U. S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

               FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2001

          [ ] 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: 1-15513

                              PREMIER BANCORP, INC.
                              ---------------------
        (Exact name of small business issuer as specified in its charter)

         PENNSYLVANIA                                    23-2921058
         ------------                                    ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


                  379 NORTH MAIN STREET, DOYLESTOWN, PA 18901
                  -------------------------------------------
                    (Address of principal executive offices)

                                 (215) 345-5100
                                 --------------
                           (Issuer's telephone number)

                                       N/A
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         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 __

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,224,960 shares of $0.33
par value common stock issued and outstanding as of October 31, 2001.

     Transitional Small Business Disclosure format (check one):
Yes      No   X
   ----     ---


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

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




                                                                             SEPTEMBER 30, 2001    DECEMBER 31, 2000
                                                                             ------------------    -----------------
                                                                            (Dollars in thousands, except share data)
<S>                                                                                   <C>              <C>
Assets:
Cash and due from banks                                                               $   8,619        $   7,970
Federal funds sold                                                                       11,932               --
Interest-bearing deposits                                                                   544               56
                                                                                      ---------        ---------
Cash and cash equivalents                                                                21,095            8,026
Investment securities:
     Held to maturity (fair value $2,500 in 2001 and $5,912 in 2000)                      2,498            6,026
     Available for sale (amortized cost $107,380 in 2001 and $99,548 in 2000)           104,280           94,573
Loans receivable (net of allowance for loan losses of $3,517 in 2001
     and $3,032 in 2000)                                                                285,528          235,552
Other real estate owned                                                                     475              252
Premises and equipment                                                                    4,643            4,853
Accrued interest receivable                                                               3,096            2,517
Deferred income taxes                                                                     2,065            2,703
Other assets                                                                                839              699
                                                                                      ---------        ---------

Total assets                                                                          $ 424,519        $ 355,201
                                                                                      =========        =========
Liabilities, minority interest in subsidiary and shareholders' equity:

Deposits                                                                              $ 335,245        $ 303,293
Borrowings                                                                               49,437           14,404
Accrued interest payable                                                                  4,737            4,127
Other liabilities                                                                         3,661            5,422
Subordinated debt                                                                         1,500            1,500
                                                                                      ---------        ---------
Total liabilities                                                                       394,580          328,746

Corporation-obligated mandatorily redeemable capital securities of subsidiary
     trust holding solely junior subordinated debentures of the corporation              10,000           10,000

Shareholders' equity:
Common stock- $0.33 par value; 30,000,000 shares authorized; issued and
     outstanding 3,224,960 at September 30, 2001 and 3,105,248 at December 31, 2000       1,064            1,025
Additional paid-in capital                                                               12,181           11,792
Retained earnings                                                                         8,740            6,921
Accumulated other comprehensive loss                                                     (2,046)          (3,283)
                                                                                      ---------        ---------

Total shareholders' equity                                                               19,939           16,455
                                                                                      ---------        ---------

Total liabilities, minority interest in subsidiary and shareholders' equity           $ 424,519        $ 355,201
                                                                                      =========        =========

</TABLE>


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


                                        2


<PAGE>

<TABLE>
<CAPTION>
                                                    PREMIER BANCORP, INC.
                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                                         (UNAUDITED)

                                                                FOR THE THREE MONTHS ENDED       FOR THE NINE MONTHS ENDED
                                                              SEPTEMBER 30,    SEPTEMBER 30,   SEPTEMBER 30,     SEPTEMBER 30,
                                                                   2001            2000             2001             2000
                                                              -------------    -------------   -------------     -------------
                                                                        (Dollars in thousands, except per share data)
<S>                                                              <C>             <C>             <C>              <C>
Interest income:
   Loans                                                         $     5,783     $     4,887     $    16,575      $    13,853
   Federal funds sold and interest-bearing deposits                      106             102             301              318
   Investments:
      Taxable                                                          1,497           1,580           4,418            4,778
      Tax-exempt                                                         270             221             711              663
                                                                 -----------     -----------     -----------      -----------
Total interest income                                                  7,656           6,790          22,005           19,612

Interest expense:
   Deposits                                                            3,586           3,335          11,252            9,037
   Borrowings                                                            611             615           1,266            2,047
                                                                 -----------     -----------     -----------      -----------
Total interest expense                                                 4,197           3,950          12,518           11,084
                                                                 -----------     -----------     -----------      -----------

Net interest income                                                    3,459           2,840           9,487            8,528
Provision for loan losses                                                179             125             518              400
                                                                 -----------     -----------     -----------      -----------

Net interest income after loan loss provision                          3,280           2,715           8,969            8,128

Non-interest income:
   Service charges and other fees                                        128              88             409              205
   Gain, net, on sale of investment securities
     securities available for sale                                         3              --              --               --
   Loss on sale of other real estate owned                                --              --             (17)              --
   Gain on sale of loans held for sale                                     7               1              32               18
                                                                 -----------     -----------     -----------      -----------
Total non-interest income                                                138              89             424              223

Non-interest expense:
   Salaries and employee benefits                                      1,099             991           3,262            2,915
   Occupancy                                                             190             163             580              454
   Data processing                                                       233             205             716              623
   Professional services                                                  75              69             240              273
   Marketing                                                              92              66             316              316
   Minority interest in expense of subsidiary                            219             218             655              655
   Other                                                                 454             337           1,195            1,033
                                                                 -----------     -----------     -----------      -----------
Total non-interest expense                                             2,362           2,049           6,964            6,269
                                                                 -----------     -----------     -----------      -----------

Income before income tax                                               1,056             755           2,429            2,082
Income tax expense                                                       266             186             610              506
                                                                 -----------     -----------     -----------      -----------
Net income                                                       $       790     $       569     $     1,819      $     1,576
                                                                 ===========     ===========     ===========      ===========

Earnings per share:
   Basic                                                         $      0.24     $      0.18     $      0.57      $      0.51
   Diluted                                                       $      0.23     $      0.17     $      0.53      $      0.46

Weighted average number of shares outstanding:

   Basic                                                           3,224,960       3,105,248       3,207,402        3,094,868
   Diluted                                                         3,476,774       3,333,965       3,413,102        3,401,846



</TABLE>
                  The accompanying notes are an integral part
                   of the consolidated financial statements.
                                        3

<PAGE>



                                        PREMIER BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                             (Unaudited)


<TABLE>
<CAPTION>


FOR THE NINE MONTHS ENDED SEPTEMBER 30,                                           2001       2000
---------------------------------------                                           ----       ----
                                                                                   (In thousands)
<S>                                                                            <C>         <C>
Operating activities:
      Net income                                                               $  1,819    $  1,576
      Adjustments to reconcile net income to cash provided
        by operating activities:
           Depreciation expense                                                     393         327
           Provision for loan losses                                                518         400
           Write-off of capitalized costs related to branch expansion                --          68
           Amortization of premiums and discounts on
              investment securities held to maturity                                 --           6
           Amortization of premiums and discounts on
              investment securities available for sale                              131          87
           Loss on sale of other real estate owned                                   17          --
           Gain on sale of loans held for sale                                      (32)        (18)
           Originations of loans held for sale                                   (5,572)     (3,670)
           Proceeds from sale of loans held for sale                              5,604       3,388
           Increase in accrued interest receivable                                 (579)       (535)
           (Increase) decrease in other assets                                     (140)         35
           Increase in deferred loan fees                                           320         126
           Increase in accrued interest payable                                     610       1,861
           Decrease in other liabilities                                         (1,574)       (695)
                                                                               --------    --------
Net cash provided by operating activities                                         1,515       2,956
                                                                               --------    --------
Investing activities:
      Proceeds from sale of investment securities available for sale             24,161          --
      Repayment of investment securities available for sale                       8,265       3,416
      Purchase of investment securities available for sale                      (40,389)        (50)
      Repayment of investment securities held to maturity                         3,528         592
      Net increase in loans receivable                                          (51,289)    (28,071)
      Proceeds from sale of other real estate owned                                 235          --
      Purchases of premises and equipment                                          (183)     (1,165)
                                                                               --------    --------
Net cash used in investing activities                                           (55,672)    (25,278)
                                                                               --------    --------
Financing activities:
      Net increase in deposits                                                   31,952      53,648
      Net increase (decrease) in borrowings less than 90 days                     5,033      (5,867)
      Proceeds from borrowings greater than 90 days                              30,000          --
      Repayment of borrowings greater than 90 days                                   --     (10,000)
      Proceeds from exercised common stock options                                  241          76
                                                                               --------    --------
Net cash provided by financing activities                                        67,226      37,857
                                                                               --------    --------
Increase in cash and cash equivalents                                            13,069      15,535

Cash and cash equivalents:
      Beginning of period                                                         8,026       8,491
                                                                               --------    --------
      End of period                                                            $ 21,095    $ 24,026
                                                                               ========    ========

Supplemental disclosures:
      Cash payments for:
           Interest expense                                                    $ 11,908    $  9,333
           Taxes                                                                    627         556

Supplemental disclosure of noncash activities:
      Change in the estimated fair value of investment securities
        available for sale                                                     $  1,875    $    342
      Change in the deferred tax asset related to investment securities
        available for sale                                                         (638)       (116)
      Tax effect of exercised common stock options                                  187          63
      Transfer of loans to other real estate owned                                  475          --
</TABLE>



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

                                        4

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Organization

     Premier Bancorp, Inc. (PBI) is a Pennsylvania business corporation and a
registered financial holding company headquartered in Doylestown, Bucks County,
Pennsylvania. PBI was incorporated on July 15, 1997 and reorganized on November
17, 1997 as the one-bank holding company of Premier Bank. PBI's primary business
is the operation of its wholly owned subsidiary, Premier Bank, which is managed
as a single business segment.

     Premier Bank provides a full range of banking services to individual and
corporate customers through its branch banking system located in Bucks,
Montgomery and Northampton Counties in Pennsylvania. The bank is a Pennsylvania
chartered commercial bank and member of the Federal Reserve Bank of Philadelphia
and the Federal Deposit Insurance Corporation. The bank competes with other
financial institutions and other financial services companies with respect to
services offered and customers.

