<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended DECEMBER 31, 2000

                                       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 number: 0-25191

                           Willow Grove Bancorp, Inc.
             (Exact name of registrant as specified in its charter)

                    United States                          23-2986192
            (State or other jurisdiction                (I.R.S. Employer
          of incorporation or organization)            Identification No.)

           Welsh and Norristown Roads, Maple Glen, Pennsylvania 19002
                    (Address of principal executive offices)

                                 (215) 646-5405
              (Registrant's telephone number, including area code)


         Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         YES  [X ]         NO  [   ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

The Registrant had 5,143,487 shares of common stock issued and outstanding as of
February 13, 2001.



                                       1
<PAGE>





                           WILLOW GROVE BANCORP, INC.

                                      INDEX
<TABLE>
<CAPTION>
                                                                                                           PAGE NO.
PART I                     FINANCIAL INFORMATION                                                           --------
<S>                        <C>                                                                             <C>


         Item 1.           Financial Statements (unaudited)

                           Consolidated Statements of Financial Condition at
                           December 31, 2000 and June 30, 2000............................................        3

                           Consolidated Statements of Operations - For the Three
                           and Six Months Ended December 31, 2000 and 1999................................        4

                           Consolidated Statements of Cash Flows - For the Six
                           Months Ended December 31, 2000 and 1999........................................        5

                           Notes to Consolidated Financial Statements.....................................        6

         Item 2.           Management's Discussion and Analysis of Financial
                           and Results of Operation.......................................................       10

         Item 3.           Quantitative and Qualitative Disclosures about Market Risk.....................       19

PART II  OTHER INFORMATION

         Item 1.           Legal Proceedings .............................................................       20

         Item 2.           Changes in Securities and Use of Proceeds......................................       20

         Item 3.           Defaults upon Senior Securities................................................       20

         Item 4.           Submission of Matters to a Vote of Security Holders............................       20

         Item 5.           Other Information .............................................................       20

         Item 6            Exhibits and Reports on Form 8-K...............................................       21
</TABLE>



                                      2

<PAGE>



                           WILLOW GROVE BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (Unaudited)

(Dollars in thousands, except share data)


<TABLE>
<CAPTION>


ASSETS                                                                              December 31, 2000      June 30, 2000
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>                <C>
Cash and cash equivalents:
       Cash on hand and non-interest-earning deposits                                         $ 6,840            $ 4,442
       Interest-earning deposits                                                                9,332             10,239
                                                                                   --------------------------------------
       Total cash and cash equivalents                                                         16,172             14,681
Assets available for sale:
       Securities (amortized cost of $110,386 and $74,291, respectively)                      109,874             70,577
       Loans                                                                                    1,981             35,753
Loans (net of allowance for loan losses of $8,327 and $3,905, respectively)                   438,832            424,940
Accrued income receivable                                                                       3,801              2,795
Property and equipment, net                                                                     6,158              6,232
Intangible assets                                                                               1,389              1,540
Other real estate owned                                                                           145                  -
Other assets                                                                                    4,603              3,605
-------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                                $ 582,955          $ 560,123

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------------
Deposits                                                                                    $ 459,353          $ 452,857
Federal Home Loan Bank (FHLB) advances                                                         54,742             37,517
Advance payments from borrowers for taxes                                                       2,889              4,725
Accrued interest payable                                                                        2,004              1,474
Other liabilities                                                                               2,576              2,907
-------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                             521,564            499,480
Commitments and contingencies
Stockholders' equity:
       Common stock, $0.01 par value; (25,000,000 authorized;
        5,143,487 issued at December 31 and June 30, 2000)                                         51                 51
Additional paid-in capital                                                                     22,265             22,270
Retained earnings-substantially restricted                                                     42,699             43,291
Accumulated other comprehensive income (loss)                                                    (314)            (2,340)
Treasury stock at cost, 96,000 shares and 22,500 shares
    at December 31 and June 30, 2000, respectively                                             (1,044)              (211)
Unallocated common stock held by
      employee stock ownership plan (ESOP)                                                     (1,554)            (1,613)
Common stock held by recognition
      and retention plan trust (RRP)                                                             (712)              (805)
-------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                                     61,391             60,643
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                  $ 582,955          $ 560,123
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>



                           WILLOW GROVE BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                        For the Three Months Ended       For the Six Months Ended
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                  December 31,                    December 31,
                                                       -----------------------------------------------------------
                                                                2000           1999             2000         1999
------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>             <C>          <C>

Interest and dividend income:
   Loans                                                     $ 8,983        $ 8,174         $ 18,041     $ 15,830
   Securities, primarily taxable                               2,131          1,161            3,953        2,403
------------------------------------------------------------------------------------------------------------------

      Total interest income                                 $ 11,114        $ 9,335         $ 21,994     $ 18,233
------------------------------------------------------------------------------------------------------------------
Interest expense:
   Deposits                                                  $ 5,117        $ 4,090         $ 10,061      $ 8,023
   Borrowings                                                  1,072            509            1,930          837
   Advance payment from borrowers for taxes                        3              4                8            9
------------------------------------------------------------------------------------------------------------------

Total interest expense                                       $ 6,192        $ 4,603         $ 11,999      $ 8,869
------------------------------------------------------------------------------------------------------------------
Net interest income                                            4,922          4,732            9,995        9,364
Provision for loan losses                                      4,366            221            4,476          491
------------------------------------------------------------------------------------------------------------------

Net interest income after provision for loan losses            $ 556        $ 4,511          $ 5,519      $ 8,873
------------------------------------------------------------------------------------------------------------------
Non-interest income:
     Service charges and fees                                  $ 343          $ 262            $ 646        $ 514
     Gain on sale of loans available for sale                    110              -              114            -
     Gain on sale of securities available for sale               143              -              162            -
     Loan servicing income, net                                   22             13               40           22
------------------------------------------------------------------------------------------------------------------

Total non-interest income                                      $ 618          $ 275            $ 962        $ 536
------------------------------------------------------------------------------------------------------------------
Non-interest expense:
     Compensation and employee benefits                      $ 2,002        $ 1,698          $ 4,001      $ 3,269
     Occupancy                                                   264            218              531          397
     Furniture and equipment                                     164            114              325          222
     Federal insurance premium                                    22             57               45          111
     Amortization of intangible assets                            47            103              150          205
     Data processing                                             139            125              274          248
     Advertising                                                  84             89              170          168
     Community enrichment                                         37             37               75           75
     Deposit account services                                    161            143              333          283
     Other expense                                               463            321              848          691
------------------------------------------------------------------------------------------------------------------

Total non-interest expense                                   $ 3,383        $ 2,905          $ 6,752      $ 5,669
------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                           $ (2,209)       $ 1,881           $ (271)     $ 3,740
Income taxe expense (benefit)                                   (821)           665             (124)       1,317
------------------------------------------------------------------------------------------------------------------

