SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

For the fiscal year ended December 31, 2001

                                       OR

[ ]  TRANSITION REPORT UNDER 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.
                              ---------------------
                 (Name of Small Business Issuer in Its Charter)

Pennsylvania                                            23-2921058
------------                                            ----------
(State or Other Jurisdiction of                         (I.R.S. Employer
Incorporation or Organization)                          Identification No.)

379 North Main Street, Doylestown, Pennsylvania         18901
-----------------------------------------------         -----
(Address of Principal Executive Offices)                (Zip Code)

                                 (215) 345-5100
                                 --------------
                 Issuer's Telephone Number, Including Area Code

Securities registered under Section 12(b) of the Exchange Act:

Common Stock, $0.33 par value                           American Stock Exchange
-----------------------------                           -----------------------
Title of Each Class                                     Name of Each Exchange
                                                        on Which Registered

Securities registered under Section 12(g) of the Exchange Act:

None
----
(Title of Class)

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

YES X  NO
   ---   ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

     The issuer's revenues for its most recent fiscal year were $30,245,000.

     As of March 19, 2002, 3,320,326 shares of common stock of the registrant
were outstanding and the aggregate market value of the voting and non-voting
common stock of the registrant, held by non-affiliates was approximately
$17,882,000.

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


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for the registrant's
2002 annual meeting of shareholders are incorporated by reference into Part III
of this report.

<PAGE>

                              PREMIER BANCORP, INC.
                                   FORM 10-KSB
                                      INDEX

PART I                                                                      Page

Item 1  Business...............................................................1

Item 2  Properties.............................................................9

Item 3  Legal Proceedings......................................................9

Item 4  Submission of Matters to a Vote of Security Holders....................9

PART II

Item 5  Market for Common Stock and Related Shareholder Matters...............10

Item 6  Management's Discussion and Analysis of Financial Condition and
        Results of Operations.................................................12

Item 7  Financial Statements and Supplementary Data...........................35

Item 8  Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure..............................................67

PART III

Item 9  Directors and Executive Officers; Compliance with Section 16(a)
        of the Exchange Act...................................................67

Item 10 Executive Compensation................................................67

Item 11 Security Ownership of Certain Beneficial Owners and Management........67

Item 12 Certain Relationships and Related Transactions........................67

Item 13 Exhibits List and Reports on Form 8-K.................................68


        Signatures............................................................69


<PAGE>


                                     PART I

     ITEM 1 - BUSINESS

PREMIER BANCORP, INC.

     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 (Premier). Each
outstanding share of Premier Bank common stock was converted into one share of
Premier Bancorp, Inc. common stock under the Plan of Reorganization approved by
the bank's shareholders. PBI's primary business is the operation of its
wholly-owned subsidiary, Premier Bank, which is managed as a single business
segment.

     PBI's consolidated financial condition and results of operations consist
almost entirely of those of Premier Bank. At December 31, 2001, PBI had total
consolidated assets of $450,569,000, total deposits of $358,282,000 and total
shareholders' equity of $19,609,000.

     Other wholly-owned subsidiaries include PBI Capital Trust and Lenders
Abstract, LLC. PBI Capital Trust is a Delaware statutory business trust
established in 1998 for the sole purpose of issuing $10,000,000 in capital
securities. Lenders Abstract, LLC is a Pennsylvania limited liability company
organized in December 2000 to sell title insurance policies.

     As of December 31, 2001, PBI did not own or lease any property and had no
employees.


PREMIER BANK

     Premier was organized in 1990 as a Pennsylvania chartered banking
institution and began operations on April 24, 1992. Premier 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 primarily derived from net interest
income.

     Premier's deposit products include checking, savings and money market
accounts, as well as certificates of deposit. Premier offers numerous credit
products, but specializes in lending to small and medium-sized businesses,
individuals and professionals. The bank offers a full array of lending products
including loans secured by real estate and other assets, working capital lines
and other commercial loans. Other credit products include residential mortgage
loans, home equity loans and lines of credit, personal lines of credit and other
consumer loans. Premier also offers other services such as internet banking,
telephone banking, cash management services, automated teller services and safe
deposit boxes.

     Premier is a member of the Federal Reserve System. Deposits are insured by
the Federal Deposit Insurance Corporation's Bank Insurance Fund to the fullest
extent provided by law.

     Premier conducts business from seven full-service Pennsylvania banking
offices in Doylestown, Easton, Southampton, Floral Vale, Bethlehem,
Montgomeryville, and Bensalem. In addition, the bank operates a limited service
branch in the Heritage Towers Retirement Community in Doylestown. Premier's most
recently established banking offices in Bensalem and Montgomeryville were opened
in October 2000.

     At December 31, 2001 the bank had 65 full-time and 29 part-time employees.

MARKET AREA

     Premier's primary market area is Doylestown, Pennsylvania and the
surrounding Bucks County and Greater Delaware Valley communities. The bank has
four Bucks County based offices and one office in Montgomery County. Premier
also services parts of the Lehigh Valley from its Bethlehem and Easton,
Northampton County, Pennsylvania offices. Though the vast majority of Premier's
deposit and lending business comes from these specific areas, Premier will from
time to time do business in a wider geographic region including all of Eastern
Pennsylvania and portions of New Jersey, including the New Jersey coastline.

                                       1

<PAGE>


LENDING ACTIVITIES

     Premier offers a variety of loan products to its customers, including loans
secured by real estate, commercial and consumer loans. The bank's lending
objectives are as follows:

     o    to establish a diversified commercial loan portfolio;

     o    to provide a satisfactory return to the company's shareholders by
          properly pricing loans to include the cost of funds, administrative
          costs, bad debts, local economic conditions, competition, customer
          relationships, the term of the loan, credit risk, collateral quality
          and a reasonable profit margin.

     Premier manages credit risk through portfolio diversification, underwriting
policies and procedures, and loan monitoring practices. The bank generally
secures its loans with real estate, with such collateral values dependent and
subject to change based on real estate market conditions within the bank's
market area. Premier also has a significant number of borrowers engaged in
medical, dental, legal and real estate professions, as well as, restaurant and
hotel businesses.

     Gross loans totaled $316,066,000 at December 31, 2001 compared to
$239,445,000 at December 31, 2000. The $76,621,000 or 32% increase is primarily
due to the continued success of Premier's lending staff in servicing the small
and medium-sized business community. Gross loans represented approximately 70%
and 67% of total assets at year-end 2001 and 2000, respectively. At December 31,
2001, $269,736,000 or 85% of loans were secured by real estate compared to
$205,368,000 or 86% at December 31, 2000.

     Loans secured by commercial properties include owner occupied commercial
properties and investment income producing properties. Commercial mortgages
totaled $208,412,000 and $161,675,000 at December 31, 2001 and 2000,
respectively.

     Loans secured by residential properties include both first and second
mortgages on single family homes. Many of these loans were made to small
business owners and professionals. Loans secured by residential property totaled
$30,188,000 and $25,401,000 at December 31, 2001 and 2000, respectively.

     Loans secured by apartments and other multi-family residential properties
totaled $15,011,000 at December 31, 2001 and $13,667,000 at December 31, 2000.