     PBI and the bank are regulated by certain federal and state agencies and
are periodically examined by them.

2.   Basis of Financial Statement Presentation

     We prepared the accompanying interim unaudited consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America as applied to the banking industry and in accordance
with instructions for quarterly reports on Form 10-QSB. These statements do not
include information or footnotes necessary for a complete presentation of
financial condition, results of operations, shareholders' equity and cash flows.
The consolidated financial statements include the accounts of PBI and its wholly
owned subsidiaries: Premier Bank, PBI Capital Trust and Lenders Abstract, LLC.
All significant intercompany accounts and transactions were eliminated in the
consolidated financial statements. Certain previously reported amounts have been
reclassified to conform to current presentation standards. These
reclassifications had no effect on net income. The results of operations for the
three and nine months ended September 30, 2001 and 2000 are not necessarily
indicative of the results that may be expected for the entire fiscal year. These
quarterly financial statements should be read in conjunction with the audited
consolidated financial statements on Form 10-KSB and notes thereto for the year
ended December 31, 2000.

3.   Use of Estimates

     In preparing the consolidated financial statements, we are required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from such estimates. Material estimates that are particularly susceptible to
significant change in the near term include the determination of the allowance
for loan losses and the carrying value of other real estate owned, if any.

4.   Derivative Financial Instruments

     PBI has limited involvement with derivative financial instruments and
currently uses them only in relation to the bank's Index Powered SM Certificate
of Deposit (IPCD) product. The IPCD, which was introduced in the first quarter
of 2001, contains an embedded derivative feature that provides a potential
return to the depositor based on a formula that is dependent on the return of
the Standard & Poor's 500[Registered] Index. This deposit product is unique in
that the customer may receive a return that is based on an equity market index
rather than a stated interest rate but, like other traditional certificates of
deposit, is insured in its principal amount by the FDIC to the fullest extent
provided by law.

                                       5


<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   Derivative Financial Instruments (Continued)

     In order to offset the risks associated with the variable cost of the IPCD,
the bank entered into a derivative contract with the Federal Home Loan Bank of
Pittsburgh (FHLB). The terms of the derivative contract provide for the bank's
receipt of an amount equal to the amount to be paid to the IPCD depositor, in
exchange for a periodic payment stream to the FHLB expressed as a fixed rate of
interest.

     The bank accounts for its derivative contract with the FHLB and the
derivative embedded in the IPCD in accordance with Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended.
Accordingly, the bank carries these derivatives at fair value in the
Consolidated Statements of Financial Condition and recognizes any changes in
fair value in current period earnings.

     The notional amount of derivative contracts with the FHLB and IPCD
customers was $10,311,000 at September 30, 2001. The fair value of derivatives
is included in "Other liabilities" and approximated $1,991,000 at September 30,
2001. During the three and nine months ended September 30, 2001, approximately
$61,000 and $83,000, respectively, was recorded in other expense for net changes
in the fair market value of derivative contracts.

5.   Stock Dividend

     On February 17, 2000, PBI declared a 5% common stock dividend to
shareholders of record as of February 29, 2000 that was paid on March 10, 2000.
The number of shares and per share amounts have been restated to reflect this
event as of the earliest date presented in this Form 10-QSB.

6.   Earnings Per Share

     Basic earnings per share is calculated on the basis of the weighted average
number of shares outstanding after giving retroactive effect to the 5% common
stock dividend declared on February 17, 2000. Diluted earnings per common share
includes dilutive common stock equivalents as computed under the treasury stock
method using average common stock prices for the respective period. Options to
purchase 556,278 and 648,327 shares of common stock were outstanding at
September 30, 2001 and 2000, respectively, and to the extent dilutive, were
included in the computation of earnings per diluted common share. Options to
purchase 51,998 shares of common stock were anti-dilutive and excluded from the
calculation of earnings per diluted common share for the three and nine months
ended September 30, 2001 and 2000.

                                        6

<PAGE>



                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   Earnings Per Share (Continued)

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

<TABLE>
<CAPTION>

                                                        FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
                                                        ---------------------------------------------
                                                         (Dollars in thousands, except per share data)
                                                                                             Per share
                                                         Net income           Shares           Amount
                                                         ----------         ---------         --------
<S>                                                       <C>               <C>               <C>
Basic earnings per share                                  $     790         3,224,960         $   0.24
Effect of dilutive stock options                                 --           251,814            (0.01)
                                                          ---------         ---------         --------
Earnings per diluted share                                $     790         3,476,774         $   0.23
                                                          =========         =========         ========

                                                        FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
                                                        ---------------------------------------------
                                                         (Dollars in thousands, except per share data)
                                                                                             Per share
                                                         Net income           Shares           Amount
                                                         ----------         ---------         --------
Basic earnings per share                                  $     569         3,105,248         $   0.18
Effect of dilutive stock options                                 --           228,717            (0.01)
                                                          ---------         ---------         --------
Earnings per diluted share                                $     569         3,333,965         $   0.17
                                                          =========         =========         ========


                                                         FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                                                        ---------------------------------------------
                                                         (Dollars in thousands, except per share data)
                                                                                             Per share
                                                         Net income           Shares           Amount
                                                         ----------         ---------         --------
Basic earnings per share                                  $   1,819         3,207,402         $   0.57
Effect of dilutive stock options                                 --           205,700            (0.04)
                                                          ---------         ---------         --------
Earnings per diluted share                                $   1,819         3,413,102         $   0.53
                                                          =========         =========         ========

                                                        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                                                        ---------------------------------------------
                                                         (Dollars in thousands, except per share data)
                                                                                             Per share
                                                         Net income           Shares           Amount
                                                         ----------         ---------         --------
Basic earnings per share                                  $   1,576         3,094,868         $   0.51
Effect of dilutive stock options                                 --           306,978            (0.05)
                                                          ---------         ---------         --------
Earnings per diluted share                                $   1,576         3,401,846         $   0.46
                                                          =========         =========         ========
</TABLE>


                                       7

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   Comprehensive Income

     The following table displays net income and the components of other
comprehensive income to arrive at total comprehensive income. The only component
of other comprehensive income for PBI is the change in the estimated fair value
of investment securities available for sale.

<TABLE>
<CAPTION>
                                                         FOR THE THREE MONTHS ENDED      FOR THE NINE MONTHS ENDED
                                                               SEPTEMBER 30,                   SEPTEMBER 30,
                                                             2001        2000                 2001       2000
                                                           -------     -------              -------    -------
                                                          (Dollars in thousands)         (Dollars in thousands)
<S>                                                        <C>         <C>                  <C>        <C>
Net income                                                 $   790     $   569              $ 1,819    $ 1,576
Other comprehensive income, net of tax:
  Unrealized gains on investment securities
      available for sale:
    Unrealized holding gains during the period                 980         435                1,237        226
    Less: reclassification adjustment for gains
      included in net income                                    (2)         --                   --         --
                                                           -------     -------              -------    -------
Other comprehensive income, net of tax                         978         435                1,237        226
                                                           -------     -------              -------    -------
Comprehensive income                                       $ 1,768     $ 1,004              $ 3,056    $ 1,802
                                                           =======     =======              =======    =======
</TABLE>

                                   8


<PAGE>


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

GENERAL

     Premier Bancorp, Inc. (PBI) is a Pennsylvania business corporation and a
registered financial holding company headquartered in Doylestown, Bucks County,
Pennsylvania. PBI was incorporated on July 15, 1997 and reorganized on November
17, 1997 as the one-bank holding company of Premier Bank. PBI's primary business
is the operation of its wholly owned subsidiary, Premier Bank, which is managed
as a single business segment.

     Premier Bank was organized in 1990 as a Pennsylvania chartered banking
institution and began operations on April 24, 1992. The bank is a
community-oriented financial services provider whose business primarily consists
of attracting retail deposits from the general public and small businesses and
originating commercial and consumer loans in its market area. The bank also
invests in securities such as mortgage-backed securities, obligations of U.S.
government agencies and government sponsored entities, corporate bonds and
municipal bonds.

     The bank's revenues are derived principally from interest on its loans and
investment portfolios. The bank's primary sources of funds are deposits and
borrowed funds. The bank also receives funds from repayment, prepayment and
maturity of loans and investments. Currently, the bank has seven full-service
Pennsylvania banking offices: Doylestown, Easton, Southampton, Floral Vale,
Bethlehem, Bensalem and Montgomeryville and a limited service office in the
Heritage Towers Retirement Community in Doylestown. The bank opened its Bensalem
and Montgomeryville branches in October 2000. The bank faces significant
competition from other financial services companies, many of which are larger
organizations with more resources and locations than the bank.

     PBI's consolidated results of operations are dependent primarily on net
interest income, which is the difference between the interest income earned on
interest-earning assets, such as loans and securities, and the interest expense
paid on interest-bearing liabilities, such as deposits and borrowed money. PBI
also generates non-interest income such as service charges, fees from sales of
title insurance and other fees. Non-interest expenses primarily consist of
employee compensation and benefits, occupancy expenses, marketing, data
processing costs and other operating expenses. PBI is subject to losses from the
bank's loan portfolio if borrowers fail to meet their obligations. PBI's results
of operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory agencies.

     Overhead expenses in 2001 are expected to be higher than in 2000 due to a
full year of expenses for new branches opened in October 2000. In addition, the
bank is facing increased competition for deposits and loans in the current
interest rate environment. This may also impact PBI's results of operations for
2001.

     The following is management's discussion and analysis of the significant
changes in the results of operations for the three and nine months ended
September 30, 2001 as compared to the same periods in 2000 and changes in
financial condition from December 31, 2000 to September 30, 2001. Current
performance may not be indicative of future performance. This discussion should
be read in conjunction with PBI's 2000 Annual Report on Form 10-KSB.