Net Income (loss)                                           $ (1,388)       $ 1,216           $ (147)     $ 2,423
------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
     Basic                                                   $ (0.29)        $ 0.25          $ (0.03)      $ 0.49
    Diluted                                                  $ (0.28)        $ 0.24          $ (0.03)      $ 0.49
Cash dividends declared per share                             $ 0.11         $ 0.09           $ 0.21       $ 0.17
Weighted average shares outstanding                        4,839,769      4,885,040        4,856,007    4,914,781
Weighted average diluted shares outstanding                4,936,728      4,951,626        4,956,272    4,949,955
</TABLE>


SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>


                           Willow Grove Bancorp, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                 For the Six Months Ended December 31,
                                                                               ------------------------------------------
                                                                                             2000       1999
<S>                                                                                      <C>         <C>

Net cash flows from operating activities:
Net (loss) income                                                                        $   (147)   $  2,423
     Adjustments to reconcile net income to net cash provided by
        operating activities:
     Depreciation                                                                             362         255
     Amortization of premium and accretion of discount, net                                  (286)          6
     Amortization of intangible assets                                                        150         205
     Provision for loan losses                                                              4,476         491
     Gain on sale of loans available for sale                                                (114)         --
     Gain on sale of securities available for sale                                           (162)         --
     Increase in deferred loan fees                                                            71         103
     Increase(decrease) in accrued income receivable                                       (1,006)         54
     (Increase)decrease in other assets                                                    (2,174)       (323)
     Increase(decrease) in accrued interest payable                                           530        (120)
     Decrease in other liabilities                                                           (331)       (649)
     Expense of ESOP and RRP                                                                  147          55
     Originations and purchases of loans available for sale                               (14,593)         --
     Proceeds from sale of loans available for sale                                        48,479          --

Net cash provided by operating activities                                                $ 35,402    $  2,500

Cash flows from investing activities:
     Net increase in loans                                                                (18,582)    (50,843)
     Purchase of securities available for sale                                            (60,652)     (3,981)
     Proceeds from sales and calls of securities available for sale                        21,604       6,506
     Principal repayments of securities available for sale                                  3,401       2,923
     Proceeds from sale of other real estate owned                                           --           281
     Purchase of property and equipment, net                                                 (288)       (532)

Net cash used in investing activities                                                    $(54,517)   $(45,646)

Cash flows from financing activities:
     Net increase in deposits                                                               6,496      17,006
     Net increase in FHLB advances with
     original maturity less than 90 days                                                    4,500      28,000
     Increase in FHLB advances with original maturity greater than 90 days                 36,000      17,000
     Repayment of FHLB advances with original maturity greater than 90 days               (23,275)     (9,202)
     Net decrease in advance payments from borrowers for taxes                             (1,836)     (1,069)
     Dividends paid                                                                          (446)       (352)
     Purchase of RRP shares                                                                    --        (929)
     Purchase of Treasury Stock                                                              (833)         --

Net cash provided by financing activities                                                $ 20,606    $ 50,454

Net Decrease(increase) in cash and cash equivalents                                      $  1,491    $  7,308
Cash and cash equivalents:
Beginning of period                                                                        14,681       4,889

End of period                                                                            $ 16,172    $ 12,197

Supplemental disclosures of cash and cash flow information:
     Interest paid                                                                         11,469       8,989
     Income taxes paid                                                                      2,005       1,610
Non-cash items:
     Change in unrealized gain (loss) on securities available for sale                      2,025      (1,615)
     (net of taxes of ($1,177) and $598 in 2000 and 1999, respectively)
     Loans transferred to other real estate owned                                             145         281

</TABLE>


SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>



                           WILLOW GROVE BANCORP, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Description of Business

         In 1998, Willow Grove Bancorp, Inc. (the "Company") completed the
reorganization of Willow Grove Bank (the "Bank") into the federal mutual holding
company form of ownership whereby the Bank converted into a federally chartered
stock savings bank as a wholly owned subsidiary of the Company, and the company
became a majority owned subsidiary of Willow Grove Mutual Holding Company (the
"MHC").

         The Company provides a full range of banking services through the
Bank's eleven branches in Montgomery, Bucks, and Philadelphia counties in
Pennsylvania. All of the branches are full-service and offer commercial and
retail banking products and services. These products include checking accounts
(interest-bearing and non-interest-bearing), savings accounts, and certificates
of deposit, business loans, real estate loans, and consumer loans. The Company
is subject to competition from other financial institutions and other companies
that offer financial services. The Company is subject to the regulations of
certain federal agencies and undergoes periodic examinations by these regulatory
authorities.

2.       BASIS OF FINANCIAL STATEMENT PRESENTATION

         The accompanying consolidated financial statements were prepared in
accordance with instructions to Form 10-Q, and therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
these financial statements, have been included. These financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for the period ended June 30, 2000. The results for the interim
periods presented are not necessarily indicative of the results that may be
expected for the year ending June 30, 2001.

         In preparing the financial statements, management is required to make
certain estimates and assumptions that affect the carrying values of certain
assets and liabilities, and revenues and expenses for the reporting periods
contained herein, in particular the allowance for loan losses. Actual results
could differ from such estimates.

3.       EARNINGS (LOSS) PER SHARE

         Earnings (Loss) per share, basic and diluted, were $(0.29) and $(0.28)
for the three months ended December 31, 2000 compared to $0.25 and $0.24 for the
three months ended December 31, 1999. Earnings (Loss) per share, basic and
diluted, were $(0.03) and $(0.03) for the six months ended December 31, 2000
compared to $0.49 and $0.49 for the six months ended December 31, 1999.


                                       6
<PAGE>



         The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share calculations.

<TABLE>
<CAPTION>
                                                               Three Months               Six Months
                                                            Ended December 31,         Ended December 31,
                                                                  2000                       2000
                                                       -------------------------- --------------------------
                                                                     (Dollars in thousands, except share data)
                                                       ------------- ------------ ------------- ------------
                                                          Basic        Diluted       Basic        Diluted
                                                       ------------- ------------ ------------- ------------
<S>                                                        <C>          <C>             <C>          <C>
Net Income (loss)                                          $ (1,388)    $ (1,388)       $ (147)      $ (147)
Dividends on unvested common stock awards                        (9)          (9)          (18)         (18)
                                                       ------------- ------------ ------------- ------------
Adjusted net loss used in EPS calculations                 $ (1,397)    $ (1,397)       $ (165)      $ (165)
Weighted average shares outstanding                       4,839,769    4,839,769     4,856,007    4,856,007
Effect of dilutive securities:
     Options                                                     --       28,380            --       24,467
     Unvested common stock awards                                --       68,579            --       75,798
                                                       ------------- ------------ ------------- ------------
Adjusted weighted average shares used in
     EPS computation                                      4,839,769    4,936,728     4,856,007    4,956,272
                                                       ============= ============ ============= ============

Earnings (loss) per share                                     (0.29)       (0.28)        (0.03)       (0.03)
</TABLE>