     Construction loans are secured by real estate primarily for the building of
residential properties. Construction loans totaled $15,911,000 and $4,395,000 at
December 31, 2001 and 2000, respectively.

     Other loans not secured by real estate include commercial and consumer
loans. Commercial loans are generally made to finance the acquisition of
machinery and equipment and to provide working capital for local commercial,
retail and professional companies. These loans are usually secured by business
assets, excluding real property, and guaranteed by the owners. Commercial loans
totaled $45,238,000 and $32,295,000 at December 31, 2001 and 2000, respectively.

     Consumer loans consist generally of automobile loans and personal loans. At
December 31, 2001 and 2000, these loans totaled $1,092,000 and $1,782,000,
respectively.


INVESTMENT ACTIVITIES

     At December 31, 2001 and 2000, PBI's investment portfolio totaled
$98,351,000 and $100,599,000, respectively. Investments consisted primarily of
mortgage-backed securities, corporate bonds and municipal securities. Corporate
bonds included in the investment portfolio are trust preferred capital
securities issued by other banking companies. Equity securities include stock in
the Federal Home Loan Bank of Pittsburgh, the Federal Reserve Bank of
Philadelphia and the Atlantic Central Bankers Bank, Premier's principal
correspondent bank. Investment securities available for sale are recorded at
market value with the unrealized holding gain or loss, net of tax, included in
shareholders' equity. Investment securities held to maturity are recorded at
amortized cost.

                                       2

<PAGE>

     The carrying value of the held to maturity portfolio was $500,000 and
$6,026,000 at December 31, 2001 and 2000, respectively. The held to maturity
portfolio decreased $5,526,000 as a result of investment calls and maturities.

     At December 31, 2001 and 2000, the carrying value of the available for sale
portfolio was $97,851,000 and $94,573,000, respectively. The available for sale
portfolio experienced significant market value depreciation during 1999 as
interest rates rose. This trend reversed itself late in 2000 and continued
through 2001 as several segments of the portfolio improved in value. The
unrealized loss on available for sale securities was $4,548,000 and $4,975,000
at December 31, 2001 and 2000, respectively. The unrealized loss on corporate
bonds was $3,862,000 and $3,808,000 at December 31, 2001 and 2000, respectively.
In addition to changes in interest rates, corporate bond valuations have been
influenced by perceived credit risk in response to certain world events.
Management believes that the credit quality of the corporate bond portfolio is
sound and that the unrealized loss is temporary.

     Management views the investment portfolio as a source of earnings and
liquidity. Decisions on maturity and type of investment are dictated by
investment and balance sheet management policies as approved annually by the
Board of Directors. The Chief Financial Officer makes the decision regarding the
specific selection of investments for the portfolio. The Asset Liability
Committee sets investment guidelines and strategy based on PBI's financial goals
and interest rate sensitivity.

SOURCES OF FUNDS

     Premier primarily uses deposits and borrowings to finance lending and
investment activities. Borrowing sources include advances from the Federal Home
Loan Bank of Pittsburgh, reverse repurchase agreements with investment banks and
overnight borrowings from Premier's customers and correspondent bank. All
borrowings, except for the line of credit with Premier's correspondent bank,
require collateral in the form of loans or securities. Borrowings are,
therefore, limited by collateral levels and the available lines of credit
extended by the bank's creditors. As a result, deposits remain key to the future
funding and growth of the business. Deposit growth within the banking industry
has generally been slow due to strong competition from a variety of financial
services companies. Competition for deposits may require banks to increase
deposit prices or expand their branch office networks (increasing costs) to
adequately grow deposits in the future.

COMPETITION

     Premier actively competes with other financial services companies for
deposit and loan business. Competitors include other commercial banks, savings
banks, savings and loan associations, insurance companies, securities brokerage
firms, credit unions, finance companies, mutual funds, and money market funds.
Financial institutions compete primarily on the quality of services rendered,
interest rates on loans and deposits, service charges, the convenience of
banking facilities, location and hours of operation and, in the case of loans to
larger commercial borrowers, relative lending limits.

     Many competitors are significantly larger than Premier and have
significantly greater financial resources, personnel and locations from which to
conduct business. In addition, the bank is subject to banking regulations while
certain competitors may not be. Consequently, competition exists from both
regulated and non-regulated entities. For more information, see the "Supervision
and Regulation" section below.

     The growth of mutual funds over the past decade has made it increasingly
difficult for financial institutions to attract deposits. The continued flow of
cash into mutual funds, much of which is made through tax deferred investment
vehicles such as 401(k) plans, and a generally strong economy, have, until
recently, fueled high returns for these investments, in particular certain
equity funds. These returns perpetuated the flow of additional investment
dollars into mutual funds and other products not traditionally offered by banks.
In addition, insurance companies recently have become more significant
competitors for deposits through their thrift subsidiaries.

                                       3

<PAGE>


SUPERVISION AND REGULATION

General

     Bank holding companies and banks are extensively regulated under both
Federal and state laws. The regulation and supervision of PBI and Premier are
designed primarily for the protection of depositors, the FDIC and the monetary
system, and not PBI or its shareholders. Enforcement actions may include the
imposition of a conservator or receiver, cease-and-desist orders and written
agreements, the termination of insurance on deposits, the imposition of civil
money penalties and removal and prohibition orders. If any enforcement action is
taken by a banking regulator, the value of an equity investment in PBI could be
substantially reduced or eliminated.

Holding Company Regulation

     As a registered financial holding company under the Bank Holding Company
Act of 1956 and a Pennsylvania business corporation, PBI is regulated by the
Federal Reserve Board and the provisions of Section 115 of the Pennsylvania
Banking Code of 1965.

     The Bank Holding Company Act requires PBI to file an annual report with the
Federal Reserve Board regarding the financial holding company and its subsidiary
bank. The Federal Reserve Board also makes examinations of the financial holding
company and its subsidiary bank. The Federal Reserve Board possesses
cease-and-desist powers over bank holding companies and their subsidiaries where
their actions would constitute an unsafe or unsound practice or violation of
law.

     The Bank Holding Company Act restricts a bank holding company's ability to
acquire control of additional banks. In addition, the Act restricts the
activities in which bank holding companies may engage directly or through
non-bank subsidiaries.

     The Gramm-Leach-Bliley Financial Services Modernization Act of l999 (the
"Gramm-Leach-Bliley Act") amended the Bank Holding Company Act of 1956 to create
a new category of holding company - the "financial holding company." To be
designated as a financial holding company, a bank holding company must file an
application with the Federal Reserve Board. The holding company must be well
capitalized and well managed, as determined by Federal Reserve Board
regulations. When a bank holding company becomes a financial holding company,
the holding company or its affiliates may engage in any financial activities
that are "financial in nature or incidental to such activities." Furthermore,
the Federal Reserve may approve a proposed activity if it is "complementary" to
financial activities and does not threaten the safety and soundness of banking.
The Act provides an initial list of activities that constitute activities that
are financial in nature, including:

     o    lending and deposit activities;
     o    insurance activities, including underwriting, agency and brokerage;
     o    providing financial investment advisory services;
     o    underwriting in, and acting as a broker or dealer in, securities;
     o    merchant banking;
     o    insurance company portfolio investment;
     o    support services;
     o    making equity and debt investments in corporations or projects
          designed primarily to promote community welfare, and providing
          advisory services to these programs;
     o    subject to certain limitations, providing others financially oriented
          data processing or bookkeeping services;
     o    issuing and selling money orders, travelers' checks and United States
          savings bonds;
     o    providing consumer financial counseling that involves counseling,
          educational courses and distribution of instructional materials to
          individuals on consumer-oriented financial management matters,
          including debt consolidation, mortgage applications, bankruptcy,
          budget management, real estate tax shelters, tax planning, retirement
          and estate planning, insurance and general investment management, so
          long as this activity does not include the sale of specific products
          or investments; and
     o    providing tax planning and preparation advice.