     In addition to historical information, this management discussion and
analysis contains forward-looking statements. Forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. We caution readers not to place undue
reliance on these forward-looking statements, which reflect our analysis only as
of this date. We are not obligated to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
this date. Readers should carefully review the risk factors described in other
documents we file from time to time with the Securities and Exchange Commission,
including annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and
any current reports on Form 8-K.

                                       9

<PAGE>


MANAGEMENT'S STRATEGY

     The bank's lending activities are specialized in small and medium sized
businesses, professionals and individuals. In order to fund its lending
activities and allow for increased contact with customers, the bank is
establishing a branch network to develop a stable core deposit base catering
primarily to retail and business depositors. We have a strong commitment to
highly personalized customer service. To support PBI's growth, without
compromising personalized service, we have made significant investments in
experienced personnel and have incurred significant costs related to branch
office expansion.

     Since the 1992 opening of Premier Bank, PBI has grown to seven full service
Pennsylvania banking offices. The bank opened its fifth office in Bethlehem,
Northampton County, in December 1999 and a limited service office in the
Heritage Towers Retirement Community in Doylestown in July 2000. The bank opened
its sixth and seventh Pennsylvania full service offices in Bensalem and
Montgomeryville in October 2000. New branches normally contribute positively to
earnings after they mature and grow.

     In conjunction with its branch expansion, the bank added significantly to
its commercial lending staff in 1999 to grow its loan portfolio and shift assets
toward loans and away from investments. However, the development of a quality
loan portfolio takes considerable time. Investment securities can be added to a
portfolio quickly. Therefore, the bank may buy or sell investment securities
from time to time depending on market conditions, business trends, liquidity,
and capital levels.

     In addition to the ongoing expansion of the bank's traditional business, we
continuously review and consider new products and services to offer customers.
These new products and services are largely intended to generate and increase
fee income. In December 2000, we organized Lenders Abstract, LLC to generate fee
income from the origination of title insurance policies.

     Recent changes in federal banking laws allow financial institutions to
engage in a broader range of activities than previously permitted. These
legislative changes may serve to increase both opportunity and competition.


                                       10

<PAGE>


     The following table sets forth, for the periods indicated, certain average
balance sheet amounts and their corresponding earnings/expenses and rates (which
have been annualized).
<TABLE>
<CAPTION>

                                   AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE SUMMARY


FOR THE THREE MONTHS ENDED SEPTEMBER 30,                              2001                                      2000
                                                         ---------------------------------    ----------------------------------
                                                          AVERAGE                AVERAGE       AVERAGE                   AVERAGE
                                                          BALANCE   INTEREST       RATE        BALANCE       INTEREST     RATE
                                                         --------   --------     -------      ---------      --------    -------
                                                                                 (Dollars in thousands)
Assets

<S>                                                       <C>           <C>       <C>             <C>            <C>      <C>
    Interest-bearing deposits                             $ 1,301       $ 12      3.66%           $ 434          $ 7      6.42%
    Federal funds sold                                     10,660         94      3.50%           6,118           95      6.18%
    Investment securities available for sale
       Taxable (1)                                         86,036      1,434      6.61%          83,773        1,474      7.00%
       Tax-exempt (1)(2)                                   20,795        409      7.80%          17,858          335      7.46%
    Investment securities held to maturity                  3,932         63      6.40%           6,531          106      6.46%
                                                         --------      -----      ----        ---------        -----      ----
       Total investment securities                        110,763      1,906      6.83%         108,162        1,915      7.04%
    Loans, net of unearned income (3) (4)                 277,561      5,795      8.28%         221,817        4,897      8.78%
                                                         --------      -----      ----        ---------        -----      ----
    Total interest-earning assets                         400,285      7,807      7.74%         336,531        6,914      8.17%
    Cash and due from banks                                 7,346                                 5,995
    Allowance for loan losses                              (3,456)                               (2,852)
    Other assets (5)                                        9,740                                 8,353
                                                         --------                             ---------
Total assets                                            $ 413,915                             $ 348,027
                                                        ==========                            =========
Liabilities, minority interest in subsidiary
    and shareholders' equity
    Interest checking                                    $ 29,292        192      2.60%        $ 21,492          138      2.55%
    Money market deposit accounts                          19,450        151      3.08%           8,130          105      5.14%
    Savings accounts                                       44,878        323      2.86%          45,047          393      3.47%
    Time deposits                                         202,187      2,920      5.73%         175,441        2,699      6.12%
                                                         --------      -----      ----         --------        -----      ----
       Total interest-bearing deposits                    295,807      3,586      4.81%         250,110        3,335      5.30%
    Short-term borrowings                                  20,685        134      2.57%          36,712          583      6.32%
    Long-term borrowings                                   30,000        449      5.94%               -            -         -
                                                         --------      -----      ----         --------        -----      ----
       Total borrowings                                    50,685        583      4.56%          36,712          583      6.32%
    Subordinated debt                                       1,500         28      7.41%           1,500           32      8.49%
                                                         --------      -----      ----         --------        -----      ----
    Total interest-bearing liabilities                    347,992      4,197      4.78%         288,322        3,950      5.45%
    Non-interest-bearing deposits                          26,646                                25,141
    Other liabilities                                       7,746                                 5,641
    Capital securities                                     10,000                                10,000
    Shareholders' equity (6)                               21,531                                18,923
                                                         --------                              --------
Total liabilities, minority interest in
   subsidiary and shareholders' equity                  $ 413,915                             $ 348,027
                                                        =========                             =========

    Net interest income/rate spread                                  $ 3,610      2.96%                      $ 2,964      2.72%
                                                                     =======      ====                       =======      ====

    Net interest margin (7)                                                       3.58%                                   3.50%

     Average interest-earning assets as a percentage
     of average interest-bearing liabilities              115.03%                               116.72%
</TABLE>


-----------
(1)  Excludes the SFAS 115 valuation allowance on investment securities
     available for sale.

(2)  Interest income on tax-exempt investment securities was presented on a
     tax-equivalent basis. Tax-exempt yields were adjusted to a tax equivalent
     basis using a 34% rate.

(3)  Includes non-accrual loans of $244,000 and $329,000 on average for the
     three months ended September 30, 2001 and 2000, respectively.


(4)  Includes tax-exempt loans of $2,416,000 and $1,059,000 on average for the
     three months ended September 30, 2001 and 2000, respectively.
     Tax-exempt yields were adjusted to a tax-equivalent basis using a 34% rate.

(5)  Excludes the deferred tax asset related to the SFAS 115 valuation allowance
     on investment securities available for sale.

(6)  Excludes the SFAS 115 valuation allowance on investment securities
     available for sale, net of tax.

(7)  Net interest margin is calculated as net interest income divided by average
     interest-earning assets.

                                       11

<PAGE>


     The following table set forth, for the periods indicated, certain average
balance sheet amounts and their corresponding earnings/expenses and rates (which
have been annualized).

<TABLE>
<CAPTION>

                                   AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE SUMMARY

FOR THE NINE MONTHS ENDED SEPTEMBER 30,                           2001                                   2000
                                              ----------------  ------------   ---------  -------------  -------------  ---------
                                                  AVERAGE                      AVERAGE      AVERAGE                     AVERAGE
                                                  BALANCE         INTEREST       RATE       BALANCE        INTEREST       RATE
                                              ----------------  ------------   ---------  -------------  -------------  ---------
                                                                               (Dollars in thousands)
Assets
<S>                                                     <C>             <C>       <C>             <C>            <C>       <C>
    Interest-bearing deposits                           $ 800           $ 25      4.18%           $ 402          $ 19      6.31%
    Federal funds sold                                  8,247            276      4.47%           6,631           299      6.02%
    Investment securities available for sale
       Taxable (1)                                     81,834          4,175      6.82%          84,928         4,447      6.99%
       Tax-exempt (1)(2)                               18,789          1,077      7.66%          17,859         1,005      7.52%
    Investment securities held to maturity              5,316            243      6.10%           6,799           331      6.50%
                                              ---------------   ------------   --------   -------------  -------------  ---------
       Total investment securities                    105,939          5,495      6.93%         109,586         5,783      7.05%
    Loans, net of unearned income (3) (4)             260,109         16,610      8.54%         212,305        13,883      8.73%
                                              ---------------   ------------   --------   -------------  -------------  ---------
    Total interest-earning assets                     375,095         22,406      7.99%         328,924        19,984      8.12%
    Cash and due from banks                             6,769                                     5,685
    Allowance for loan losses                          (3,248)                                   (2,721)
    Other assets (5)                                    9,703                                     8,025
                                              ---------------                             -------------
Total assets                                        $ 388,319                                 $ 339,913
                                              ===============                             =============
Liabilities, minority interest in subsidiary
    and shareholders' equity
    Interest checking                                $ 26,752            512      2.56%        $ 21,592           411      2.54%
    Money market deposit accounts                      18,552            518      3.73%           4,214           150      4.75%
    Savings accounts                                   43,464          1,028      3.16%          49,549         1,294      3.49%
    Time deposits                                     200,409          9,194      6.13%         163,660         7,182      5.86%
                                              ---------------   ------------   --------   -------------  ------------  ---------
       Total interest-bearing deposits                289,177         11,252      5.20%         239,015         9,037      5.05%
    Short-term borrowings                              18,140            487      3.59%          43,157         1,951      6.04%
    Long-term borrowings                               15,678            696      5.94%               -             -         -
                                              ---------------   ------------   --------   -------------  ------------  ---------
       Total borrowings                                33,818          1,183      4.68%          43,157         1,951      6.04%
    Subordinated debt                                   1,500             83      7.40%           1,500            96      8.55%
                                              ---------------   ------------   --------   -------------  ------------  ---------
    Total interest-bearing liabilities                324,495         12,518      5.16%         283,672        11,084      5.22%
    Non-interest-bearing deposits                      25,517                                    22,825
    Other liabilities                                   7,472                                     5,106
    Capital securities                                 10,000                                    10,000
    Shareholders' equity (6)                           20,835                                    18,310
                                              ---------------                             -------------
Total liabilities, minority interest in
   subsidiary and shareholders' equity              $ 388,319                                 $ 339,913
                                              ===============                             =============

    Net interest income/rate spread                                  $ 9,888      2.83%                       $ 8,900      2.90%
                                                                ============   ========                  ============  =========

    Net interest margin (7)                                                       3.52%                                    3.61%

     Average interest-earning assets as a percentage
     of average interest-bearing liabilities           115.59%                                   115.95%
</TABLE>

-----------
(1)  Excludes the SFAS 115 valuation allowance on investment securities
     available for sale.