<TABLE>
<CAPTION>
                                                              Three Months               Six Months
                                                           Ended December 31,         Ended December 31,
                                                                  1999                       1999
                                                       -------------------------- --------------------------
                                                                     (Dollars in thousands, except share data)
                                                       ------------- ------------ ------------- ------------
                                                          Basic        Diluted       Basic        Diluted
                                                       ------------- ------------ ------------- ------------
<S>                                                         <C>          <C>           <C>          <C>
Net Income                                                  $ 1,216      $ 1,216       $ 2,423      $ 2,423
Dividends on unvested common stock awards                        (8)          (8)           (8)          (8)
                                                       ------------- ------------ ------------- ------------
Adjusted net income used in EPS calculations                $ 1,208      $ 1,208       $ 2,415      $ 2,415
Weighted average shares outstanding                       4,885,040    4,885,040     4,914,781    4,914,781
Effect of dilutive securities:
     Options                                                     --        2,048            --        2,048
     Unvested common stock awards                                --       64,538            --       33,126
                                                       ------------- ------------ ------------- ------------
Adjusted weighted average shares used in
     EPS computation                                      4,885,040    4,951,626     4,914,781    4,949,955
                                                       ============= ============ ============= ============

Earnings per share                                             0.25         0.24          0.49         0.49

</TABLE>


                                       7
<PAGE>






4.       LOAN PORTFOLIO

         The Bank's loan portfolio consisted of the following at the dates
indicated:


<TABLE>
<CAPTION>
                                         December 31, 2000                    June 30, 2000
                                    ----------------------------       -----------------------------
(Dollars in thousands)                           Percentage of                      Percentage of
                                       Amount        Total                Amount         Total
----------------------------------------------------------------------------------------------------
<S>                                    <C>                <C>             <C>                 <C>

Mortgage loans:
Single-family residential              $ 201,748          45.0%           $ 206,340           48.0%
Multi-family residential                  18,614           4.2%              21,437            5.0%
Commercial real estate                    94,822          21.2%              81,076           18.9%
Construction                              21,050           4.7%              14,973            3.5%
Home Equity                               75,633          16.8%              72,217           16.8%
----------------------------------------------------------------------------------------------------
Total mortgage loans                   $ 411,867          91.9%           $ 396,043           92.2%
----------------------------------------------------------------------------------------------------
Other consumer loans                       8,835           2.0%               7,818            1.8%
Commercial business loans                 27,227           6.1%              25,683            6.0%
----------------------------------------------------------------------------------------------------
Total loans receivable                 $ 447,929         100.0%           $ 429,544          100.0%
Less:
    Allowance for loan losses             (8,327)                            (3,905)
    Deferred loan origination fees          (770)                              (699)
----------------------------------------------------------------------------------------------------
Loans receivable, net                  $ 438,832                          $ 424,940
----------------------------------------------------------------------------------------------------
</TABLE>



         Included in loans receivable are loans on non-accrual status in the
amounts of $9.6 million and $1.3 million at December 31, 2000 and June 30, 2000,
respectively. As of December 31, 2000 the Company had impaired loans totaling
$8.5 million of which a specific reserve was established in the amount of $4.2
million related to one commercial loan in the amount of $6.7 million. This
compares to impaired loans totaling $390,000, of which no specific reserves were
required at June 30, 2000.

                                        8

<PAGE>



5.       SECURITIES

            The amortized cost of available-for-sale securities and their
estimated fair values at December 31, 2000 and June 30, 2000 are as follows:




<TABLE>
<CAPTION>
                                                                                   December 31, 2000
                                                               -------------------------------------------------------
                                                               Amortized     Unrealized      Unrealized      Estimated
(Dollars in Thousands)                                           Cost           Gains          Losses        Fair Value
-----------------------------------------------------------------------       --------        --------      ----------
<S>                                                            <C>            <C>             <C>
Equity securities                                              $  7,735                       $    (38)       $  7,697
US government and government
   agency securities                                             47,919            274            (548)         47,645
Mortgage backed securities                                       52,730            182            (351)         52,561
Municipal securities                                              2,002              1             (32)          1,971
                                                               --------       --------        --------        --------
Total                                                          $110,386       $    457        $   (969)       $109,874
                                                               --------       --------        --------        --------
<CAPTION>

                                                                                     June 30, 2000
                                                               -------------------------------------------------------
                                                               Amortized    Unrealized      Unrealized      Estimated
(Dollars in Thousands)                                           Cost          Gains          Losses        Fair Value
-----------------------------------------------------------------------       --------        --------      ----------

Equity securities                                              $  7,528       $   --          $    (77)       $  7,451
US government and government
   agency securities                                             33,000           --            (1,975)         31,025
Mortgage backed securities                                       31,162           --            (1,536)         29,626
Municipal securities                                              2,601           --              (126)          2,475
                                                               --------       --------        --------        --------
Total                                                          $ 74,291       $   --          $ (3,714)       $ 70,577
                                                               --------       --------        --------        --------

</TABLE>


6.       RECENT ACCOUNTING PRONOUNCEMENTS

         ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
         EXTINGUISHMENTS OF LIABILITIES

         In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This statement supercedes and replaces the guidance in SFAS No. 125. It revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, although it
carries over most of SFAS No. 125's provisions without reconsideration.

         The SFAS No. 140 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001 and for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000, and is to be applied prospectively with certain exceptions.
Other than those exceptions, earlier or retroactive application of its
accounting provisions is not permitted. The Company has not yet determined the
impact, if any, of this statement on the Company's financial condition, equity,
results of operations, or disclosure.


                                       9
<PAGE>




7.       COMPREHENSIVE INCOME (LOSS)

         The following table displays net income and the components of other
comprehensive income to arrive at total comprehensive income (loss). For the
Company, the only component of other comprehensive income is the change in the
estimated fair value of investment securities available-for-sale.

<TABLE>
<CAPTION>

                                                                     Three Months Ended                Six Months Ended
(Dollars in thousands)                                                  December 31,                      December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                            2000             1999             2000             1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>              <C>              <C>
Comprehensive income (loss):
Net income (loss)                                                        $(1,388)         $ 1,216          $  (147)         $ 2,423
Other comprehensive income (loss) net of tax
    Less: reclassification adjustments                                       143             --                162             --
    Net change in unrealized gain (loss)                                   1,223             (697)           1,864           (1,017)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss):                                             $   (22)         $   519          $ 1,879          $ 1,406
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


8.       DIVIDENDS

         On July 25, 2000 and October 24, 2000, the Company declared dividends
on its common stock of $0.10 and $0.11 per share payable on August 25, 2000 and
November 22, 2000 to owners of record on August 11, 2000 and November 10, 2000.
The MHC, which owns 2,812,974 shares of common stock, waived its portion of this
dividend, reducing the actual dividend payout amount to $446,000. The dollar
amount of dividends waived by the MHC is considered a restriction of retained
earnings of the Company. The amount of any dividend waived by the MHC shall be
available for declaration of a dividend solely to the MHC. At December 31, 2000,
the cumulative amount of dividends waived by the MHC was $1.8 million.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         This Form 10-Q contains certain forward-looking statements and
information based upon our beliefs as well as assumptions we have made. In
addition, to those and other portions of this document, the words "anticipate,"
"believe," "estimate," "expect," "intend," "should," and similar expressions, or
the negative thereof, as they relate to us are intended to identify
forward-looking statements. Such statements reflect our current view with
respect to future looking events and are subject to certain risks,
uncertainties, and assumptions. Factors that could cause future results to vary
from current management expectations include, but are not limited to, general
economic conditions, legislative and regulatory changes, monetary and fiscal
policies of the federal government, changes in tax policies, rates and
regulations of federal, state and local tax authorities, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition of the
Company's loan and investment portfolios, changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and fees. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected, or intended. We do not intend to update these
forward-looking statements.

