held in arrears to be paid
         at the time that such stock becomes  non-forfeitable.  At September 30,
         2001,  2,592  shares with a market value of $29,523 at such date (based
         on the  closing  price of  Common  Stock  $11.39 at such  date)  remain
         unvested.
(2)      See "-- Stock Awards."
(3)      For fiscal year 2001 represents an allocation of 4,582 shares of Common
         Stock under the ESOP,  at a cost of $10 per share.  As of September 30,
         2001, the market value of such shares was $52,189.

         Employment  Agreement.  The Bank entered into an  employment  agreement
with  Peggy  J.  Stewart,  President  and  CEO of the  Bank  ("Agreement").  The
Agreement has a three year term. Under the Agreement,  Ms. Stewart's  employment
may be terminated by the Bank for "just cause" as defined in the  Agreement.  If
the Bank terminates Ms. Stewart without just cause, Ms. Stewart will be entitled
to a  continuation  of her  salary  from the  date of  termination  through  the
remaining  term of the Agreement,  but not less than one year's  salary.  In the
event of the  termination of employment in connection with any change in control
of the Bank during the term of the Agreement, Ms. Stewart will be paid in a lump
sum an amount  equal to 2.99 times the five year  average of her annual  taxable
compensation.  In the event of a change in control at September  30,  2001,  Ms.
Stewart  would  have  been  entitled  to a lump  sum  payment  of  approximately
$480,000.

                                       64
<PAGE>

Stock Awards

         The  following  tables set forth  information  with  respect to options
granted to Ms.  Stewart in fiscal 2001 and previously  granted.  The Company has
not granted to Ms. Stewart any stock appreciation rights.

<TABLE>
<CAPTION>
                               OPTION GRANTS TABLE
                      Option Grants in Last Fiscal Year (1)

                                   Individual Grants
--------------------------------------------------------------------------------
                                        % of Total
                   # of Securities       Options
                      Underlying        Granted to      Exercise or
                       Options         Employees in      Base Price   Expiration
 Name                 Granted(#)       Fiscal Year         ($/Sh)        Date
 ----                 ----------       -----------         ------        ----

<S>                   <C>               <C>              <C>      <C>
Peggy J. Stewart        25,000            21.63%           $8.125    November 13, 2010

</TABLE>

<TABLE>
<CAPTION>

                    Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Values
                    -------------------------------------------------------------------------

                                                               Number of Securities
                                                                    Underlying
                                                                   Unexercised               Value of Unexercised
                                                                      Options                In-The-Money Options
                                                                 at FY-End (#)                  at FY-End ($)
                                                           -------------------------     -------------------------
                     Shares Acquired         Value
Name                 on Exercise(#)        Realized($)     Exercisable/Unexercisable     Exercisable/Unexercisable
----                 --------------        -----------     -------------------------     -------------------------
<S>                     <C>                   <C>         <C>                            <C>
Peggy J. Stewart           --                  --             25,000 / --                    81,625 / --  (1)
                           --                  --             29,289 / 7,324                     -- / --  (2)
                           --                  --              7,321 / 1,831                  1,611 / 403 (3)
</TABLE>
---------------
(1)  Based upon an  exercise  price of $8.125 per share and  estimated  price of
     $11.39 as of September 30, 2001.
(2)  Based upon an  exercise  price of $11.89 per share and  estimated  price of
     $11.39 as of September 30, 2001.
(3)  Based upon an  exercise  price of $11.17 per share and  estimated  price of
     $11.39 as of September 30, 2001.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         Persons  and  groups  owning in excess  of 5% of the  Common  Stock are
required  to file  certain  reports  regarding  such  ownership  pursuant to the
Securities Exchange Act of 1934, as amended.  The following table sets forth, as
of November 30, 2001, persons or groups who own more than 5% of the Common Stock
and the ownership of each director,  named executive officer,  and all executive
officers  and  directors  of the Company as a group.  Other than as noted below,
management knows of no person or group that owns more than 5% of the outstanding
shares of Common Stock at the record date.