(2)  Interest income on tax-exempt investment securities was presented on a
     tax-equivalent basis. Tax-exempt yields were adjusted to a tax equivalent
     basis using a 34% rate.

(3)  Includes non-accrual loans of $132,000 and $137,000 on average for the nine
     months ended September 30, 2001 and 2000, respectively.

(4)  Includes tax-exempt loans of $1,543,000 and $1,094,000 on average for the
     nine months ended September 30, 2001 and 2000, respectively.
     Tax-exempt yields were adjusted to a tax-equivalent basis using a 34% rate.

(5)  Excludes the deferred tax asset related to the SFAS 115 valuation allowance
     on investment securities available for sale.

(6)  Excludes the SFAS 115 valuation allowance on investment securities
     available for sale, net of tax.

(7)  Net interest margin is calculated as net interest income divided by average
     interest-earning assets.

                                       12

<PAGE>


RESULTS OF OPERATIONS

     PBI reported net income of $790,000 or $.23 earnings per common share on a
diluted basis for the three months ended September 30, 2001. This represents an
increase of $221,000 or 39% from the net income of $569,000 or $.17 earnings per
common share on a diluted basis reported for the same period in 2000. Interest
income grew $866,000 or 13% in 2001 compared to 2000 primarily due to loan
growth. Loans grew $62,938,000 or 28% since September 30, 2000. However, growth
in net interest income was slowed by eight decreases in the prime lending rate
totaling 3.50% during the nine months ended September 30, 2001. The national
prime-lending rate decreased two times for a total of 75 basis points during the
three months ended September 30, 2001. The national prime-lending rate was cut
six times earlier in 2001. These rate cuts affected the rates on new loans and
existing adjustable/variable rate loans. Other income was $49,000 higher in 2001
due mostly to fees generated from our new title insurance business. Overhead
expenses were $313,000 or 15% higher for the three months ended September 30,
2001 compared to the same period in 2000. This increase is due in part to the
overall growth of the company including the opening of two new branches in
October 2000. Overhead expenses in 2001 also included the fair market write-down
of derivatives associated with the bank's IPCD product due to falling interest
rates. Return on average assets and return on average shareholders' equity were
 .76% and 16.50%, respectively, for the three months ended September 30, 2001
compared to .66% and 16.21%, respectively, for the same period in 2000. Return
on average shareholders' equity, exclusive of the unrealized loss on investment
securities available for sale was 14.56% for the three months ended September
30, 2001 compared to 11.96% for the same period in 2000.

     PBI reported net income of $1,819,000 or $.53 earnings per common share on
a diluted basis for the nine months ended September 30, 2001. This represents an
increase of $243,000 or 15% from the net income of $1,576,000 or $.46 earnings
per common share on a diluted basis reported for the same period in 2000. Both
net income and net interest income grew during the nine months ended September
30, 2001 compared to the same period in 2000. However, growth in net interest
income was slowed by eight decreases in the national prime-lending rate totaling
3.50% during the nine months ended September 30, 2001. These rate cuts affected
the rates on new loans and existing adjustable/variable rate loans. The
provision for loan losses was $118,000 higher due to a more rapid rate of loan
growth in 2001. Loans grew $50,781,000 or 21% during the nine months ended
September 30, 2001 compared to $28,064,000 or 14% during the same period in
2000. Other income was $201,000 higher in 2001 due mostly to $121,000 in fees
generated from our new title insurance business and financial advisory services
combined and $50,000 in fees related to a loan pay-off. Overhead expenses were
$878,000 or 14% higher for the nine months ended September 30, 2001 compared to
the same period in 2000, exclusive of $183,000 in one-time charges in 2000.
Overhead expenses were higher due in part to the bank's opening of two new
branches in October 2000 and the overall growth of the company. Return on
average assets and return on average shareholders' equity were .63% and 13.53%,
respectively, for the nine months ended September 30, 2001 compared to .63% and
16.10%, respectively, for the same period in 2000. Return on average
shareholders' equity, exclusive of the unrealized loss on investment securities
available for sale was 11.67% for the nine months ended September 30, 2001
compared to 11.50% for the same period in 2000.

NET INTEREST INCOME

     Net interest income is the most significant component of the company's
operating income. Net interest income depends upon the levels of
interest-earning assets and interest-bearing liabilities and the difference or
"spread" between the respective yields earned and rates paid. The interest rate
spread is influenced by the overall interest rate environment and by
competition. The interest rate spread is also influenced by differences in the
maturity and repricing of assets versus the liabilities that fund them. During
the nine months ended September 30, 2001, the bank increased its loan portfolio
by $50,781,000 or 21%. Much of this growth was funded by deposit generation. The
bank continues to face strong competition for both loans and deposits. This
competition continues to put pressure on the net interest margin.

     During the nine months ended September 30, 2001 the Federal Reserve cut the
targeted federal funds rate an unprecedented eight times for a total of 3.50%.
Three rate cuts totaling 1.50% occurred in the first quarter of 2001; three rate
cuts totaling 1.25% occurred in the second quarter of 2001; and two rate cuts
totaling .75% occurred in the third quarter of 2001. These cuts immediately
lowered the national prime-lending rate and in turn reduced prime rate based
loans in the bank's portfolio. In addition, the magnitude of the Federal Reserve
rate cuts increases the likelihood that customers with higher fixed rate loans
will seek to renegotiate lower interest rates or prepay their

                                       13

<PAGE>


loans. Although we cannot predict the extent or timing of such refinance
activity, we do expect the yield on our loan portfolio to decline as this
activity occurs. We cannot predict to what extent the lower asset yields will be
offset by lower cost of funds.

     For the three months ended September 30, 2001, net interest income, on a
tax-equivalent basis, was $646,000 higher than the same period in 2000. This
increase was primarily a function of asset growth and a lower rate on average
interest-bearing liabilities. These positive factors were offset in part by a
lower yield on average interest-earning assets and a lower ratio of average
interest-earning assets to average interest-bearing liabilities. Average
interest-earning assets grew $63,754,000 or 19% from $336,531,000 at September
30, 2000 to $400,285,000 at September 30, 2001. Average loan and average
investment balances increased $55,744,000 and $2,601,000, respectively. The
yield on average interest-earning assets and the rate on average
interest-bearing liabilities decreased 43 and 67 basis points, respectively. The
average rate on interest-bearing liabilities improved in part due to the
maturity of approximately $32,568,000 in 9-month certificates of deposits
yielding 7%. These deposits were retained/replaced at a lower rate. The offering
rates on most deposit products have been lowered in response to the decline in
the national prime-lending rate. In the first quarter of 2002, approximately
$23,311,000 in 23-month certificates of deposits yielding 7% are scheduled to
mature and may provide an opportunity to lower our cost of funds further.
Short-term borrowings and subordinated debt also repriced lower in 2001. We
expect the yield on average interest-earning assets and the rate on average
interest-bearing liabilities to continue to trend downward in 2001 as a result
of the recent rate cuts. The net interest margin increased 8 basis points from
3.50% at September 30, 2000 to 3.58% at September 30, 2001. The net interest
rate spread increased 23 basis points from 2.72% at September 30, 2000 to 2.95%
at September 30, 2001.

     For the nine months ended September 30, 2001, net interest income, on a
tax-equivalent basis, was $988,000 higher than the same period in 2000. This
increase was primarily a function of asset growth and a lower yield on average
interest-bearing liabilities. These positive items were offset in part by a
lower rate on average interest-earning assets. The ratio of average
interest-earning assets to average interest-bearing liabilities decreased from
115.95% for the nine months ended September 30, 2000 to 115.59% for the nine
months ended September 30, 2001. Average interest-earning assets grew
$46,171,000 or 14% from $328,924,000 at September 30, 2000 to $375,095,000 at
September 30, 2001. Average loan balances increased $47,804,000 while average
investments decreased $3,647,000. The yield on average interest-earning assets
and the rate on average interest-bearing liabilities decreased 13 and 6 basis
points, respectively. The rate on average interest-bearing deposits was higher
in 2001 primarily due to the aggressive promotion of the 9-month and 23-month
certificates of deposit yielding 7% in 2000. All of the 9-month certificates of
deposit yielding 7% matured by September 30, 2001. Approximately $23,311,000 in
23-month certificates of deposit is scheduled to mature in the first quarter of
2002. The rates on average savings and average money market accounts declined
while the rate on average interest checking accounts was relatively flat.
Short-term borrowings and subordinated debt repriced lower in 2001 and offset,
in part, the increased rate on time deposits. The net interest margin decreased
9 basis points from 3.61% at September 30, 2000 to 3.52% at September 30, 2001.
The net interest rate spread decreased 7 basis points from 2.90% at September
30, 2000 to 2.83% at September 30, 2001. The maturity/repricing characteristics
of our balance sheet in combination with increased competition for loans and
deposits, has contributed to this margin compression.

NON-INTEREST INCOME

     Non-interest income consists primarily of service charges on deposits, fees
from sales of title insurance, fees for financial advisory services and gains
(losses) on the sale of investment securities available for sale and loans held
for sale.

     Total non-interest income was $138,000 for the three months ended September
30, 2001 compared to $89,000 for the same period in 2000. The increase is
primarily attributable to $36,000 in fees generated from the sales of title
insurance through our recently formed subsidiary, Lenders Abstract, LLC.

     Total non-interest income was $424,000 for the nine months ended September
30, 2001 compared to $223,000 for the same period in 2000. The increase is
largely due to $97,000 in fees from sales of title insurance, and a $42,000
increase in fees from ATM/debit card activity. In addition, $50,000 in fees was
recorded in 2001 related to a loan pay-off.