                                       10


<PAGE>




       RESULTS OF OPERATIONS

       GENERAL - Operations for the three-month and six-month periods ended
December 31, 2000 were adversely effected by a $4.4 million provision for loan
losses which included a $4.2 million provision related to one non-performing
commercial loan. Net losses for the three-month and six-month periods ended
December 31, 2000 were $1.4 million and $147,000, respectively. Excluding the
effect of the additional $4.2 million provision, net income would have been $1.2
million and $2.5 million for the three-month and six-month periods ended
December 31, 2000. This compares to net income of $1.2 million and $2.4 million
for the respective prior year periods. Net interest income grew as a result of a
continuing larger interest-earning asset base. However, as a result of greater
increases on the average rates paid on interest-bearing liabilities compared to
the increases in average rates earned on interest-earning assets, together with
the effect of the large non-performing loan, the Company's net-interest margin
decreased 39 basis points and 34 basis points, respectively, for the three-month
and six-month periods ended December 31, 2000 compared to similar prior year
periods. For the three-month and six-month periods ended December 31, 2000
increases in net interest income were partially offset by increases in
non-interest expense compared to the same prior year periods.

       NET INTEREST INCOME - Net interest income is determined by our interest
rate spread (i.e., the difference between the yields on interest-earning assets
and the rates paid on interest-bearing liabilities) and also the amount of
interest-earning assets relative to interest-bearing and non-interest-bearing
deposit liabilities.

       For the three-month and six-month periods ended December 31, 2000, net
interest income increased $190,000 and $631,000, or 4.0% and 6.7%, respectively,
compared to the three-month and six-month periods ended December 31, 1999.
During the three-month and six-month periods ended December 31, 2000, the
increase in net interest income was primarily the result of increased average
balances on interest-earning assets. However, the result of greater increases on
the average rates paid on interest-bearing liabilities compared to the increases
in average rates earned on interest-earning assets contributed to a decline in
interest rate spread. For the three-month and six-month periods ended December
31, 2000 the Company's interest rate spread declined 54 basis points and 45
basis points to 2.46% and 2.58%, respectively, compared to 3.00% and 3.03% at
December 31, 1999. Excluding the effect of the non-performing loan, net interest
spread would have been 2.56% and 2.63% for the three-month and six-month periods
ended December 31, 2000, respectively.

         Average interest-earning assets increased $79.0 million and $83.0
million, or 16.0% and 17.2%, for the three-month and six-month periods ended
December 31, 2000 compared to the respective prior year periods. Average
interest-bearing liabilities for the three-month and six-month periods ended
December 31, 2000, increased on average $63.5 million and $68.8 million, or
15.6% and 17.4%, respectively, over the same period one year ago. The ratio of
average interest-earning assets to average interest-bearing liabilities
increased 40 basis points to 121.95% for the three-month period ended December
31, 2000 compared to 121.55% for the three-month period ended December 31, 1999.
Conversely, the ratio of average interest-earning assets to average
interest-bearing liabilities declined slightly, 22 basis points, to 121.91% for
the six-month period ended December 31, 2000 compared to 122.13% for the
six-month period ended December 30, 1999. For the three-month period ended
December 31, 2000, the decline in interest rate spread, offset slightly by the
increase in the ratio of interest-earning assets to interest-bearing
liabilities, reduced net interest margin 39 basis points to 3.40% from 3.79% one
year ago. For the six-month period ended December 31, 2000 the decline in
interest rate spread combined with the decrease in the ratio of interest-earning
assets to interest-bearing liabilities reduced net interest margin 34 basis
points to 3.50% from 3.84% at December 31, 1999.

                                       11

<PAGE>



         The following table presents the average daily balances for various
categories of assets and liabilities, and income and expense related to those
assets and liabilities for the three-month and six-month periods ended December
31, 2000 and 1999. The Company maintained average balances of tax-exempt
securities of $2.6 million and $2.0 million for the periods ending December 31,
2000 and 1999, respectively, for which the tax-exempt yield has not been
adjusted to a taxable equivalent yield. Loans receivable include non-accrual
loans.

<TABLE>
<CAPTION>


                                                                   Three Months Ended December 31,
   --------------------------------------------------------------------------------------------------------------------------
   (Dollars in thousands)                                    2000                                       1999
   ------------------------------------------------------------------------------    ----------------------------------------
                                            Average                     Average         Average                     Average
                                            BALANCE       INTEREST      YIELD/COST      BALANCE       INTEREST      YIELD/COST
                                            -------       --------      ----------      -------       --------      ----------
<S>                                          <C>             <C>           <C>           <C>             <C>           <C>
   Interest-earning assets:
   Loans receivable:
       Mortgage loans                        $ 409,446       $ 8,302       8.11%         $ 390,579       $7,657        7.84%
       Other consumer loans                      8,808           152       6.85%             7,078          120        6.73%
       Commercial loans                         25,379           529       8.27%            16,164          397        9.74%
                                          ---------------------------                ---------------------------
          Total loans                        $ 443,633       $ 8,983       8.03%         $ 413,821       $8,174        7.84%
   Securities                                $ 120,490       $ 2,070       6.82%          $ 74,747       $1,123        5.96%
   Other interest-earning assets                 9,951            61       2.43%             6,467           38        2.33%
                                          ---------------------------                ---------------------------
      Total interest-earning assets          $ 574,074      $ 11,114       7.68%         $ 495,035       $9,335        7.48%
                                                         ------------                                 ----------
   Noninterest-earning assets                   12,502                                      13,686
                                          -------------                              --------------
          Total assets                       $ 586,576                                   $ 508,721
                                          =============                              ==============