                                       4

<PAGE>

     In addition to permitting financial services providers to enter into new
lines of business, the law allows companies the freedom to streamline existing
operations and to potentially reduce costs. The Act may increase both
opportunity as well as competition. Many community banks are less able to devote
the capital and management resources needed to facilitate broad expansion of
financial services including insurance and brokerage services.

     In the fourth quarter of 2000, PBI became a registered financial holding
company. Under this new designation PBI operates a title insurance agency
through its subsidiary, Lenders Abstract, LLC. PBI's ability to retain its
ownership of Lenders Abstract, LLC, and its authority to expand into other
activities permissible for financial holding companies but not permissible for
bank holding companies that are not financial holding companies, is contingent
on maintaining Premier as a well capitalized and well managed institution in the
view of the applicable regulatory authorities.

Bank Regulation

     Premier is subject to supervision, regulation and examination by the
Pennsylvania Department of Banking, the FDIC and the Federal Reserve Board. In
addition, the bank is subject to a variety of local, state and federal laws.

     Banking regulations include, but are not limited to, permissible types and
amounts of loans, investments and other activities, capital adequacy, branching,
interest rates on loans and the safety and soundness of banking practices.


Capital Requirements

     Under risk-based capital requirements for bank holding companies, PBI is
required to maintain a minimum ratio of total capital to risk-weighted assets
(including certain off-balance-sheet activities, such as standby letters of
credit) of eight percent. At least half of the total capital is to be composed
of common equity, retained earnings and qualifying perpetual preferred stock,
less goodwill ("tier 1 capital" and together with tier 2 capital "total
capital"). The remainder may consist of subordinated debt, non-qualifying
preferred stock and a limited amount of the loan loss allowance ("tier 2
capital").

     In addition, the Federal Reserve Board has established minimum leverage
ratio requirements for bank holding companies. These requirements provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
("leverage ratio") equal to three percent for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a leverage
ratio of from at least four to five percent. The requirements also provide that
bank holding companies experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the requirements indicate that the Federal Reserve Board will
continue to consider a "tangible tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised PBI of any specific minimum tier 1 leverage ratio
applicable to it.

     Premier Bank is subject to similar capital requirements adopted by the
Federal Reserve Board for state member banks. The Federal Reserve Board has not
advised Premier of any specific minimum leverage ratios applicable to it.

     The capital ratios of PBI and Premier are described below in the
"Management's Discussion and Analysis" section.

                                       5

<PAGE>

     Banking regulators continue to indicate their desire to further develop
capital requirements applicable to banking organizations. Changes to capital
requirements could materially affect the profitability of PBI or the market
value of PBI stock.

Prompt Corrective Action

     In addition to the required minimum capital levels described above, federal
law establishes a system of "prompt corrective actions" which Federal banking
agencies are required to take, and certain actions which they have discretion to
take, based upon the capital category into which a federally regulated
depository institution falls. Regulations set forth detailed procedures and
criteria for implementing prompt corrective action in the case of any
institution which is not adequately capitalized. Under the rules, an institution
will be deemed to be "adequately capitalized" or better if it exceeds the
minimum Federal regulatory capital requirements. However, it will be deemed
"undercapitalized" if it fails to meet the minimum capital requirements,
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0 percent, a Tier 1 risk-based capital ratio that is less than
3.0 percent, or a leverage ratio that is less than 3.0 percent, and "critically
undercapitalized" if the institution has a ratio of tangible equity to total
assets that is equal to or less than 2.0 percent.

     The prompt corrective action rules require an undercapitalized institution
to file a written capital restoration plan, along with a performance guaranty by
its holding company or a third party. In addition, an undercapitalized
institution becomes subject to certain automatic restrictions including a
prohibition on payment of dividends, a limitation on asset growth and expansion,
in certain cases, a limitation on the payment of bonuses or raises to senior
executive officers, and a prohibition on the payment of certain "management
fees" to any "controlling person". Institutions that are classified as
undercapitalized are also subject to certain additional supervisory actions,
including increased reporting burdens and regulatory monitoring, a limitation on
the institution's ability to make acquisitions, open new branch offices, or
engage in new lines of business, obligations to raise additional capital,
restrictions on transactions with affiliates, and restrictions on interest rates
paid by the institution on deposits. In certain cases, bank regulatory agencies
may require replacement of senior executive officers or directors, or sale of
the institution to a willing purchaser. If an institution is deemed to be
"critically undercapitalized" and continues in that category for four quarters,
the statute requires, with certain narrowly limited exceptions, that the
institution be placed in receivership.

Deposit Insurance

     Deposits of the bank are insured by the FDIC through the Bank Insurance
Fund ("BIF"). Deposits of certain savings associations are insured by the FDIC
through the Savings Association Insurance Fund ("SAIF"). The insurance
assessments paid by an institution are to be based on the probability that the
fund will incur a loss with respect to the institution. The FDIC has adopted
deposit insurance regulations under which insured institutions are assigned to
one of the following three capital groups based on their capital levels:
"well-capitalized," "adequately capitalized" and "undercapitalized." Banks in
each of these three groups are further classified into three subgroups based
upon the level of supervisory concern with respect to each bank. The resulting
matrix creates nine assessment risk classifications to which are assigned
deposit insurance premiums ranging from 0.00% for the best capitalized,
healthiest institutions, to 0.27% for undercapitalized institutions with
substantial supervisory concerns.

     The FDIC sets deposit insurance assessment rates on a semiannual basis and
will increase deposit insurance assessments whenever the ratio of reserves to
insured deposits in a fund is less than 1.25. While under the current assessment
matrix Premier does not pay any assessments for deposit insurance, because of
recent bank failures there is a significant possibility that the FDIC will
adjust the assessment matrix in the near future and that as a result Premier may
have to start paying insurance assessments.

     Premier is also subject to quarterly assessments relating to interest
payments on Financing Corporation (FICO) bonds issued in connection with the
resolution of the thrift industry crisis. The FICO assessment rate is adjusted
quarterly to reflect changes in the assessment bases of the BIF and SAIF. The
FICO assessments on BIF-insured deposits are set at an annual rate of 1.84% of
assessable deposits.

                                       6

<PAGE>

Environmental Laws

     Management does not anticipate that compliance with environmental laws and
regulations will have any material effect on PBI's capital, expenditures,
earnings, or competitive position. However, environmentally related hazards have
become a source of high risk and potentially unlimited liability for financial
institutions.