                                       14


<PAGE>


NON-INTEREST EXPENSE

     For the three months ended September 30, 2001, non-interest expenses were
$2,362,000 or $313,000 higher than the $2,049,000 recorded during the same
period in 2000. Overhead expenses increased principally due to the continued
growth of our franchise, namely the opening of our Bensalem and Montgomeryville
offices in October 2000. Salaries and benefits were $108,000 higher in 2001, an
increase of 11%, compared to the same period in 2000. This increase was
principally due to an increase in the number of employees and salary
adjustments. The number of full-time equivalent employees grew from 75 at
September 30, 2000 to 78 at September 30, 2001. Occupancy and data processing
expenses were $27,000 and $28,000 higher, respectively. Other expenses consist
primarily of loan expenses, furniture/equipment expense, employee travel, meals
and entertainment, stationery/supplies, postage, Pennsylvania shares tax and
Board of Directors' fees. Other expenses increased $117,000 due principally to
the growth of the institution and $61,000 in fair market value write-downs on
derivatives related to the IPCD product due to falling interest rates.

     For the nine months ended September 30, 2001, non-interest expenses were
$6,964,000 or $695,000 higher than the $6,269,000 recorded during the same
period in 2000. Overhead expenses for the nine months ended September 30, 2000
included one-time charges of $115,000 related to two discontinued internet
banking initiatives and $68,000 for the write-off of improvements to a proposed
branch site in Bensalem which was relocated. Excluding these one-time charges,
overhead increased $878,000 or 14% principally due to the continued growth of
our franchise, namely the opening of our Bensalem and Montgomeryville offices in
October 2000. Salaries and benefits were $347,000 higher in 2001, an increase of
12%, compared to the same period in 2000. This increase was principally due to
an increase in the number of employees and salary adjustments. Higher health
insurance costs, higher bonus accruals and employee recruiting fees accounted
for $142,000 of the increase in salaries and benefits expense in 2001. Occupancy
expenses were $126,000 higher due primarily to the additional rent,
depreciation, maintenance and utility costs for the new branches. Data
processing expenses increased $93,000 principally due to the growth of the
institution, variable costs associated with item processing and account volumes,
and new services. Professional services were lower during the nine months ended
September 30, 2001 due in part to the one-time charges in 2000. Other expenses
consist primarily of loan expenses, furniture/equipment expense, employee
travel, meals and entertainment, stationery/supplies, postage, Pennsylvania
shares tax and Board of Directors' fees. Other expenses in 2000 included $68,000
for the write-off of improvements related to a proposed branch site that was
relocated. Exclusive of this one-time charge in 2000, other expenses increased
$230,000 or 24% due principally to the growth of the institution, higher loan
collection costs and higher Pennsylvania shares tax expense. Other expenses in
2001 also included $83,000 in fair market value write-downs on derivatives
related to the IPCD product due to falling interest rates.

PROVISION FOR LOAN LOSSES

     The provision for loan losses represents the amount necessary to be charged
to operations to bring the allowance for loan losses to a level that we deem
adequate to provide for known and inherent losses. The amount of the provision
for loan losses and the amount of the allowance for loan losses is subject to
ongoing analysis of the loan portfolio which considers current economic
conditions, actual loss experience, the current risk profile of the portfolio,
delinquency statistics, and the composition of loan types within the portfolio.
Net charge-offs were $33,000 and $6,000 for the nine months ended September 30,
2001 and September 30, 2000, respectively. The bank's loan portfolio is
relatively immature given its recent growth rates. Therefore, charge-off and
non-performing asset trends may not be indicative of future performance.

     The provision for loan losses increased $54,000 from $125,000 during the
three months ended September 30, 2000 to $179,000 during the same period in
2001. The provision for loan losses also increased $118,000 from $400,000 during
the nine months ended September 30, 2000 to $518,000 during the same period in
2001. The increase was primarily due to the higher amount/rate of loan growth in
2001 versus 2000. Additional provisions were also recorded in 2001 to replenish
reserves as a result of $29,000 in charge-offs during the third quarter. Total
loans grew $17,593,000 or 6% during the three months ended September 30, 2001
compared to $12,409,000 or 6% during the same period in 2000. Total loans grew
$50,781,000 or 21% during the nine months ended September 30, 2001 compared to
$28,064,000 or 14% during the same period in 2000. The loan loss allowance as a
percentage of total loans was 1.21% and 1.28% at September 30, 2001 and
September 30, 2000, respectively.

                                       15


<PAGE>


INCOME TAX EXPENSE

     We recorded a $266,000 or 25.2% tax provision for the three months ended
September 30, 2001 compared to $186,000 or 24.6% for the same period in 2000. We
recorded a $610,000 or 25.1% tax provision for the nine months ended September
30, 2001 compared to $506,000 or 24.3% for the same period in 2000. The
effective tax rates for the three and nine months ended September 30, 2001 were
higher than the comparable periods in 2000, due principally to a lower ratio of
tax-exempt interest relative to total pre-tax income.

FINANCIAL CONDITION

     Consolidated assets grew $69,318,000 or 20% during the nine months ended
September 30, 2001. Federal funds sold, investments and total gross loans grew
$11,932,000, $6,179,000 and $50,781,000, respectively. Asset growth was
primarily funded by increases in borrowings and deposits and by proceeds from
the sale of investment securities available for sale. Borrowings grew
$35,033,000 from $14,404,000 at December 31, 2000 to $49,437,000 at September
30, 2001. Deposits grew $31,952,000 from $303,293,000 at December 31, 2000 to
$335,245,000 at September 30, 2001. Shareholders' equity increased $3,484,000
from $16,455,000 at December 31, 2000 to $19,939,000 at September 30, 2001. This
increase was attributable to $1,819,000 in earnings, a $1,237,000 improvement in
the estimated fair value of investment securities available for sale, net of
tax, and $428,000 from the exercise of common stock options.

INVESTMENT SECURITIES

     The company's investment policies dictate permissible investment
categories, credit quality, maturity intervals and investment concentrations. We
are responsible for making the specific investment purchases within these
standards. Total investments increased by $6,179,000 from $100,599,000 at
December 31, 2000 to $106,778,000 at September 30, 2001. Corporate bonds and
municipal bonds increased $10,540,000 and $2,940,000, respectively, during the
nine months ended September 30, 2001, excluding changes in estimated fair value.
U.S. government agency obligations decreased $7,343,000 during the nine months
ended September 30, 2001, excluding changes in estimated fair value.

     We buy and sell investment securities from time to time depending on market
conditions, business trends, liquidity and capital levels. Investment securities
provide an interim way to add to assets quickly and generate additional
earnings. While loan growth is the company's ultimate goal, the development of a
quality loan portfolio requires significant time. We generally earn a positive
interest spread by assuming interest rate risk using deposits and short-term
borrowings to purchase securities with longer maturities.

     Investment securities are classified at the time of purchase by one of
three purposes: trading, available for sale (AFS) or held to maturity (HTM). To
date, we have not purchased any securities for trading purposes. We classify
most of our securities as AFS even though we have no immediate intent to sell
them. The AFS designation affords us the flexibility to sell certain securities
and adjust the balance sheet in response to capital levels, liquidity needs
and/or changes in market conditions. AFS securities are marked to market in the
Consolidated Statements of Financial Condition with an adjustment to equity, net
of tax, and presented in the caption "Accumulated other comprehensive income
(loss)." The carrying values for AFS and HTM securities were $104,280,000 and
$2,498,000, respectively, as of September 30, 2001.

     The estimated fair value of AFS securities improved $1,875,000 from an
unrealized loss of $4,975,000 at December 31, 2000 to an unrealized loss of
$3,100,000 at September 30, 2001. The estimated fair value of AFS securities
improved during the nine months ended September 30, 2001 principally due to
lower interest rates. The unrealized loss on the corporate bond portfolio was
$3,369,000 at September 30, 2001.

     At September 30, 2001 corporate bonds comprised $36,707,000 or 34% of the
total investment portfolio. Approximately 72% of our corporate bonds are fixed
rate and 28% are variable rate. We began investing in the corporate bonds of
other financial institutions after the issuance of our $10,000,000 of capital
securities in August 1998. Our corporate bond portfolio has experienced an
unrealized loss in value beyond that caused by interest rate

                                       16

<PAGE>


changes alone as the market has deeply discounted these securities due to
perceived credit risk. We believe that the market valuations of our corporate
bonds were discounted further because certain bonds were issued by non-rated or
below investment grade rated companies.

     We evaluated the credit quality of corporate bond issuers prior to their
purchase and monitor these issuers on an ongoing basis. We believe that the
credit quality of our corporate bond portfolio is sound and that we will
ultimately be repaid. Therefore, we view the unrealized loss in the market value
of our corporate bonds as temporary. If, at some future date, we believe that
the recovery of the unrealized loss on our corporate bonds is not probable and
other than temporary, we will recognize the loss through earnings.

     Although we have no immediate plans to sell these securities, we have
classified them as "available for sale" allowing us the flexibility to sell the
securities and adjust our portfolio as future conditions change. Although
interest rates have recently declined, these bonds have yet to materially
recover their unrealized losses in estimated fair market value. At this time we
plan to hold these investment positions realizing it may be some time before
market conditions improve.