   Interest-bearing liabilities:
   Deposits:
       NOW and money market accounts          $ 60,668         $ 384       2.51%          $ 57,000        $ 324        2.26%
       Savings accounts                         51,692           269       2.06%            51,779          268        2.05%
       Certificates of deposit                 291,890         4,464       6.07%           260,499        3,498        5.33%
                                          ---------------------------                ---------------------------
          Total deposits                     $ 404,250       $ 5,117       5.02%         $ 369,278       $4,090        4.39%
   Total borrowings                             64,259         1,072       6.62%            35,458          509        5.70%
   Total escrows                                 2,222             3       0.54%             2,529            4        0.63%
                                          ---------------------------                ---------------------------
          Total interest-bearing
             liabilities                     $ 470,731       $ 6,192       5.22%         $ 407,265       $4,603        4.48%
                                                         ------------                                 ----------
   Noninterest bearing liabilities              50,913                                      39,979
                                          -------------                              --------------
          Total liabilities                  $ 521,644                                   $ 447,244
          Total equity                          64,932                                      61,477
                                          -------------                              --------------
          Total liabilities and equity       $ 586,576                                   $ 508,721
                                          =============                              ==============
   Net interest-earning assets               $ 103,343                                    $ 87,770
   Net interest income/interest rate spread                  $ 4,922       2.46%                         $4,732        3.00%
                                                         ========================                     =======================
   Net interest margin                                                     3.40%                                       3.79%
                                                                       ==========                                  ==========
   Ratio of average interest-earning assets
      to average interest-bearing liabilities                            121.95%                                     121.55%
                                                                       ==========                                  ==========
</TABLE>

                                       12

<PAGE>


<TABLE>
<CAPTION>
                                                                      Six Months Ended December 31,
     -------------------------------------------------------------------------------------------------------------------------
     (Dollars in thousands)                                   2000                                       1999
     -------------------------------------------------------------------------------    --------------------------------------
                                                                         Average                                    Average
                                                Average                   Yield/          Average                   Yield/
                                                BALANCE     INTEREST       COST           BALANCE      INTEREST      COST
                                                -------     --------       ----           -------      --------      ----
<S>                                              <C>          <C>             <C>          <C>           <C>            <C>
     Interest-earning assets:
     Loans receivable:
         Mortgage loans                          $ 410,333    $ 16,565        8.07%        $ 379,252     $ 14,878       7.85%
         Other consumer loans                        8,516         299        6.96%            6,830          235       6.83%
         Commercial loans                           25,055       1,177        9.32%           14,700          717       9.68%
                                             --------------------------                 --------------------------
            Total loans                          $ 443,904    $ 18,041        8.06%        $ 400,782     $ 15,830       7.84%
      Securities                                   113,563       3,837        6.70%           76,762        2,337       6.04%
      Other interest-earning assets                  8,968         116        2.57%            5,865           66       2.23%
                                             --------------------------                 --------------------------
            Total interest-earning assets        $ 566,435    $ 21,994        7.70%        $ 483,409     $ 18,233       7.48%
                                                           ------------                              -------------
      Non-interest-earning assets                   12,290                                    12,391
                                             --------------                             -------------
            Total assets                         $ 578,725                                 $ 495,800
                                             ==============                             =============

     Interest-bearing liabilities:
     Deposits:
         NOW and money market accounts            $ 59,935       $ 727        2.41%         $ 57,628        $ 661       2.28%
         Savings accounts                           52,100         540        2.06%           50,678          523       2.05%
         Certificates of deposit                   292,100       8,794        5.97%          254,964        6,839       5.32%
                                             --------------------------                 --------------------------
            Total deposits                       $ 404,135    $ 10,061        4.94%        $ 363,270      $ 8,023       4.38%
     Total borrowings                               57,539       1,930        6.65%           29,567          837       5.62%
     Total escrows                                   2,948           8        0.54%            2,963            9       0.60%
                                             --------------------------                 --------------------------
            Total interest-bearing liabilities   $ 464,622    $ 11,999        5.12%        $ 395,800      $ 8,869       4.45%
                                                           ------------                              -------------
     Non-interest-bearing liabilities               49,569                                    38,781
                                             --------------                             -------------
            Total liabilities                    $ 514,191                                 $ 434,581
            Total equity                            64,534                                    61,219
                                             --------------                             -------------
            Total liabilities and equity         $ 578,725                                 $ 495,800
                                             ==============                             =============
     Net interest-earning assets                 $ 101,813                                  $ 87,609
     Net interest income/interest rate spread                  $ 9,995        2.58%                       $ 9,364       3.03%
                                                           =========================                 =========================
     Net interest margin                                                      3.50%                                     3.84%
                                                                       =============                              ============
     Ratio of average interest-earning assets
        to average interest-bearing liabilities                             121.91%                                   122.13%
                                                                       =============                              ============
</TABLE>

                                       13


<PAGE>





         INTEREST INCOME - Interest income on loans increased $809,000 million,
or 9.9%, and $2.2 million, or 14.0%, for the three-month and six-month periods
ended December 31, 2000, respectively, compared to the similar prior year
periods. The increases in average loan balances and increase in average loan
rates were primarily responsible for the increase in income. Interest income on
securities and other interest-earning assets increased $970,000, or 83.5%, and
$1.6 million, or 64.5%, for the three-month and six-month periods ended December
31, 2000 compared to the respective prior year periods. The increase in average
securities balances and increase in average securities rates accounted for the
increase during the three-month and six-month periods ended December 31, 2000
compared to the three-month and six-month periods ended December 31, 1999.

         INTEREST EXPENSE - Interest expense on deposit accounts increased $1.0
million, or 25.1%, and $2.0 million, or 25.4%, for the three-month and six-month
periods ended December 31, 2000 compared to similar prior year periods. The
increase in average balances on deposits and increased average deposit rates
were primarily responsible for the increase. Interest expense on borrowings
increased $563,000, or 110.6%, and $1.1 million, or 130.6%, for the three-month
and six-month periods ended December 31, 2000 compared to the respective prior
year periods. The increase in average balances on borrowings and increased
average borrowing rates were primarily responsible for the increase. The
increase in borrowings was in part to provide an additional source of funds to
the Company for the purpose of originating loans in our market area as part of
our plan to diversify the loan portfolio.

         PROVISION FOR LOAN LOSSES - The Company's provision for loan losses was
$4.4 million for the three-month period ended December 31, 2000, of which $4.2
million related to one non-performing loan totaling $6.7 million. For the six
months ended December 31, 2000, the provision for loan loss was $4.5 million.
This compares to $221,000 and $491,000 for the three-month and six-month periods
ended December 31, 1999. Other than the $4.2 million provision made on the one
non-performing loan, the Company's provision for loan losses on the remainder of
its loan portfolio during the three and six month periods ended December 31,
2000 were slightly less than the provision made in the prior corresponding
period. Including the $4.2 provision for loan loss on the one non-performing
loan, the ratio of allowance for loan losses to net loans increased to 1.86% at
December 31, 2000 compared to .91% at June 30, 2000. The ratio of the allowance
for loan losses to total non-performing loans was 85.5% at December 31, 2000
compared to 310.9% at June 30, 2000. The significant increase in the Company's
provision for loan losses during the three and six months ended December 31,
2000 was primarily due to one $6.7 million commercial business loan that was
placed on non-accrual status during the quarter ended December 31, 2000. This
loan is to a local business and is secured by inventory, receivables, equity
securities and certain interests in real estate. The Bank is vigorously pursuing
its legal remedies as well as a possible work-out with the borrower. With the
exception of this loan and certain other smaller non-performing loans, the
Company's loan portfolio continues to perform well and the Company's management
believes that the credit quality of the remainder of its portfolio is relatively
strong. Management believes that the Company's allowance for loan losses was
adequate at December 31, 2000, however, no assurance can be given as to the
amount or timing of additional provisions for loan losses in the future as a
result of any further deterioration in the loan which was primarily responsible
for the provision in the second quarter in fiscal 2001 or as a result in any
additional increases in the amount of the Company's non-performing loans from
the remainder of the Company's loan portfolio. In recent periods the Company has
significantly increased the amounts of its commercial real estate, construction,
consumer and commercial business loans. Such loans generally are considered to
involve a higher degree of risk than single-family residential mortgage loans.
While the Company believes that its oversight of the risk elements in its loan
portfolio is adequate, no assurance can be given that there may not be
additional increases in the Company's non-performing loans and, as a result, its
provisions for loan losses.