                                       65
<PAGE>
<TABLE>
<CAPTION>
                                                                       Amount and               Percent of Shares
                                                                         Nature of              of Common Stock
Name and Address of Beneficial Owner*                            Beneficial Ownership           Outstanding (%)
-------------------------------------                            --------------------           ---------------
<S>                                                               <C>                         <C>
Heritage Savings Bank, F.S.B.
Employee Stock Ownership Plan and Trust ("ESOP")
1505 York Road
Lutherville, Maryland 21093                                              138,568(1)                 10.78

Jeffrey L. Gendell
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
200 Park Avenue, Suite 3900
New York, New York 10166                                                  74,605(2)                  5.81

Gary R. Dowell
Janet M. Dowell
1720 Content Lane
Reisterstown, MD 21136                                                    67,000(3)                  5.21

Terrence S. Walsh
1701 Walters Mill Rd.
Forrest Hill, MD 21050                                                    66,444(4)                  5.17

John E. Lufburrow
1505 York Road
Lutherville, MD  21093                                                   104,903(5)                  7.74

Peggy J. Stewart
1505 York Road
Lutherville, Maryland 21093                                              132,736(5)                  9.79


Philip W. Chase, Jr.                                                      29,129(5)(6)               2.25

Herbert A. Davis                                                          21,197(5)(6)(7)            1.64

Urban P. Francis, Jr.                                                     28,816(5)(6)               2.23

D. Edward Lauterbach, Jr.                                                 23,425(5)(6)               1.81

Hugh P. McCormick                                                         33,516(5)(6)(7)            2.59

Edwin C. Muhly, Jr.                                                       22,697(5)(6)               1.75

Directors and executive officers as a group
(11 persons)                                                             466,495                    30.80
</TABLE>

(Footnotes continued on next page.)

                                       66
<PAGE>

------------------
(1)  The  ESOP  purchased  such  shares  for  the  exclusive   benefit  of  plan
     participants with funds borrowed from the Company. The shares are held in a
     suspense account and will be allocated among ESOP participants  annually on
     the  basis  of  compensation  as the  ESOP  debt is  repaid.  The  Board of
     Directors has  appointed a committee  consisting  of the  Compensation  and
     Benefits  Committee of the bank comprised of non- employee directors Chase,
     Davis,  Lauterbach,  Francis, and Muhly to serve as the ESOP administrative
     committee  ("ESOP  Committee")  and to serve as the  ESOP  trustees  ("ESOP
     Trustee").  The ESOP  Committee  or the Board  instructs  the ESOP  Trustee
     regarding  investment  of ESOP plan assets.  The ESOP Trustee must vote all
     shares  allocated  to  participant  accounts  under the ESOP as directed by
     participants.  Unallocated  shares and  shares  for which no timely  voting
     direction is received, will be voted by the ESOP Trustee as directed by the
     ESOP  Committee.  As of the record date,  89,761 shares have been allocated
     under the ESOP to participant accounts.
(2)  The  information  with  respect to Jeffrey L.  Gendell,  Tontine  Financial
     Partners,  L.P.,  and  Tontine  Management,   L.L.C.,  (collectively,   the
     "Reporting  Persons"),  is derived from a Schedule  13D,  dated  January 5,
     2001,  which  states that the  Reporting  Persons,  through  certain of its
     affiliates,  had  shared  voting  power and shared  dispositive  power with
     regard to 74,605 shares.
(3)  The  information  with  respect to Gary R.  Dowell  and Janet M.  Dowell is
     derived from an amended Schedule 13D, dated November 21, 2001, which states
     that Gary R. Dowell has sole voting and  dispositive  power with respect to
     51,300 shares and shared voting and dispositive power with his spouse Janet
     M. Dowell with respect to 15,700 shares.
(4)  The  information  with  respect to  Terrence  S.  Walsh is  derived  from a
     Schedule  13D,  filed with the SEC on November 28, 2001,  which states that
     Mr.  Walsh has sole  voting and  dispositive  power with  respect to 66,444
     shares.
(5)  Includes  8,605 shares of Common Stock  (except for Mr.  Lufburrow  and Ms.
     Stewart)  which may be acquired  pursuant to the exercise of stock  options
     which are exercisable  within 60 days of the record date. For Mr. Lufburrow
     and Ms. Stewart, includes 70,765 shares of Common Stock.
(6)  Excludes  138,568  shares of  Common  Stock  under the ESOP for which  such
     individual  serves as a member of the ESOP  committee  or as an ESOP Trust.
     Also,  excludes 11,142 MSBP shares for which such  individuals  serves as a
     member of the MSBP trust committee.  Such individuals  disclaim  beneficial
     ownership with respect to ESOP and MSBP shares.
(7)  Mr. Herbert A. Davis and Mr. Hugh P. McCormick are first cousins.
*    Addresses of beneficial  holders that hold over 5% of the Company's  common
     stock.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The Bank,  like many financial  institutions,  has followed a policy of
granting various types of loans to officers, directors, and employees. The loans
have been made in the ordinary course of business and on substantially  the same
terms, including interest rates and collateral,  as those prevailing at the time
for comparable transactions with the Bank's other customers,  and do not involve
more than the  normal  risk of  collectibility,  or  present  other  unfavorable
features.