                              INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>

                                                                SEPTEMBER 30, 2001
                                           -------------------------------------------------------------
                                                  HELD TO MATURITY              AVAILABLE FOR SALE
                                              AMORTIZED      ESTIMATED       AMORTIZED      ESTIMATED
                                                COST         FAIR VALUE        COST         FAIR VALUE
                                           -------------------------------------------------------------
                                                                   (In thousands)

<S>                                             <C>            <C>                 <C>            <C>
U.S. government agency obligations              $ 1,998        $ 2,000       $       -      $       -
Mortgage-backed securities                            -              -          44,385         45,041
Municipal securities                                  -              -          20,796         20,409
Equity securities                                     -              -           2,008          2,008
Corporate bonds                                       -              -          40,076         36,707
Other debt securities                               500            500             115            115
                                                -------        -------       ---------      ---------
Total                                           $ 2,498        $ 2,500       $ 107,380      $ 104,280
                                                =======        =======       =========      =========

                                                                 DECEMBER 31, 2000
                                           -------------------------------------------------------------
                                                  HELD TO MATURITY              AVAILABLE FOR SALE
                                              AMORTIZED      ESTIMATED       AMORTIZED      ESTIMATED
                                                COST         FAIR VALUE        COST         FAIR VALUE
                                           -------------------------------------------------------------
                                                                   (In thousands)


U.S. government agency obligations              $ 4,997        $ 4,888         $ 4,344        $ 4,363
Mortgage-backed securities                          529            524          45,764         45,142
Municipal securities                                  -              -          17,856         17,292
Equity securities                                     -              -           1,933          1,933
Corporate bonds                                       -              -          29,536         25,728
Other debt securities                               500            500             115            115
                                                -------        -------       ---------      ---------
Total                                           $ 6,026        $ 5,912        $ 99,548       $ 94,573
                                                =======        =======       =========      =========
</TABLE>



Loans

     The bank originates a wide variety of loans principally to small and medium
size businesses, professionals and individuals. Company policies and applicable
laws and regulations require risk analysis as well as ongoing portfolio and
credit management. We manage credit risk through lending limit constraints,
credit review, approval policies, and ongoing internal monitoring. A majority of
the loan portfolio is collateralized, at least in part, by real estate in the
greater Lehigh and Delaware Valleys of Pennsylvania and New Jersey. Real estate
values are typically subject to risks associated with the general economy, among
other matters.

                                       17

<PAGE>


     In addition to credit risk, interest rate risk is inherent with the lending
function. We manage interest rate risk within our asset/liability framework
using various modeling techniques and analyses. Most loans are adjustable rate
that reset in intervals of five years or fewer. When possible, the bank also
originates variable rate loans.

     Gross loans increased $50,781,000 or 21% from $239,445,000 at December 31,
2000 to $290,226,000 at September 30, 2001. Loans secured by commercial real
estate grew $36,322,000 during the nine months ended September 30, 2001.


                                                           LOAN PORTFOLIO

<TABLE>
<CAPTION>

                                   SEPTEMBER 30, 2001     % OF TOTAL     DECEMBER 31, 2000      % OF TOTAL
                                   ------------------     ----------     -----------------      ----------
                                                               (Dollars in thousands)

<S>                                  <C>                       <C>        <C>                         <C>
Real estate-farmland                 $            218          0.07%      $            230           0.10%
Real estate-construction                       10,756          3.71%                 4,395           1.83%
Real estate-residential                        27,848          9.59%                25,401          10.61%
Real estate-multifamily                        12,270          4.23%                13,667           5.71%
Real estate-commercial                        197,997         68.22%               161,675          67.52%
Commercial                                     39,929         13.76%                32,295          13.49%
Consumer                                        1,208          0.42%                 1,782           0.74%
                                   ------------------     ----------     -----------------      ----------
Total loans                                   290,226        100.00%               239,445         100.00%
                                                          ==========                            ==========
Less:
    Unearned income                             1,181                                  861
    Allowance for loan losses                   3,517                                3,032
                                   ------------------                    -----------------
Total loans, net                     $        285,528                     $      $ 235,552
                                   ==================                    =================
</TABLE>


ALLOWANCE FOR LOAN LOSSES

     We maintain an allowance for loan losses and charge losses to this
allowance when losses are realized. The allowance for loan losses is maintained
at a level that we consider adequate to provide for known and inherent losses in
the loan portfolio. Our evaluation includes such factors as current economic
conditions, actual loss experience and the current risk profile of the loan
portfolio. Each commercial loan is assigned a specific loan loss reserve using a
scoring system. This scoring system takes into consideration collateral type and
value, loan to value ratios, the borrower's risk rating, delinquency statistics
and other factors previously described. Loan officers determine borrowers' risk
ratings at the inception of each loan. These risk ratings are then subject to
ongoing analysis and update by an independent loan reviewer. Homogeneous loans,
comprised primarily of home equity and non-real estate secured consumer loans,
are analyzed in the aggregate. Because the bank is less than ten years old with
a limited history for loan losses, we also use peer group analysis to gauge the
overall reasonableness of the loan loss allowance. While we calculate the
allowance based on specific loans or loan categories, we consider the total
allowance available for losses in the entire loan portfolio. The unallocated
portion of the reserve is primarily determined based on our assessment of the
collateral risk inherent in non-real estate secured commercial loans as well as
other risk factors that may not have manifested themselves in the company's
historical loss experience. Some of these other risk factors include the economy
and inherent delays in obtaining information regarding a customer's financial
condition or changes in their unique business conditions affecting the
identification and estimation of losses.

     While we believe that we use the best information available to determine
the allowance for loan losses, unforeseen market conditions could result in
adjustments to the allowance, and net income could be significantly affected if
circumstances differ substantially from the assumptions used in determining the
allowance.

                                       18

<PAGE>



<TABLE>
<CAPTION>


                                                 ALLOWANCE FOR LOAN LOSS ALLOCATION

                                         SEPTEMBER 30, 2001       DECEMBER 31, 2000     SEPTEMBER 30, 2000
                                         --------------------   --------------------   -------------------
                                                   % LOANS TO             % LOANS TO             % LOANS TO
                                         AMOUNT   TOTAL LOANS   AMOUNT   TOTAL LOANS   AMOUNT   TOTAL LOANS
                                         ------   -----------   ------   -----------   ------   ----------
                                                              (Dollars in thousands)
Balance at end of period
   applicable to:
<S>                                      <C>            <C>     <C>            <C>     <C>            <C>
Real estate-farmland                     $    2         0.07%   $    2         0.10%   $    2         0.10%
Real estate-construction                     65         3.71%       30         1.83%       37         2.35%
Real estate-residential                     240         9.59%      236        10.61%      265        10.49%
Real estate-multi-family                     71         4.23%       76         5.71%       75         5.99%
Real estate-commercial                    1,795        68.22%    1,419        67.52%    1,343        67.39%
Commercial                                  730        13.76%      662        13.49%      648        12.96%
Consumer                                     12         0.42%       14         0.74%       13         0.72%
Unallocated                                 602          --        593          --        522          --
                                         ------       ------    ------       ------    ------       ------
Total                                    $3,517       100.00%   $3,032       100.00%   $2,905       100.00%
                                         ======       ======    ======       ======    ======       ======
</TABLE>


     Regulatory authorities, as an integral part of their examinations,
periodically review the allowance for loan losses. They may require additions to
the allowance based upon their judgment and information available to them at the
time of examination.

     At September 30, 2001, the allowance for loan losses totaled $3,517,000,
representing 1.21% of outstanding loans receivable compared to 1.27% and 1.28%
at December 31, 2000 and September 30, 2000, respectively.

                                       19


<PAGE>


     The following table sets forth the activity in the allowance for loan
losses and certain key ratios for the periods indicated. The bank's loan
portfolio is relatively immature given its recent growth rates. Therefore,
current charge-off and non-performing asset trends may not be indicative of
future performance.

     In September 2001, one non-accrual loan was paid-off, resulting in a
charge-off of $29,000.


<TABLE>
<CAPTION>
                                                                  ALLOWANCE FOR LOAN LOSSES

                                                  FOR THE NINE              FOR THE              FOR THE NINE
                                                  MONTHS ENDED             YEAR ENDED            MONTHS ENDED
                                               SEPTEMBER 30, 2001      DECEMBER 31, 2000      SEPTEMBER 30, 2000
                                               ------------------      -----------------      ------------------
                                                                      (Dollars in thousands)
<S>                                                       <C>                    <C>                     <C>
Balance at beginning of period                          $   3,032              $   2,511               $   2,511

Charge-offs:
   Real estate-residential                                      -                      6                       6
   Real estate-commercial                                      29                      -                       -
   Commercial                                                   4                      1                       -
                                               ------------------      -----------------      ------------------
Total charge-offs                                              33                      7                       6

Recoveries:                                                     -                      -                       -
                                               ------------------      -----------------      ------------------
Net charge-offs                                                33                      7                       6
Provision for loan losses                                     518                    528                     400
                                               ------------------      -----------------      ------------------
Balance at end of period                                $   3,517              $   3,032               $   2,905
                                               ==================      =================     ===================
Total gross loans:
Average                                                 $ 261,148              $ 217,128               $ 212,987
End of period                                           $ 290,226              $ 239,445               $ 227,288

Ratios:
Net charge-offs to:
   Average loans                                            0.01%                      -                       -
   Loans at end of period                                   0.01%                      -                       -
   Allowance for loan losses                                0.94%                  0.23%                   0.21%
   Provision for loan losses                                6.37%                  1.33%                   1.50%

Allowance for loan losses to:
   Total gross loans at end of period                       1.21%                  1.27%                   1.28%
   Non-performing loans (1)                                   N/M                    N/M                 690.02%
</TABLE>

----------------
(1)  Ratio is not meaningful since there were no non-performing loans at
     September 30, 2001 or December 31, 2000.

                                       20

<PAGE>


NON-PERFORMING ASSETS

     Non-performing assets are defined as accruing loans past due 90 days or
more, non-accruing loans, restructured loans and other real estate owned.
Non-performing assets at September 30, 2001 consisted of one commercial property
classified as other real estate owned. Non-performing assets at December 31,
2000 consisted of seven residential properties classified as other real estate
owned. These other real estate owned properties were sold in May 2001 at a loss
of $17,000.

                              NON-PERFORMING ASSETS

                                                     SEPTEMBER 30,  DECEMBER 31,
                                                         2001          2000
                                                     -------------  ------------
                                                       (Dollars in thousands)


Loans past due 90 days or more and accruing                   $ --         $ --
Non-accrual loans                                               --           --
Other real estate owned                                        475          252
                                                     -------------  ------------
       Total non-perfoming assets                             $475         $252
                                                     =============  ============
Ratio of non-performing loans to total loans (1)               N/M          N/M

Ratio of non-performing assets to total assets                0.11%        0.07%


                                                                           ----
----------
(1)  Ratio is not meaningful because there were no non-performing loans at
     September 30, 2001 or December 31, 2000.