                                       14
<PAGE>


<TABLE>
<CAPTION>
                                                                 For the Six Months Ended
                                                                         December 31,
                                                       --------------------------------------
                                                              2000                      1999
---------------------------------------------------------------------------------------------
                                                                   ( Dollars in Thousands)
<S>                                                        <C>                       <C>
Allowance at beginning of period                           $ 3,905                   $ 3,138
                                                       ------------             -------------
  Provisions                                                 4,476                       491
  Charge-offs:
     Mortgage loans                                              4                        51
     Non-mortgage loans                                         51                        13
     Commercial business loans                                  --                        --
                                                       ------------             -------------
  Total charge-offs                                             55                        64
  Recoveries                                                     1                       146
                                                       ------------             -------------
Allowance for loan losses at end of period                 $ 8,327                   $ 3,711
                                                       ------------             -------------

Allowance for loan losses to total non-performing
  loans at end of period                                     85.45%                   309.51%
                                                       ------------             -------------
Allowance for loan losses  to loans net of deferred
  fees at end of period                                       1.86%                     0.87%
                                                       ------------             -------------
Ratio of charge-offs to average loans                         0.01%                     0.02%
                                                       ------------             -------------
</TABLE>


       NON-INTEREST INCOME - Non-interest income increased $343,000, or 124.7 %,
and $426,000, or 79.5%, for the three-month and six-month periods ended December
31, 2000 compared to similar periods in the prior year. These increases were
primarily a result of the Company taking advantage of market opportunities to
realize gains upon the sale of loans and securities available-for-sale as well
as increases in general service fees and charges. Gains on AFS loans were
$110,000 and $114,000 for the three-month and six-month periods ended December
31, 2000 compared to no gains for the respective prior year period. Similarly,
gains on AFS securities were $143,000 and $162,000 for the three-month and
six-month periods ended December 31, 2000 compared to no gains for the
respective prior year period.

         NON-INTEREST EXPENSE - Non-interest expense, increased $478,000, or
16.5%, and $1.1 million, or 19.1%, for the three-month and six-month periods
ended December 31, 2000 compared to the similar periods in the prior year.
Compensation and employee benefits expense increased $304,000, or 17.9%, and
$732,000, or 22.4%, for the three-month and six-month periods ended December 31,
2000 compared to the similar periods in the prior year. The increases were
primarily a result of general increases in salary levels, compensation charges
related to the ESOP, RRP and the increase in Company employees as a result of
operation of two additional banking offices and the expansion of our lending
function to support the Company's loan diversification plan. Occupancy and
furniture and fixture expense increased $96,000 or 28.9% and $237,000 or 38.3%
for the three-month and six-month periods ended December 31, 2000, respectively,
compared to similar periods in the prior year. The increases were a result of
management's continuing efforts to update equipment and facilities and the
operation of two additional banking offices and an operations center to better
service the Company's needs. Amortization of intangible assets declined $56,000,
or 54.4%, and $55,000, or 26.8 %, for the three-month and six-month periods
ended December 31, 2000 compared to the similar periods in the prior year. These
declines were a result of revised estimates of useful lives based on a recent
empirical analysis. Deposit account services expense increased $18,000 or,
12.6%, and $50,000 or, 17.7%, for the three-month and six-month periods ended
December 31, 2000 compared to the similar periods in the prior year. These
increases are a result of the growth of additional accounts associated with two
additional banking offices as well as continued efforts in acquiring core
deposit accounts. All other non-interest operating expenses, in the aggregate,
increased $116,000 and $119,000, or 18.4% and 9.2% for the three-month and
six-month period ended December 31, 2000. These increases were primarily the
result of legal expenses associated with loan workout of an impaired credit and
other corporate legal matters.

       INCOME TAX - The benefit for income taxes for the three-month and
six-month periods ended December 31, 2000 were ($821,000) and ($124,000),
respectively. This compares to provisions for income tax expense of $665,000 and
$1.3 million for the three-month and six-month periods ended December 31, 1999.
The reduction in the provisions for income taxes in the three-month and
six-month periods ended December 31, 2000 primarily relates to the decrease in
pretax income resulting from the $4.2 million provision sustained during the
year.


                                       15
<PAGE>



CHANGES IN FINANCIAL CONDITION

         GENERAL. Total assets of the Company increased by $22.8 million, or
4.1%, to $583.0 million at December 31, 2000 compared to $560.1 million at June
30, 2000. The increase in assets resulted from loans increasing $13.9 million,
or 3.3%, and securities available-for-sale ("AFS") increasing $39.3 million, or
55.7%. This increase was primarily a result of fixed-rate and adjustable-rate
securities purchased utilizing proceeds from a sale of an aggregate $35.0
million fixed-rate loans during the year. Total liabilities amounted to $521.6
million, an increase of $22.1 million, or 4.4%, from June 30, 2000. Deposits
increased $6.5 million, or 1.4%, to $459.4 million while borrowings increased
$17.2 million, or 45.9%, to $54.7 million at December 31, 2000. Total
stockholders' equity increased $748,000 to $61.4 million at December 31, 2000
compared to $60.6 million at June 30, 2000. Changes in stockholders' equity
reflect the purchase of additional shares of Treasury stock and a $2.0 million
decline in accumulated other comprehensive loss, primarily as a result of
declining interest rates.

         CASH AND CASH EQUIVALENTS. Cash and cash equivalents amounted to $16.2
million and $14.7 million at December 31, 2000 and June 30, 2000, respectively.
Cash increased slightly during the period as a result of increased deposit
balances.

         ASSETS AVAILABLE FOR SALE. At December 31, 2000, assets that were
classified AFS consisted of securities totaling $109.9 million and loans
totaling $2.0 million. This compares to $70.6 million in AFS securities and
$35.8 million in AFS loans at June 30, 2000. The increase of $39.3 million, or
55.7%, in AFS securities and the decrease of $33.8 million, or 94.5%, in AFS
loans were primarily a result of fixed-rate and adjustable-rate securities
purchased utilizing proceeds from a sale of an aggregate $35.0 million
fixed-rate loans during the year. At December 31, 2000, the Company had
unrealized losses on securities AFS of $512,000 compared to unrealized losses on
securities AFS of $3.7 million at June 30, 2000. The decrease in unrealized
losses is a result of decreases in the general level of interest rates.