                                       67
<PAGE>

Item 13.  Exhibits, List, and Reports on Form 8-K
-------------------------------------------------

         a. The following  exhibits are included in this Report or  incorporated
herein by reference:

<TABLE>
<CAPTION>
          <S>           <C>
                   3(i)    Articles of Incorporation of WHG Bancshares  Corporation *
                   3(ii)   Amended Bylaws of WHG Bancshares Corporation ******
                  10.1     Form of Amended and Restated Employment Agreement with
                           Peggy J. Stewart ***
                  10.2     Form of Amended and Restated Change in Control Severance
                           Agreements for three executive officers ***
                  10.3     Amendment to the 1996 Stock Option Plan ****
                  10.4     Amendment to Management Stock Bonus Plan and Trust Agreement ****
                  10.5     Form of Directors Change In Control Severance Plan **
                  10.6     2001 Stock Option Plan *****
                  21       Subsidiaries of the Registrant (See Item 1 - Description of Business)
                  23       Consent of Anderson Associates, LLP
</TABLE>

          -----------------------
          *       Incorporated  by  reference  to  the registration statement on
                  Form S-1 (File No. 33-80487) declared effective by the SEC  on
                  February 7, 1996.

          **      Incorporated  by  reference  to the  September  30,  1999 Form
                  10-KSB filed with the SEC on December 21, 1999.

          ***     Incorporated  by  reference  to the  September  30,  2000 Form
                  10-KSB filed with the SEC on December 18, 2000.

          ****    Incorporated  by  reference  to the  proxy  statement  for the
                  annual meeting of stockholders  filed with the SEC on or about
                  December 19, 1997.

          *****   Incorporated  by  reference  to  the  proxy  statement for the
                  annual meeting of stockholders  filed with the SEC on or about
                  December 18, 2000.

          ******  Incorporated  by  reference  to the March 31,  2001 Form 10QSB
                  filed with the SEC on February 13, 2001.

         (b) Not applicable


                                       68
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized  as of
December 21, 2001.

                             WHG BANCSHARES CORPORATION


                             By: /s/Peggy J. Stewart
                                 -----------------------------------------------
                                 Peggy J. Stewart
                                 President, Chief Executive Officer and Director
                                 (Duly Authorized Representative)

         Pursuant to the requirement of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of December 21, 2001.

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


/s/Peggy J. Stewart                                           /s/John E. Lufburrow
-----------------------------------------------               --------------------------------------------
Peggy J. Stewart                                              John E. Lufburrow
President, Chief Executive Officer and Director               Chairman of the Board
(Principal Executive Officer)

/s/Daniel J. Gallagher                                        /s/Robin L. Taylor
-----------------------------------------------               --------------------------------------------
Daniel J. Gallagher                                           Robin L. Taylor
Vice President and Chief Financial Officer                    Controller
                                                              (Principal Accounting and Financial Officer)

/s/Philip W. Chase, Jr.                                       /s/Herbert A. Davis
-----------------------------------------------               --------------------------------------------
Philip W. Chase, Jr.                                          Herbert A. Davis
Director                                                      Director

/s/Urban P. Francis, Jr.                                      /s/D. Edward Lauterbach, Jr.
-----------------------------------------------               --------------------------------------------
Urban P. Francis, Jr.                                         D. Edward Lauterbach, Jr.
Director                                                      Director

/s/Hugh P. McCormick                                          /s/Edwin C. Muhly, Jr.
-----------------------------------------------               --------------------------------------------
Hugh P. McCormick                                             Edwin C. Muhly, Jr.
Director                                                      Director

</TABLE>