OTHER REAL ESTATE OWNED

     Other real estate owned of $475,000 at September 30, 2001 consisted of one
commercial property. This property was transferred into other real estate owned
in August 2001. Other real estate owned at December 31, 2000 was sold in May
2001 for a loss of $17,000.

DEFERRED TAXES

     The $638,000 decrease in deferred taxes from $2,703,000 at December 31,
2000 to $2,065,000 at September 30, 2001 relates to the change in the estimated
fair value of investment securities available for sale.

OTHER ASSETS

     Other assets increased $140,000 from $699,000 at December 31, 2000 to
$839,000 at September 30, 2001. Approximately $88,000 of this increase relates
to prepaid letter of credit and other fees associated with the IPCD product.
These fees are amortized to interest expense over a period not to exceed the
term of the IPCD.

                                       21


<PAGE>


DEPOSITS

     Premier Bank, a traditional community-based bank, is largely dependent upon
its base of competitively priced core deposits to provide a stable funding
source. The bank has retained and grown its customer base since inception
through a combination of price, quality service, convenience, and a stable and
experienced staff. During the nine months ended September 30, 2001 total
deposits grew $31,952,000 or 11% from $303,293,000 at December 31, 2000 to
$335,245,000 at September 30, 2001. Core deposits, which exclude time deposits
greater than $100,000, grew $17,473,000 or 7% during the nine months ended
September 30, 2001 to $277,342,000. Our personal cash management money market
accounts and golden checking accounts grew $3,715,000 and $5,824,000,
respectively, during the nine months ended September 30, 2001.

     Certificate of deposit accounts grew $16,996,000 or 9% from $193,736,000 at
December 31, 2000 to $210,732,000 at September 30, 2001. The IPCD product, which
was introduced in January 2001, totaled $8,396,000 at September 30, 2001. During
the nine months ended September 30, 2001 approximately $32,568,000 in 9-month
certificate of deposits yielding 7% matured. The recent rate cuts in combination
with the maturity of these 9-month certificates of deposit enabled us to
significantly lower our cost of deposits, excluding non-interest-bearing
accounts, from 5.62% at December 31, 2000 to 4.70% at September 30, 2001. In the
first quarter of 2002, approximately $23,311,000 in 23-month certificates of
deposits yielding 7% are scheduled to mature and may provide another opportunity
to lower our cost of deposits further. Certificates of deposit maturing after
one-year total $36,797,000.

     The growth of mutual funds over the past decade have made it increasingly
difficult for community-based financial institutions like Premier Bank to
attract deposits as many consumers in search of higher returns have shifted
their investment dollars into the stock market and away from traditional bank
deposit products. In addition, insurance companies recently have become more
significant competitors for deposits through their thrift and banking
subsidiaries.

     We expect to continue to grow deposits through promotions, business
development programs, maturation of existing branches and branch expansion. The
bank opened its sixth and seventh branches in Bensalem and Montgomeryville,
respectively, in October 2000.

<TABLE>
<CAPTION>
                                                                DEPOSITS BY MAJOR CLASSIFICATION

                                                       SEPTEMBER 30, 2001                    DECEMBER 31, 2000
                                               ----------------------------------   -----------------------------------
                                               WEIGHTED                              WEIGHTED
                                               AVERAGE                               AVERAGE
                                               INTEREST                      % OF    INTEREST                    % OF
                                                 RATE       AMOUNT          TOTAL      RATE       AMOUNT        TOTAL
                                                 ----   -----------         -----      ----      --------      ------
                                                                         (Dollars in thousands)
<S>                                              <C>    <C>                  <C>       <C>       <C>             <C>
Interest checking                                2.62%  $    30,508          9.10%     2.53%     $ 25,690        8.47%
Money market                                     2.92%       19,270          5.75%     5.37%       15,347        5.06%
Savings                                          2.68%       43,614         13.01%     3.50%       40,682       13.41%
Time                                             5.58%      210,732         62.86%     6.50%      193,736       63.88%
                                                 ----   -----------         -----      ----      --------      ------
     Total interest-bearing deposits             4.70%      304,124         90.72%     5.62%      275,455       90.82%
                                                 ====                       -----      ----      --------      ------

Non-interest-bearing deposits                                31,121          9.28%                 27,838        9.18%
                                                        -----------         -----                --------      ------
Total deposits                                          $   335,245        100.00%               $303,293      100.00%
                                                        ===========        ======                ========      ======
</TABLE>

                                       22

<PAGE>


BORROWINGS

     Borrowings increased $35,033,000 from $14,404,000 at December 31, 2000 to
$49,437,000 at September 30, 2001. Additional borrowings were utilized during
the nine months ended September 30, 2001 to fund increases in loans and
investments.

     At September 30, 2001 borrowings consisted of $30,000,000 in FHLB
borrowings maturing in approximately 6.5 years and $19,437,000 in overnight
borrowings from customers. At December 31, 2000 borrowings included $785,000 in
overnight federal funds purchased and $13,619,000 in overnight borrowings from
customers. The weighted average interest rate on borrowings was 4.34% and 5.59%
at September 30, 2001 and December 31, 2000, respectively.

     Customer repurchase agreements are collateralized by investment securities
in an amount equal to or exceeding such borrowings. The company controls the
securities pledged as collateral for customer repurchase agreements.

OTHER LIABILITIES

     Other liabilities decreased $1,761,000 from $5,422,000 at December 31, 2000
to $3,661,000 at September 30, 2001. This decrease relates principally to the
settlement of a $2,000,000 security purchase that was accrued at December 31,
2000 and a $1,752,000 net decrease in accruals/payables related to normal
operations. These decreases were partially offset by the $1,991,000 recorded for
the fair value of derivatives related to the IPCD product.

CAPITAL ADEQUACY

     At September 30, 2001, we believe that the company was in compliance with
all applicable regulatory requirements to be classified as "well capitalized"
pursuant to banking regulations.

     The tables below depict PBI's capital components and ratios along with the
"adequately" and "well" capitalized criteria as defined by banking regulations.
At September 30, 2001, PBI exceeded all regulatory requirements and was
classified as "well capitalized".

     PBI's growth rate continues to exceed returns on equity. In addition, PBI
has continued to shift assets into the higher risk weighted asset categories
(i.e., certain loans) as defined by regulatory capital guidelines. If these
trends continue, PBI will need additional capital to remain "well capitalized".



                                       23

<PAGE>

                               CAPITAL COMPONENTS

                                                     SEPTEMBER 30,  DECEMBER 31,
                                                          2001          2000
                                                     -------------  ------------
                                                        (Dollars in thousands)
Tier I
Shareholders' equity                                    $ 19,939      $ 16,455
Allowable portion of minority interest in equity
   of subsidiary                                           7,329         6,580
Net unrealized losses on AFS securities                    2,046         3,283
                                                        --------      --------
Total Tier I Capital                                    $ 29,314      $ 26,318
                                                        ========      ========

Tier II
Allowable portion of minority interest in equity
   of subsidiary                                        $  2,671      $  3,420
Allowable portion of the allowance for loan losses         3,517         3,032
Allowable portion of subordinated debt                     1,500         1,500
                                                        --------      --------
Total Tier II Capital                                   $  7,688      $  7,952
                                                        ========      ========

Total Capital                                           $ 37,002      $ 34,270

Risk-weighted assets                                    $350,315      $284,544


                                 CAPITAL RATIOS
<TABLE>
<CAPTION>
                                                                                                  "ADEQUATELY          "WELL
                                                                                                  CAPITALIZED"      CAPITALIZED"
                                                     SEPTEMBER 30, 2001    DECEMBER 31, 2000         RATIOS            RATIOS
                                                     ------------------    -----------------      -----------       ------------
<S>                                                              <C>                  <C>             <C>             <C>
Total risk-based capital/risk-weighted assets                    10.56%               12.04%          8.00%           10.00%
Tier I capital/risk-weighted assets                               8.37%                9.25%          4.00%            6.00%
Tier I capital/average assets (leverage ratio)                    7.08%                7.41%          4.00%            5.00%
</TABLE>


LIQUIDITY

     Liquidity represents an institution's ability to generate cash or otherwise
obtain funds at reasonable rates to satisfy commitments to borrowers and demands
of depositors. Our primary sources of funds are deposits and borrowings. Cash is
also generated from principal and interest payments on loans, mortgage-backed
securities and investments. While maturities and scheduled amortization of loans
and investments are a predictable source of funds, deposit flows, loan
prepayments and mortgage-backed securities prepayments are influenced by
interest rates, economic conditions and competition.

     For the nine months ended September 30, 2001, investing activities used
cash and cash equivalents of $55,672,000 while operating and financing
activities provided $1,515,000 and $67,226,000, respectively. The cash provided
by financing activities was primarily from increases of $35,033,000 and
$31,952,000 in borrowings and deposits, respectively. Cash was also provided by
sales of AFS securities and by payments/maturities of investment securities.
Together, this cash was primarily used for loan originations and purchases of
mortgage-backed securities, municipal bonds and corporate bonds. During the nine
months ended September 30, 2001, loans grew $51,289,000. Investments grew
$4,304,000 during the nine months ended September 30, 2001, exclusive of the
change in unrealized losses on securities available for sale.


                                       24


<PAGE>


     For the nine months ended September 30, 2000, operating and financing
activities provided cash and cash equivalents of $2,956,000 and $37,857,000,
respectively, while investing activities used $25,278,000. The cash provided by
financing activities resulted primarily from a $53,648,000 increase in deposits.
This increase in deposits was mostly due to promotions of 9 and 23-month
certificates of deposit. This cash was primarily used for loan originations and
the repayment of borrowings. For the nine months ended September 30, 2000, loans
grew $28,071,000 while borrowings decreased $15,867,000. Investments decreased
$4,051,000, exclusive of the change in unrealized losses on securities available
for sale.