         LOANS. The net loan portfolio of the Company increased from $424.9
million at June 30, 2000 to $438.8 million at December 31, 2000. The increase in
the Company's net loan portfolio was due, in large part, to the Company's
continuing efforts to expand its lending activities with a concentrated effort
to expand multi-family, commercial real estate, consumer and business loans.

         During the six months ended December 31, 2000, the Company's commercial
real estate mortgage loans increased by $13.7 million or 17.0%, construction
loans increased $6.1 million or 40.6%, home equity loans increased $3.4 million
or 4.7%, single-family residential mortgage loans decreased by $4.6 million or
2.2% and multi-family loans decreased $2.8 million or 13.2%. The decline in the
Company's multi-family loan portfolio during the six-month period ended December
31, 2000, was in management's opinion, a temporary event. During the same
period, the Company's other consumer loans increased $1.0 million or 13.0% and
commercial business loans increased $1.5 million or 6.0%. Such changes in the
Bank's loan portfolio reflect the Company's continuing efforts to diversify its
loan portfolio and increase its holdings in loans that generally have higher
yields and shorter terms to maturity and/or repricing than single-family
residential mortgage loans. However, commercial real estate loans, multi-family
residential mortgage loans, construction loans, home equity loans and other
consumer loans all generally are deemed to have increased credit risk
characteristics in comparison to single-family residential mortgage loans.


                                       16
<PAGE>



         The following table sets forth information with respect to
non-performing assets identified by the Company, including non-accrual loans and
other real estate owned.

<TABLE>
<CAPTION>


                                                                    December 31,         June 30,
                                                                        2000               2000
                                                               --------------------------------------
                                                                      (Dollars in Thousands)
<S>                                                                    <C>                   <C>
Accruing loans past due 90 days or more:
  Mortgage loans                                                       $   101               $     9
  Other consumer loans                                                      --                    --
                                                               ----------------       ---------------
          Total                                                        $   101               $     9
                                                               ----------------       ---------------
Non-accrual loans:
  Mortgage loans
     Single-family residential                                         $   876               $   828
     Multi-family and Commercial Real Estate                             1,298                   140
     Construction                                                          466                    --
     Home Equity                                                           191                    10
  Other consumer loans                                                      19                    19
  Commercial business loans                                              6,794                   250
                                                               ----------------       ---------------
          Total                                                        $ 9,644               $ 1,247
                                                               ----------------       ---------------
Total non-performing loans                                             $ 9,745               $ 1,256
                                                               ----------------       ---------------
Other real estate owned, net                                           $   145               $    --
                                                               ----------------       ---------------
Total non-performing assets                                            $ 9,890               $ 1,256
                                                               ----------------       ---------------
Non-performing loans to total loans, net of deferred fees                 2.18%                 0.29%
Non-performing assets to total assets                                     1.70%                 0.22%
</TABLE>

         Non-accrual commercial business loans increased $6.5 million at
December 31, 2000 compared to June 30, 2000. The increase is related to the
previously mentioned local business loan on which a $4.2 million specifically
allocated allowance for loan losses has been established. Non-accrual
multi-family and commercial real estate loans increased $1.2 million at December
31, 2000 compared to June 30, 2000. The primary reason for the increase was
related to one borrower who defaulted on two commercial real estate loans
secured with real estate collateral with an estimated value of $2.2 million.
Non-accrual construction loans increased $464,000 at December 31, 2000 compared
to June 30, 2000. The increase is related to one loan for the construction of an
office building in Montgomery County, Pennsylvania. The Company foreclosed on
the loan and the property was sold at sheriff's sale in December 2000. Proceeds
from the sheriff's sale of $506,000 were received in February 2001 satisfying
the obligation in full.

         INTANGIBLE ASSETS. The Company's intangible assets amounted to $1.4
million and $1.5 million at December 31, 2000 and June 30, 2000, respectively.
Such assets are comprised of goodwill and a core deposit intangible resulting
from the Bank's purchase of three branch offices from another institution in
March 1994. The goodwill is being amortized on a straight-line basis over a
15-year period while the core deposit intangible is being amortized over the
remaining estimated period of benefit, currently estimated at 5.5 years.

       DEPOSITS. The Company's total deposits in the aggregate increased by $6.5
million, or 1.4%, to $459.4 million at December 31, 2000 compared to $452.9
million at June 30, 2000. This increase occurred in a highly competitive market
for deposits coinciding with a rising rate environment. Savings accounts
declined $582,000 or 1.1%, checking accounts increased $3.2 million or 3.0% and
certificates of deposit decreased $3.8 million or 1.3%. The Company intends to
continue its marketing efforts promoting core deposits to help fund asset growth
and believes the decline in the savings balance component of deposits, during
the six-months ended December 31, 2000, is temporary in nature.


                                       17

<PAGE>




       FEDERAL HOME LOAN BANK ADVANCES. The Company utilizes advances from the
FHLB of Pittsburgh primarily as an additional source of funds to meet loan
demand. FHLB advances increased $17.2 million or 45.9% to $54.7 million at
December 31, 2000 compared to $37.5 million at June 30, 2000. We also use FHLB
advances to fund certain investments approved by our Board of Directors.

       EQUITY. Total stockholders' equity of the Company amounted to $61.4
million, or 10.5%, of assets at December 31, 2000 compared to $60.6 million or
10.8% of total assets at June 30, 2000. The increase of $748,000, or 1.2%, was
attributed to a reduction in net unrealized losses on AFS securities which more
than offset the combination of a net operating loss, dividends paid and
additional shares of Treasury stock purchased during the six-month period ended
December 31, 2000. Net loss for the six-month period ended December 31, 2000 was
$147,000. Total stockholders' equity of the Company included net unrealized
losses, net of taxes, of $314,000 and $2.3 million on AFS securities at December
31, 2000 and June 30, 2000, respectively. The Company paid cash dividends of
$0.10 and $0.11 per share during the quarters ended September 30, 2000 and
December 31, 2000, respectively. These regular dividends totaled $446,000. The
Company acquired 73,500 shares of additional Treasury stock at an aggregate cost
of $833,000 during the six-month period ended December 31, 2000. As of December
31, 2000, the Company had repurchased 96,000 shares of its common stock at an
average price of $10.88 in connection with its authorization to repurchase its
common stock. On January 19, 2001 the Company's Board of Directors approved an
extension to repurchase up to 137,051 of additional shares of common stock
during the next six months as market conditions warrant.

       LIQUIDITY AND COMMITMENTS

       The Company's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing, and financing activities. The Company's
primary sources of funds are deposits, amortizations, prepayments and maturities
of outstanding loans and mortgage-backed securities, maturities of investment
securities and other short-term investments and funds provided from operations.
The Company also utilizes borrowings, generally in the form of FHLB advances, as
a source of funds. While scheduled payments from the amortization of loans and
mortgage related securities and maturing investment securities and short-term
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Company invests excess funds in
short-term interest-earning assets which provide liquidity to meet lending
requirements.