     In 1995, the Pennsylvania General Assembly enacted the Economic Development
Agency, Fiduciary and Lender Environmental Liability Protection Act which, among
other things, provides protection to lenders from environmental liability and
remediation costs under the environmental laws for releases and contamination
caused by others. A lender who engages in activities involved in the routine
practices of commercial lending, including, but not limited to, the providing of
financial services, holding of security interests, workout practices,
foreclosure or the recovery of funds from the sale of property shall not be
liable under the environmental acts or common law equivalents to the
Pennsylvania Department of Environmental Resources or to any other person by
virtue of the fact that the lender engages in such commercial lending practice.
A lender, however, will be liable if it, its employees or agents, directly cause
an immediate release or directly exacerbate a release of regulated substance on
or from the property, or known and willfully compelled the borrower to commit an
action which caused such release or violate an environmental act. The Economic
Development Agency, Fiduciary and Lender Environmental Liability Protection Act,
however, does not limit federal liability which still exists under certain
circumstances.

Federal Reserve Board Reserve Requirements

     Regulation D of the Federal Reserve Board requires all depository
institutions to maintain reserves on transaction accounts. These reserves may be
in the form of cash or non-interest-bearing deposits with the Federal Reserve
Bank of Philadelphia. Under Regulation D, Premier's reserve requirement was
$3,002,000 and $2,114,000 at December 31, 2001 and 2000, respectively.

Recent Developments

     As described above, the Gramm-Leach-Bliley Act, adopted November 12, 1999,
enacted significant changes to the bank holding company laws, providing
significantly expanded opportunities for combinations of banking, insurance and
securities activities. The law also establishes significant new consumer privacy
protections, which went into effect in July, 2001, including stringent
restrictions on the disclosure of non-public consumer financial information to
third parties. The Gramm-Leach-Bliley Act is sweeping legislation that PBI
believes will affect the financial services industry for years to come.
Implementing regulations with respect to many areas are still being developed,
and it remains too early to determine the effect the law will have on PBI or its
business, operations and financial performance.

     In the wake of the tragic events, of September 11th, on October 26, 2001,
the President signed the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001. Under the USA PATRIOT Act, financial institutions are subject to
prohibitions against specified financial transactions and account relationships
as well as enhanced due diligence and "know your customer" standards in their
dealings with foreign financial institutions and foreign customers. For example,
the enhanced due diligence policies, procedures, and controls generally require
financial institutions to take reasonable steps:

     o    to conduct enhanced scrutiny of account relationships to guard against
          money laundering and report any suspicious transaction;
     o    to ascertain the identity of the nominal and beneficial owners of, and
          the source of funds deposited into, each account as needed to guard
          against money laundering and report any suspicious transactions;
     o    to ascertain for any foreign bank, the shares of which are not
          publicly traded, the identity of the owners of the foreign bank, and
          the nature and extent of the ownership interest of each such owner;
          and
     o    to ascertain whether any foreign bank provides correspondent accounts
          to other foreign banks and, if so, the identity of those foreign banks
          and related due diligence information.

                                       7

<PAGE>

     Under the USA PATRIOT Act, financial institutions have 180 days from
enactment (or until April 25, 2002) to establish anti-money laundering programs.
The USA PATRIOT Act sets forth minimum standards for these programs, including:

     o    the development of internal policies, procedures, end controls;
     o    the designation of a compliance officer;
     o    an ongoing employee training program; and
     o    an independent audit function, to test, the programs.

     Before the 180-day grace period expires, the Secretary of the Treasury will
prescribe regulations that consider the extent to which these new requirements
are commensurate with the size, location, and activities of financial
institutions subject to the Act.

     In addition, the USA PATRIOT Act authorizes the Secretary of the Treasury
to adopt rules increasing the cooperation and information sharing between
financial institutions, regulators, and law enforcement authorities regarding
individuals, entities and organizations engaged in, or reasonably suspected
based on credible evidence of engaging in, terrorist acts or money laundering
activities. Any financial institutions complying with these rules will not be
deemed to have violated the privacy provisions of the Gramm-Leach-Bliley Act, as
discussed above.

     Premier does not have any significant international banking relationships,
and does not anticipate that the USA PATRIOT Act will have a material effect on
its business or operations.

Effects of Government Policy and Potential Changes in Regulation

     Changes in regulations applicable to PBI or Premier, or shifts in monetary
or other government policies, could have a material affect on their business.
PBI's and the bank's business is also affected by the state of the financial
services industry in general. As a result of legal and industry changes,
management believes that the industry will continue to experience an increased
rate of change as the financial services industry strives for greater product
offerings, market share and economies of scale.

AVAILABLE INFORMATION

     PBI's common stock is registered under Section 12(b) of the Securities
Exchange Act of 1934 and is traded on the American Stock Exchange under the
trading symbol "PPA." PBI is subject to the informational requirements of the
Exchange Act and, accordingly, files reports, proxy statements and other
information with the Securities and Exchange Commission. The reports, proxy
statements and other information filed with the SEC are available for inspection
and copying at the SEC's Public Reference Room at Judiciary Plaza, 450 Fifth
Street, N.W, Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. PBI is an
electronic filer with the SEC. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The SEC's Internet site address
is: http://www.sec.gov. Premier's Internet site is:
http//www.premierbankonline.com.

     You may also inspect materials and other information concerning PBI at the
offices of the American Stock Exchange, Inc. at 86 Trinity Place, New York, New
York 10006 because its common stock is listed on the American Stock Exchange
under the trading symbol "PPA." The American Stock Exchange's Internet site
address is: http://www.amex.com.

                                        8

<PAGE>

ITEM 2 - PROPERTIES

     PBI and Premier's main office is located at 379 North Main Street,
Doylestown, Pennsylvania. The bank currently conducts business from the main
office and six other full service Pennsylvania retail offices located in
Southampton, Bensalem and Lower Makefield Township, Bucks County; Bethlehem and
Easton, Northampton County, and Montgomeryville, Montgomery County. Premier also
has a limited service branch in the Heritage Towers Retirement Community in
Doylestown that opened in July 2000. The bank opened its Bensalem and
Montgomeryville offices in October 2000.

     The following table details ownership of the bank's properties at December
31, 2001.

1) Doylestown, PA                   Main office and branch - owned
2) Bensalem, PA                     Branch - leased requiring rental payments
                                       of $96,000 per year
3) Bethlehem, PA                    Branch - owned
4) Easton, PA                       Branch - owned
5) Lower Makefield Twp., PA         Branch - owned
6) Montgomeryille, PA               Branch - land leased requiring rental
                                       payments of $85,000 per year
7) Southampton, PA                  Branch and operations center- leased
                                       requiring rental payments of $59,670
                                       per year

     Lenders Abstract, LLC operates from the Lower Makefield Township Branch.


ITEM 3 - LEGAL PROCEEDINGS

     At December 31, 2001, there were no known material legal proceedings
pending against PBI, its subsidiaries, or its property. In addition, no material
proceedings are known to be contemplated by governmental authorities against
PBI, its subsidiaries, or its property.