     The bank monitors its liquidity position on a daily basis. The bank uses
overnight federal funds and interest-bearing deposits in other banks to absorb
daily excess liquidity. Conversely, overnight federal funds may be purchased to
satisfy daily liquidity needs. Federal funds are sold or purchased through a
correspondent bank, which diversifies the holdings to an approved group of
commercial banks throughout the country. If the bank requires funds beyond its
ability to generate them internally, additional sources of funds are available
through use of one of the following: $6,000,000 unsecured federal funds line of
credit with the bank's correspondent bank, and the bank's $80,749,000 borrowing
limit at the Federal Home Loan Bank of Pittsburgh. The bank could also sell or
borrow against certain investment securities. At September 30, 2001, the bank
had $30,000,000 in borrowings and $6,800,000 in letters of credit from the
Federal Home Loan Bank. The bank had no borrowings outstanding with its
correspondent bank at September 30, 2001.

DERIVATIVE FINANCIAL INSTRUMENTS

     PBI has limited involvement with derivative financial instruments and
currently uses them only in relation to the bank's Index Powered SM Certificate
of Deposit (IPCD) product. The IPCD, which was introduced in the first quarter
2001, contains an embedded derivative feature that provides a potential return
to the depositor based on a formula that is dependent on the return of the
Standard & Poor's 500[Registered] Index. This deposit product is unique in that
the customer may receive a return that is based on an equity market index rather
than a stated interest rate but, like other traditional certificates of deposit,
is insured in its principal amount by the FDIC to the fullest extent provided by
law.

     In order to offset the risks associated with the variable cost of the IPCD,
the bank entered into a derivative contract with the Federal Home Loan Bank of
Pittsburgh (FHLB). The terms of the derivative contract provide for the bank's
receipt of an amount equal to the amount to be paid to the IPCD depositor, in
exchange for a periodic payment stream to the FHLB expressed as a fixed rate of
interest.

     The bank accounts for its derivative contract with the FHLB and the
derivative embedded in the IPCD in accordance with Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended.
Accordingly, the bank carries these derivatives at fair value in the
Consolidated Statements of Financial Condition and recognizes any changes in
fair value in current period earnings.

     The notional amount of derivative contracts with the FHLB and IPCD
customers was $10,311,000 at September 30, 2001. The fair value of derivatives
is included in "Other liabilities" and approximated $1,991,000 at September 30,
2001. During the three and nine months ended September 30, 2001, approximately
$61,000 and $83,000, respectively, was recorded in other expense for net changes
in the fair market value of derivative contracts due to falling interest rates.

                                       25

<PAGE>




RECENT ACCOUNTING PRONOUNCEMENTS

TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES

     In September 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
The Statement supercedes and replaces the guidance in Statement 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 Statement No. 125's provisions without reconsideration. The
Statement 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. This Statement is to be applied prospectively with certain
exceptions. Other than those exceptions, earlier or retroactive application of
its accounting provisions is not permitted. There was no impact on earnings,
financial condition, or equity upon adoption of Statement No. 140.

BUSINESS COMBINATIONS

     In June 2001, the FASB issued Statement No. 141, "Business Combinations."
The Statement addresses financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, "Business Combinations," and
FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises." All business combinations in the scope of the Statement are to be
accounted for using the purchase method.

     The provisions of the Statement apply to all business combinations
initiated after June 30, 2001. The Statement also applies to all business
combinations accounted for using the purchase method for which the date of
acquisition is July 1, 2001, or later. There was no impact on earnings,
financial condition, or equity upon adoption of Statement No. 141.

GOODWILL AND OTHER INTANGIBLE ASSETS

     In June 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets." The Statement addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "Intangible Assets." It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. The Statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements.

     The provisions of the Statement are required to be applied starting with
fiscal years beginning after December 15, 2001, except that goodwill and
intangible assets acquired after June 30, 2001, will be subject immediately to
the nonamortization and amortization provisions of the Statement. Early
application is permitted for entities with fiscal years beginning after March
15, 2001, provided that the first interim financial statements have not
previously been issued. The Statement is required to be applied at the beginning
of an entity's fiscal year and to be applied to all goodwill and other
intangible assets recognized in its financial statements at that date. There is
no expected impact on earnings, financial condition, or equity upon adoption of
Statement No. 142.

ASSET RETIREMENT OBLIGATIONS

     In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." This Statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. As used in this
Statement, a legal obligation is an obligation that a party is required to
settle as a result of an existing or enacted law, statute, ordinance, or written
or oral contract or by legal construction of a contract under the doctrine of
promissory estoppel. This Statement

                                       26

<PAGE>


requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset.

     This Statement amends FASB Statement No. 19, "Financial Accounting and
Reporting by Oil and Gas Producing Companies," and it applies to all entities.
It is effective for financial statements issued for fiscal years beginning after
June 15, 2002. Earlier application is encouraged. There is no expected impact on
earnings, financial condition, or equity upon adoption of Statement No. 143.

IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

     In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of ". However, the Statement retains the
fundamental provisions of Statement 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale.

     This Statement supersedes the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business.
However, this Statement retains the requirement of Opinion 30 to report
discontinued operations separately from continuing operations and extends that
reporting to a component of an entity that either has been disposed of (by sale,
by abandonment, or in distribution to owners) or is classified as held for sale.
This Statement also amends ARB No. 51, "Consolidated Financial Statements," to
eliminate the exception to consolidation for a temporarily controlled
subsidiary.

     The provisions of this Statement are effective for financial statements
issued for fiscal years beginning after December 15, 2001 and interim periods
within those fiscal years, with earlier application encouraged. The provisions
of this Statement generally are to be applied prospectively. There is no
expected impact on earnings, financial condition, or equity upon adoption of
Statement No. 144.


                                       27


<PAGE>


                          Part II -- Other Information

ITEM 1 -- LEGAL PROCEEDINGS

     At September 30, 2001, there were no material legal proceedings pending
against the company.

ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5 -- OTHER INFORMATION

     None.

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are incorporated by reference herein or attached to
     this Form 10-QSB:

         3(i)     Articles of Incorporation (Incorporated by reference to
                  Exhibit 3(i) to our Quarterly Report on Form 10-QSB filed with
                  the SEC on November 14, 2000 and as amended on December 19,
                  2000).

         3(ii)    By-Laws (Incorporated by reference to Exhibit 3(ii) to our
                  Quarterly Report on Form 10-QSB filed with the SEC on November
                  14, 2000 and as amended on December 19, 2000).

         10.1     Premier Bank's 1995 Incentive Stock Option Plan (Incorporated
                  by reference to Exhibit 99.6 to the Company's Registration
                  Statement No. 333-34243 on Form S-4 filed with the SEC on
                  August 22,1997 and as amended on September 9, 1997).

         10.2     Change of Control Agreement between Premier Bancorp, Inc.,
                  Premier Bank and John C. Soffronoff (Incorporated by reference
                  to Exhibit 10.2 to our Quarterly Report on Form 10-QSB filed
                  with the SEC on November 13, 1998).

         10.3     Change of Control Agreement between Premier Bancorp, Inc.,
                  Premier Bank and John J. Ginley (Incorporated by reference to
                  Exhibit 10.3 to our Quarterly Report on Form 10-QSB filed with
                  the SEC on November 13, 1998).

         10.4     Change of Control Agreement between Premier Bancorp, Inc.,
                  Premier Bank and Bruce E. Sickel (Incorporated by reference to
                  Exhibit 10.4 to our Quarterly Report on Form 10-QSB filed with
                  the SEC on November 13, 1998).

(b)  Reports on Form 8-K

     None.

                                       28

<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.

                                          Premier Bancorp, Inc.
                                          ---------------------
                                          Registrant




DATE                                      SIGNATURE
----                                      ---------

November 13, 2001                         /s/ JOHN C. SOFFRONOFF
                                           ----------------------
                                          John C. Soffronoff
                                          President, Chief Executive Officer,
                                          Director (Principal Executive Officer)

November 13, 2001                         /s/ BRUCE E. SICKEL
                                           -------------------
                                          Bruce E. Sickel
                                          Chief Financial Officer, Director
                                          (Principal Financial Officer)

                                       29

<PAGE>

<TABLE>
<CAPTION>

                                INDEX OF EXHIBITS


                                                                                         Page

<S>       <C>                                                                             <C>
3(i)      Articles of Incorporation (Incorporated by reference to Exhibit 3(i)             *
          to our Quarterly Report on Form 10-QSB filed with the SEC on
          November 14, 2000 and as amended on December 19, 2000).

3(ii)     By-Laws (Incorporated by reference to Exhibit 3(ii) to our Quarterly             *
          Report on Form 10-QSB filed with the SEC on November 14, 2000 and as
          amended on December 19, 2000).

10.1      Premier Bank's 1995 Incentive Stock Option Plan (Incorporated by                 *
          reference to Exhibit 99.6 to the Company's Registration Statement
          No. 333-34243 on Form S-4 filed with the SEC on August 22,1997 and as
          amended on September 9, 1997).

10.2      Change of Control Agreement between Premier Bancorp, Inc., Premier               *
          Bank and John C. Soffronoff (Incorporated by reference to Exhibit
          10.2 to our Quarterly Report on Form 10-QSB filed with the SEC on
          November 13, 1998).

10.3      Change of Control Agreement between Premier Bancorp, Inc., Premier               *
          Bank and John J. Ginley (Incorporated by reference to Exhibit 10.3
          to our Quarterly Report on Form 10-QSB filed with the SEC on November
          13, 1998).

10.4      Change of Control Agreement between Premier Bancorp, Inc., Premier               *
          Bank and Bruce E. Sickel (Incorporated by reference to Exhibit 10.4
          to our Quarterly Report on Form 10-QSB filed with the SEC on November
          13, 1998).


* Incorporated by reference.

</TABLE>

                                       30

<PAGE>