       Liquidity management is both a daily and long term function of business
management. Excess liquidity is generally invested in short-term investments
such as U.S. Treasury securities. The Company uses its sources of funds
primarily to meet its ongoing commitments, to pay maturing certificates of
deposit and savings withdrawals, fund loan commitments and maintain a portfolio
of mortgage backed and mortgage related securities and investment securities. At
December 31, 2000, the total approved investment and loan origination
commitments outstanding amounted to $14.0 million. Certificates of deposit
scheduled to mature in one year or less at December 31, 2000 totaled $232.1
million. Based on historical experience, management believes that a significant
portion of maturing deposits will remain with the Company. The Company has the
ability to utilize borrowings, typically in the form of FHLB advances as an
additional source of funds. The maximum borrowing capacity available to the
Company from the Federal Home Loan Bank was $379.9 million, as of December 31,
2000, based on qualifying collateral. The Company is required to maintain a
minimum of 4% of its assets in regulatory eligible liquid investments. As of
December 31, 2000, the Company had 28.2% in eligible liquid investments. The
Company anticipates that it will continue to have sufficient funds, together
with borrowings, to meet its current commitments.

                                       18


<PAGE>

CAPITAL

       At December 31, 2000 and June 30, 2000, the Bank had regulatory capital
which was well in excess of regulatory limits set by the Office of Thrift
Supervision. The current requirements and the Bank's actual capital levels are
detailed below:

<TABLE>
<CAPTION>

                                                                                                              To be Well
                                                                                  For Capital             Capitalized Under
                                                                                   Adequacy               Prompt Corrective
                                                  Actual Capital                   Purposes               Action Provisions
                                              -----------------------     -------------------------------------------------------
                                                 Amount      Ratio           Amount      Ratio           Amount          Ratio
                                              -----------------------     -----------------------     ---------------------------
                                                                            (Dollars in thousands)
<S>                                                <C>          <C>            <C>          <C>           <C>               <C>
              AS OF DECEMBER 31, 2000
              Tangible capital                     $ 50,693     8.7%           $ 8,747      1.5%          $ 11,663          2.0%
              (to tangible assets)
              Core capital                           50,693     8.7%            23,284      4.0%            29,104          5.0%
              (to adjusted tangible assets)
              Tier I capital                         50,693    14.0%               N/A       N/A            21,697          6.0%
              (to risk-weighted assets)
              Risk-based capital                     55,260    15.3%            28,929      8.0%            36,161         10.0%
              (to risk-weighted assets)


              AS OF JUNE 30, 2000
              Tangible capital                     $ 50,611     9.0%           $ 8,399      1.5%          $ 11,199          2.0%
              (to tangible assets)
              Core capital                           50,611     9.0%            22,431      4.0%            28,039          5.0%
              (to adjusted tangible assets)
              Tier I capital                         50,611    14.6%               N/A       N/A            20,815          6.0%
              (to risk-weighted assets)
              Risk-based capital                     54,516    15.7%            27,753      8.0%            34,692         10.0%
              (to risk-weighted assets)
</TABLE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         For a discussion of the Company's asset and liability management
policies as well as the potential impact of interest rate changes upon the
market value of the Company's portfolio equity, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report for the year ended June 30, 2000. Management, as part of its
regular practices, performs periodic reviews of the impact of interest rate
changes upon net interest income and the market value of the Company's portfolio
equity. Management closely monitors interest rate risk and takes appropriate
short-term actions to maintain this risk at acceptable levels while focusing on
a longer-term loan diversification plan, which concentrates on the acquisition
of shorter maturity or repricing assets. Based on, among other factors, such
reviews, management believes that there are no material changes in the market
risk of the Company's asset and liability position since June 30, 2000.

                                       19

<PAGE>


PART II.   OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The Company is involved in routine legal proceedings in the normal
course of business which, in the aggregate, are believed by management to be
immaterial to the financial condition of the Company.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         a.   An annual meeting of stockholders of the Company was held on
              November 9, 2000 ("Annual Meeting").

         b.   Not applicable.

         c.   There were 5,093,487 shares of common stock of the Company
              eligible to be voted at the Annual Meeting and 4,784,043 shares
              were represented at the meeting by the holders thereof, which
              constituted a quorum. The items voted upon at the Annual Meeting
              and the vote for each proposal were as follows:

              1.  Election of directors for a three-year term.

<TABLE>
<CAPTION>
                                                                  FOR                          WITHHELD
                                                            -----------------             -----------------
<S>                                                            <C>                               <C>
                  Lewis W. Hull                                4,754,016                         30,027
                  Charles F. Kremp, 3rd                        4,755,889                         28,154
                  Rosemary C. Loring, Esq.                     4,755,612                         28,431
</TABLE>


              2.  Proposal to ratify the appointment of KPMG LLP, as the
                  Company's independent auditors for the year ending June 30,
                  2001.
<TABLE>
<CAPTION>
                                    FOR                         AGAINST                        ABSTAIN
                             -----------------              -----------------             -----------------
<S>                               <C>                             <C>                           <C>
                                  4,779,208                       2,921                         1,914
</TABLE>


                  Each of the proposals was adopted by the stockholders of the
                  Company.

         d.   Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable.

                                       20



<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      List of Exhibits (filed herewith unless otherwise noted)
<TABLE>
         <S>      <C>
         2.1      Plan of Reorganization*
         2.2      Plan of Stock Issuance*
         3.1      Federal Stock Charter of Willow Grove Bancorp, Inc.*
         3.2      Bylaws of Willow Grove Bancorp, Inc.*
         4.0      Form of Stock Certificate of Willow Grove Bancorp, Inc.*
        10.1      Form of Employment Agreement entered into between Willow Grove Bank and Frederick A. Marcell,
                  Jr.*
        10.2      Form of Employment Agreement entered into between Willow Grove Bank and each of
                  Christopher E. Bell, Thomas M. Fewer and John T. Powers*
        10.3      Supplemental Executive Retirement Agreement*
        10.4      Non-Employee Director's Retirement Plan*
        10.5      1999 Stock Option Plan**
        10.6      1999 Recognition and Retention Plan and Trust Agreement**
</TABLE>

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

*        Incorporated by reference from the Company's Registration Statement on
         Form S-1 as filed on September 18, 1999, as amended, and declared
         effective on November 12, 1999 (File No. 333-63737)

**       Incorporated by reference from the Company's Proxy Statement on
         Schedule 14A as filed on June 23, 1999 (File No. 000-25191).

(b)      Not applicable.


                                       21
<PAGE>



                                   SIGNATURES


In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                           WILLOW GROVE BANCORP, INC.



Date:    February 14, 2001          By:  /s/ Frederick A. Marcell Jr.
                                         -----------------------------------
                                         Frederick A. Marcell Jr.
                                         President and Chief Executive Officer


Date:    February 14, 2001          By:  /s/ Christopher E. Bell
                                         -----------------------------------
                                         Christopher E. Bell
                                         Senior Vice President and Chief
                                         Financial Officer



                                       22