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

     None.

                                        9

<PAGE>


                                     PART II



ITEM 5 - MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

     PBI's common stock was listed and began trading on the American Stock
Exchange (AMEX) on December 30, 1999 under the trading symbol "PPA." At December
31, 2001, 30,000,000 shares of common stock were authorized and 3,242,215 shares
were outstanding. PBI had 613 shareholders of record as of March 19, 2002. No
other class of common stock is authorized or outstanding.

     On February 17, 2000 PBI declared a 5% stock dividend which resulted in the
issuance of 146,492 shares of common stock on March 10, 2000 to holders of
record on February 29, 2000. All information has been retroactively restated to
reflect this stock dividend.

     Shares of common stock traded on AMEX in the range of $6.25 to $10.21 per
share during 2001 and, $6.25 to $12.50 per share during 2000. PBI's ability to
pay dividends to shareholders is dependent upon its ability to obtain dividends
from the bank. The bank's ability to pay dividends is subject to certain
regulatory restrictions that are described in greater detail at Note 21 to the
2001 Consolidated Financial Statements. To date, PBI has not declared or paid
any cash dividends.

     PBI's common stock traded within the following price ranges during each
quarter of 2001 and 2000.

<TABLE>
<CAPTION>

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

                                 High              Low              High             Low
                                 ----              ---              ----             ---
<S>                             <C>              <C>               <C>              <C>
     First Quarter              $ 7.00           $ 6.25            $ 12.50          $ 11.13

     Second Quarter               8.80             7.15              11.13             7.50

     Third Quarter                9.90             8.50               8.00             6.88

     Fourth Quarter              10.21             9.35               7.31             6.25

</TABLE>

                                       10

<PAGE>

<TABLE>
<CAPTION>

SELECTED FINANCIAL AND OTHER DATA

AS OF OR FOR THE YEARS ENDED DECEMBER 31,                   2001                 2000                 1999
-----------------------------------------                   ----                 ----                 ----
                                                                (In thousands, except per share data)
<S>                                                      <C>                  <C>                  <C>
INCOME AND EXPENSE
Interest income                                          $   29,651           $   26,693           $   21,929
Interest expense                                             16,625               15,294               11,420
                                                         ----------           ----------           ----------
Net interest income                                          13,026               11,399               10,509
Provision for loan losses                                       818                  528                  719
Non-interest income                                             594                  319                  124
Non-interest expense                                          9,405                8,454                6,744
                                                         ----------           ----------           ----------
Income before income taxes                                    3,397                2,736                3,170
Income tax expense                                              863                  675                  765
                                                         ----------           ----------           ----------
Net income                                               $    2,534           $    2,061           $    2,405
                                                         ==========           ==========           ==========

SHARE DATA
Basic earnings per share                                 $     0.79           $     0.67           $     0.80
Diluted earnings per share                                     0.74                 0.60                 0.70
Book value per share                                           6.05                 5.30                 4.11
Average common shares outstanding                         3,212,537            3,097,450            3,016,893
Average diluted shares outstanding                        3,442,369            3,422,832            3,341,208

BALANCE SHEET AT YEAR-END
Loans, net of unearned income                            $  314,693           $  238,584           $  198,632
Investment securities held to maturity                          500                6,026                6,881
Investment securities available for sale                     97,851               94,573               97,076
Other interest-earning assets                                 1,084                   56                3,845
Total assets                                                450,569              355,201              318,660
Deposits                                                    358,282              303,293              237,481
Borrowings                                                   49,605               14,404               52,537
Subordinated debt                                             3,500                1,500                1,500
Capital securities                                           10,000               10,000               10,000
Shareholders' equity                                         19,609               16,455               12,647


SELECTED FINANCIAL RATIOS
Net interest margin                                            3.39%                3.50%                3.94%
Return on average assets                                       0.63%                0.61%                0.83%
Return on average shareholders' equity                        13.66%               15.26%               17.59%
Average shareholders' equity to average assets                 4.65%                3.98%                4.70%

Number of full service banking offices at year-end                7                    7                    5

</TABLE>

                                       11

<PAGE>


ITEM 6 - 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 (Premier). PBI's
primary business is the operation of its wholly-owned subsidiary, Premier Bank,
which is managed as a single business segment.

     Premier 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 and medium-sized
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.

     Premier's revenues are derived principally from interest income on its loan
and securities portfolios. The bank's primary sources of funds are deposits,
repayments of loans and investment securities, and borrowed funds. Currently,
Premier has seven full service Pennsylvania banking offices: Doylestown, Easton,
Southampton, Bethlehem, Floral Vale, Bensalem and Montgomeryville. The bank also
operates a limited service branch in the Heritage Towers Retirement Community in
Doylestown. Premier 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 investment 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. PBI's non-interest expenses
primarily consist of employee compensation and benefits, occupancy expenses,
marketing, data processing costs and other operating expenses. The bank is
subject to losses from its loan and investment portfolios if borrowers/issuers
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.

     The following discussion focuses on the major components of PBI's
operations and presents an overview of the significant changes in the results of
operations and financial condition for the last two fiscal years. This
discussion section should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes. Current performance may not be indicative of
future performance.

     The management of PBI has made forward-looking statements in this Annual
Report on Form 10-KSB. These forward-looking statements may be subject to risks
and uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Premier Bancorp, Inc. and
its subsidiaries, Premier Bank, PBI Capital Trust and Lenders Abstract, LLC.
When words such as "believes", "expects", "anticipates" or similar expressions
occur in this Annual Report, management is making forward-looking statements.

     Shareholders should note that many factors, some of which are discussed
elsewhere in this Annual Report, could affect the future financial results of
Premier Bancorp, Inc. and its subsidiaries, both individually and collectively,
and could cause those results to differ materially from those expressed in the
forward-looking statements contained in this Annual Report. These factors
include, but are not limited to the following:

     o    operating, legal and regulatory risks, such as continued levels of
          loan quality and origination volumes, continued relationships with
          major customers, and technological changes;

     o    economic, political and competitive forces affecting our banking,
          business, such as changes in economic conditions, especially in the
          bank's market area, interest rate fluctuations, competitive product
          and pricing pressures within the bank's market, personal and corporate
          bankruptcies, monetary policy and inflation; and

                                       12

<PAGE>

     o    the risk that management's analyses of these risks and forces could be
          incorrect and or that the strategies developed to address them could
          be unsuccessful.

     Management cautions readers not to place undue reliance on these
forward-looking statements that reflects its analysis only as of this date.
Management is not obliged 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
PBI files from time to time with the Securities and Exchange Commission,
including quarterly reports on Form 10-QSB and any current reports on Form 8-K.

MANAGEMENT STRATEGY

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

     Since the 1992 opening of Premier, the bank 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.

     In conjunction with its branch expansion, Premier added significantly to
its commercial lending staff beginning in 1999 in order to grow the 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 as a means to generate additional
earnings. 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,
management continuously reviews and considers new products and services to offer
customers. These new products and services are largely intended to generate and
increase fee income. In December 2000, PBI organized Lenders Abstract, LLC to
generate fee income from the origination of title insurance policies.
Substantially all of Lenders Abstract, LLC's business to date has been derived
from Premier's customers.

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

RESULTS OF OPERATIONS

     PBI reported net income of $2,534,000 or $.74 earnings per common share on
a diluted basis for the year ended December 31, 2001. This represents an
increase of $473,000 or 23% from the net income of $2,061,000 or $.60 earnings
per common share on a diluted basis reported in 2000. Interest income grew
$2,958,000 or 11% in 2001 compared to 2000 primarily due to loan growth. Loans
grew $76,621,000 or 32% in 2001. However, growth in net interest income was
slowed by eleven decreases in the prime lending rate and, the Federal Reserve's
targeted federal funds rate, totaling 4.75% during 2001. These rate cuts
affected the rates on new loans and existing adjustable/variable rate loans.
Other income was $275,000 or 86% higher in 2001 due primarily to $137,000 in
fees generated from PBI's new title insurance business and $50,000 in fees
related to one loan pay-off. Overhead expenses were $1,134,000 or 14% higher in
2001 compared to 2000, exclusive of $183,000 in one-time charges in 2000 related
to two discontinued Internet projects and a proposed branch site, which was
relocated. Overhead expenses were higher in 2001 due primarily to the 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
13.66%, respectively, in 2001 compared to .61% and 15.26%, respectively, in
2000. Return on average shareholders' equity, exclusive of the unrealized loss
on investment securities available for sale, was 11.94% for 2001 and 11.12% for
2000.

                                       13

<PAGE>

     The following tables and discussions related to net interest income,
interest income and interest expense were prepared on a tax-equivalent basis.

NET INTEREST INCOME

     Net interest income is the most significant component of PBI'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, the composition and characteristics of
interest-earning assets and interest-bearing liabilities, 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 2001, loans
grew $76,621,000 or 32%. Much of this growth was funded by deposit generation.
Premier continues to face strong competition for both loans and deposits, which
continues to put pressure on the net interest margin. The net interest margin
has trended lower since 1999 and remains under pressure due in part to the
Federal Reserve's interest rate cuts during 2001.

     During 2001 the Federal Reserve cut the targeted federal funds rate an
unprecedented eleven times for a total of 4.75%. These cuts immediately lowered
the national prime-lending rate and in turn reduced rates on the bank's
prime-rate based loans. 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 loans. It is difficult to
predict the extent or timing of such refinance activity. However, it is expected
that the yield on the bank's loan portfolio will decline as this activity
occurs. It is unknown to what extent the lower asset yields will be offset by
lower cost of funds. See the section entitled "Interest Rate Sensitivity."

     Net interest income, on a tax equivalent basis, increased $1,684,000 or 14%
in 2001. This increase was primarily a function of asset growth and a lower rate
on average interest-bearing liabilities. These positive factors were partially
offset 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 $54,394,000 or 16% in 2001 while the yield on
average interest-earning assets declined 36 basis points. Average loans grew
$53,776,000 in 2001 with a corresponding decrease in average yield of 45 basis
points. The average rate on interest-bearing liabilities decreased 38 basis
points. The average rate on interest-bearing liabilities improved in part due to
the maturity of higher rate certificates of deposit, which were retained or
replaced at a lower rate. The offering rates on most deposit products have been
lowered in response to the reductions in the prime lending rate. Approximately
$166,366,000 in certificates of deposit mature in 2002 and may provide an
opportunity to lower the cost of funds further. Short-term borrowings and
subordinated debt also repriced lower in 2001. Management expects the yield on
average interest-earning assets and the rate on average interest-bearing
liabilities to continue to trend downward in response to the rate cuts in 2001.
The ratio of average interest-earning assets to average interest-bearing
liabilities decreased from 116.12% in 2000 to 115.44% in 2001. The net interest
margin decreased 7 basis points from 3.57% in 2000 to 3.50% in 2001. The net
interest rate spread improved 2 basis points from 2.82% in 2000 to 2.84% in
2001.

     Net interest income, on a tax equivalent basis, increased $846,000 or 8% in
2000. This increase was primarily a function of asset growth rather than
interest rate changes. Although interest rates rose in 1999 and in much of 2000,
the net interest margin and net interest rate spread compressed by 33 and 43
basis points, respectively, in 2000. Both the average yield on interest-earning
assets and the average rate on interest-bearing liabilities increased in 2000.
However, the higher yield on average interest-earning assets was more than
offset by the increase in the rate on average interest-bearing liabilities due
in large part to the maturity/repricing characteristics of the bank's balance
sheet and increased competition for loans and deposits. Average interest-earning
assets grew $49,837,000 or 18% in 2000 with a corresponding increase in average
yield of 23 basis points. Average loans grew $48,348,000 or 29% in 2000 with a
corresponding increase in average yield of 13 basis points. Average
interest-bearing liabilities grew $42,843,000 or 18% with a corresponding
increase in average rate of 66 basis points. The increase in rate on average
interest-bearing liabilities was due in part to the aggressive promotion of 9
and 23-month certificates of deposit and a personal cash management money market
account.

                                       14

<PAGE>

     The following table presents certain key average balance sheet amounts and
the corresponding earnings/expenses and rates.

         AVERAGE BALANCES, RATES AND INTEREST INCOME AND EXPENSE SUMMARY


<TABLE>
<CAPTION>

                                                                  2001
                                                  ----------------------------------
                                                    AVERAGE                 AVERAGE
                                                    BALANCE     INTEREST      RATE
                                                    -------     --------      ----
                                                         (Dollars in thousands)
<S>                                               <C>           <C>           <C>
Assets
   Interest-bearing deposits                      $   1,141     $      35     3.07%
   Federal funds sold                                10,535           368     3.49%
   Investment securities available for sale (1)
      Taxable                                        82,713         5,550     6.71%
      Tax-exempt (2)                                 19,295         1,474     7.64%
   Investment securities held to maturity             3,923           257     6.55%
                                                  ---------     ---------     ----
      Total investment securities                   105,931         7,281     6.87%
   Loans, net of unearned income (3) (4)            270,200        22,520     8.33%
                                                  ---------     ---------     ----
      Total interest-earning assets                 387,807        30,204     7.79%

   Cash and due from banks                            7,516
   Allowance for loan losses                         (3,342)
   Other assets (5)                                   9,794
                                                  ---------
Total assets                                      $ 401,775
                                                  =========


Liabilities, minority interest in subsidiary
      and shareholders' equity
   Interest checking                              $  31,180     $     809     2.59%
   Money market deposit accounts                     18,313           624     3.41%
   Savings accounts                                  43,936         1,294     2.95%
   Time deposits                                    202,819        12,093     5.96%
                                                  ---------     ---------     ----
      Total interest-bearing deposits               296,248        14,820     5.00%
   Short-term borrowings                             18,894           549     2.91%
   Long-term borrowings                              19,288         1,144     5.93%
                                                  ---------     ---------     ----
      Total borrowings                               38,182         1,693     4.43%
   Subordinated debt                                  1,505           112     7.44%
                                                  ---------     ---------     ----
      Total interest-bearing liabilities            335,935        16,625     4.95%

   Non-interest-bearing deposits                     26,561
   Other liabilities                                  8,057
   Capital securities                                10,000
   Shareholders' equity (6)                          21,222
                                                  ---------
Total liabilities, minority interest in
   subsidiary and shareholders' equity            $ 401,775
                                                  =========
Net interest income/rate spread                                 $  13,579     2.84%
                                                                =========     ====

Net interest margin (7)                                                       3.50%

Average interest-earning assets as a
   percentage of average
   interest-bearing liabilities                      115.44%
</TABLE>


<TABLE>
<CAPTION>

                                                               2000                                    1999
                                                  ---------------------------------- ------------------------------------
                                                    AVERAGE                 AVERAGE       AVERAGE                 AVERAGE
                                                    BALANCE    INTEREST       RATE        BALANCE    INTEREST       RATE
                                                    -------    --------       ----        -------    --------       ----
Assets                                                                  (Dollars in thousands)
<S>                                               <C>          <C>           <C>     <C>             <C>           <C>
   Interest-bearing deposits                    $       604    $      39     6.46%   $       394     $     18      4.57%
   Federal funds sold                                 7,246          460     6.35%         2,221          116      5.22%
   Investment securities available for sale (1)
      Taxable                                        84,546        5,924     7.01%        86,917        5,902      6.79%
      Tax-exempt (2)                                 17,858        1,340     7.50%        19,189        1,455      7.58%
   Investment securities held to maturity             6,735          432     6.41%         6,779          436      6.43%
                                                -----------    ---------     ----    -----------     --------      ----
      Total investment securities                   109,139        7,696     7.05%       112,885        7,793      6.90%
   Loans, net of unearned income (3) (4)            216,424       18,994     8.78%       168,076       14,542      8.65%
                                                -----------    ---------     ----    -----------     --------      ----
      Total interest-earning assets                 333,413       27,189     8.15%       283,576       22,469      7.92%

   Cash and due from banks                            5,850                                4,639
   Allowance for loan losses                         (2,781)                              (2,143)
   Other assets (5)                                   8,305                                6,953
                                                -----------                          -----------
Total assets                                    $   344,787                          $   293,025
                                                ===========                          ===========


Liabilities, minority interest in subsidiary
      and shareholders' equity
   Interest checking                            $    22,079    $     560     2.54%   $    18,365     $    473      2.58%
   Money market deposit accounts                      6,512          329     5.05%         1,446           37      2.56%
   Savings accounts                                  47,776        1,666     3.49%        55,138        1,888      3.42%
   Time deposits                                    171,065       10,299     6.02%       120,783        6,424      5.32%
                                                -----------    ---------     ----    -----------     --------      ----
      Total interest-bearing deposits               247,432       12,854     5.19%       195,732        8,822      4.51%
   Short-term borrowings                             38,193        2,311     6.05%        33,735        1,770      5.25%
   Long-term borrowings                                  --           --       --         13,315          722      5.42%
                                                -----------    ---------     ----    -----------     --------      ----
      Total borrowings                               38,193        2,311     6.05%        47,050        2,492      5.30%
   Subordinated debt                                  1,500          129     8.60%         1,500          106      7.07%
                                                -----------    ---------     ----    -----------     --------      ----
      Total interest-bearing liabilities            287,125       15,294     5.33%       244,282       11,420      4.67%

   Non-interest-bearing deposits                     23,640                               18,747
   Other liabilities                                  5,483                                4,340
   Capital securities                                10,000                               10,000
   Shareholders' equity (6)                          18,539                               15,656
                                                -----------                          -----------
Total liabilities, minority interest in
   subsidiary and shareholders' equity          $   344,787                          $   293,025
                                                ===========                          ===========

Net interest income/rate spread                                $  11,895     2.82%                   $ 11,049      3.25%
                                                               =========     ====                    ========      ====

Net interest margin (7)                                                      3.57%                                 3.90%

Average interest-earning assets as a
   percentage of average
   interest-bearing liabilities                      116.12%                              116.09%

</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 $458,000, $106,000 and $585,000 on average in
     2001, 2000 and 1999, respectively.
(4)  Includes tax-exempt loans of $1,733,000, $1,077,000 and $1,213,000 on
     average in 2001, 2000 and 1999, 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.

                                       15

<PAGE>

     The following table sets forth certain information regarding changes in net
interest income attributable to changes in the volumes of interest-earning
assets and interest-bearing liabilities and changes in rates for the periods
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to:

o    changes in volume (change in volume multiplied by prior year rate);

o    changes in rates (change in rate multiplied by prior year volume); and

o    total change.

     Changes due to the combination of rate and volume changes (changes in
volume multiplied by changes in rate) were allocated proportionately between
changes in rate and changes in volume.

     Interest income foregone on non-accrual loans is presented as a change in
rate.

<TABLE>
<CAPTION>

             RATE VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

FOR THE YEARS ENDED DECEMBER 31,                    2001 VS. 2000                          2000 VS. 1999
--------------------------------          ----------------------------------     ----------------------------------
                                           VOLUME        RATE        TOTAL       VOLUME         RATE        TOTAL
                                           ------        ----        -----       ------         ----        -----
                                                                       (In thousands)
<S>                                       <C>          <C>          <C>          <C>          <C>          <C>
Interest Income:
   Federal funds sold                     $   162      $  (254)     $   (92)     $   314      $    30      $   344
   Interest-bearing deposits                   23          (27)          (4)          13            8           21
   Investment securities available for sale   (28)        (212)        (240)        (260)         167          (93)
   Investment securities held to maturity    (184)           9         (175)          (3)          (1)          (4)
   Loans                                    4,534       (1,008)       3,526        4,243          209        4,452
                                          -------      -------      -------      -------      -------      -------
Total interest income                       4,507       (1,492)       3,015        4,307          413        4,720

Interest expense:
   Interest checking                          236           13          249           94           (7)          87
   Money market accounts                      432         (137)         295          228           64          292
   Savings accounts                          (127)        (245)        (372)        (256)          34         (222)
   Time deposits                            1,894         (100)       1,794        2,942          933        3,875
   Short-term borrowings                     (869)        (893)      (1,762)         250          291          541
   Long-term borrowings                     1,144           --        1,144         (722)          --         (722)
   Subordinated debt                           --          (17)         (17)          --           23           23
                                          -------      -------      -------      -------      -------      -------
Total interest expense                      2,710       (1,379)       1,331        2,536        1,338        3,874
                                          -------      -------      -------      -------      -------      -------

Net interest income                       $ 1,797      $  (113)     $ 1,684      $ 1,771      $  (925)     $   846
                                          =======      =======      =======      =======      =======      =======
</TABLE>


INTEREST INCOME

     Total interest income, on a tax equivalent basis, increased $3,015,000 or
11% in 2001 to $30,204,000. Higher average loan balances added $4,534,000 to
interest income while lower average investment balances reduced interest income
by $212,000 in 2001. The yield on interest-earning assets decreased 36 basis
points to 7.79% as overall interest rates moved lower in 2001. The lower yield
on average interest-earning assets reduced interest income by $1,492,000 in
2001.

INTEREST EXPENSE

     Total interest expense increased $1,331,000 or 9% in 2001 to $16,625,000.
Higher average deposit balances and higher average borrowings added $2,435,000
and $275,000, respectively, to total interest expense. The rate on
average interest-bearing liabilities decreased 38 basis points to 4.95% as
overall interest rates moved lower in 2001. The lower rate on average
interest-bearing liabilities reduced interest expense by $1,379,000 in 2001.

                                       16

<PAGE>


INTEREST RATE SENSITIVITY

     Premier is subject to the interest rate risk inherent in its lending,
investing and financing activities. Fluctuations in interest rates will impact
both the interest income/expense and market value of all interest-earning assets
and interest-bearing liabilities, other than those with a short term to
maturity.

     The primary objective in managing interest rate risk is to minimize the
adverse impact of changes in interest rates on PBI's net interest income while
creating an asset/liability structure that maximizes earnings. The Asset
Liability Management Committee actively monitors and manages PBI's interest rate
exposure using gap analysis and simulation models.

     Gap analysis measures the difference between volumes of rate-sensitive
assets and liabilities and quantifies these repricing differences for various
time intervals. Static gap analysis depicts interest sensitivity at a point in
time. However, it alone does not accurately measure the magnitude of changes in
net interest income because changes in interest rates do not always impact
assets and liabilities at the same time or in the same magnitude. Furthermore,
gap analysis does not consider future growth, changes in asset and liability
composition or market conditions.

     A positive gap results when the amount of interest rate-sensitive assets
exceeds interest rate-sensitive liabilities repricing within the relevant time
period and, generally means that the institution will benefit during periods of
rising interest rates. A negative gap results when the amount of interest
rate-sensitive liabilities exceeds interest rate-sensitive assets repricing
within the relevant time period and, generally means that the institution will
benefit during periods of falling interest rates.

     Gap and interest rate simulation analyses require assumptions about certain
categories of assets and liabilities. For purposes of these analyses, assets and
liabilities are stated at their contractual maturity, estimated likely call
date, or earliest repricing opportunity. Mortgage-backed securities and
amortizing loans are scheduled based on their anticipated cash flow including
estimated prepayments. Savings accounts, including passbook, statement savings,
money market, and interest checking accounts, do not have a stated maturity or
repricing term and can be withdrawn or repriced at any time. This may impact the
margin if more expensive alternative sources of deposits are required to fund
loans or deposit runoff. Management projects the repricing characteristics of
these accounts based on historical performance and assumptions that it believes
reflect their rate sensitivity.

                                       17

<PAGE>


     PBI's gap analysis at December 31, 2001 is as follows.

<TABLE>
<CAPTION>

                           INTEREST RATE SENSITIVITY

                                            WITHIN       4 TO 6      7 MONTHS       1 TO 3        3 TO 5        AFTER
DECEMBER 31, 2001                          3 MONTHS      MONTHS      TO 1 YEAR       YEARS         YEARS       5 YEARS       TOTAL
-----------------                          --------      ------      ---------       -----         -----       -------       -----
                                                                 (Dollars in thousands)
<S>                                       <C>          <C>           <C>           <C>           <C>          <C>          <C>
Assets
   Federal funds sold                     $  14,137    $      --     $      --     $      --     $      --    $      --    $  14,137
   Interest-bearing deposits                  1,084           --            --            --            --           --        1,084
   Investment securities                     19,734        2,278         4,398         9,762         4,941       57,238       98,351
   Loans, net of deferred fees               67,774       11,973        20,563       101,088       103,770        9,525      314,693
                                          ---------    ---------     ---------     ---------     ---------    ---------    ---------
Total interest rate-sensitive assets      $ 102,729    $  14,251     $  24,961     $ 110,850     $ 108,711    $  66,763    $ 428,265
                                          =========    =========     =========     =========     =========    =========    =========
Total cumulative assets                   $ 102,729    $ 116,980     $ 141,941     $ 252,791     $ 361,502    $ 428,265
                                          =========    =========     =========     =========     =========    =========



Liabilities
   Interest checking, money market
     and savings accounts                 $   4,796    $   3,596     $   7,193     $  71,925    $   23,976    $   8,396    $ 119,882
   Time deposits                             65,030       64,580        36,755        27,517        14,125           50      208,057
   Short-term borrowings                     19,605           --            --            --            --           --       19,605
   Long-term borrowings                          --           --            --            --            --       30,000       30,000
   Subordinated debt                          3,500           --            --            --            --           --        3,500
                                          ---------    ---------     ---------     ---------     ---------    ---------    ---------
Total interest rate-sensitive liabilities $  92,931    $  68,176     $  43,948     $  99,442     $  38,101    $  38,446    $ 381,044
                                          =========    =========     =========     =========     =========    =========    =========
Total cumulative liabilities              $  92,931    $ 161,107     $ 205,055     $ 304,497     $ 342,598    $ 381,044
                                          =========    =========     =========     =========     =========    =========

Gap during period                         $   9,798    $ (53,925)    $ (18,987)    $  11,408     $  70,610    $  28,317    $  47,221
                                          =========    =========     =========     =========     =========    =========    =========
Cumulative gap                            $   9,798    $ (44,127)    $ (63,114)    $ (51,706)    $  18,904    $  47,221
                                          =========    =========     =========     =========     =========    =========
Cumulative gap as a percentage of:
Interest-earning assets                        2.29%      (10.30%)      (14.74%)      (12.07%)       4.41%        11.03%
Total assets                                   2.17%       (9.79%)      (14.01%)      (11.48%)       4.20%        10.48%

</TABLE>


     As depicted above, more liabilities than assets reprice within the
three-year time interval, resulting in a cumulative negative gap for that time
frame.

     PBI uses computer-based simulation models to assess the impact of changes
in interest rates on its net interest income. These models are acquired software
programs which management loads with its various business plan assumptions
including: growth, asset and liability yields, deposit sensitivity, and the
size, composition, maturity and repricing characteristics of the balance sheet.
The assumptions are based on what management believes at that time to be the
most likely scenario given the current interest rate and business environment.

     Actual results may differ from simulated results due to various factors
including: time, magnitude and frequency of interest rate changes, the
relationship or spread between various interest rates, loan pricing and deposit
sensitivity, asset/liability strategies, and competition.

                                       18

<PAGE>


                         NON-INTEREST INCOME COMPARISON

                                                                     CHANGE
                                                              ------------------
FOR THE YEARS ENDED DECEMBER 31,           2001       2000      AMOUNT       %
--------------------------------           ----       ----      ------      ---
                                                   (Dollars in thousands)

Service charges and other fees            $  546     $  287     $  259       90%
Gain on sale of investment securities
   available for sale                         13          3         10      333%
Loss on sale of other real estate owned      (17)        --        (17)     ---
Gain on sale of loans held for sale           52         29         23       79%
                                          ------     ------     ------      ---
   Total non-interest income              $  594     $  319     $  275       86%
                                          ======     ======     ======      ===

     Non-interest income increased $275,000 during 2001 to $594,000. This
increase is primarily due to $137,000 in fees from sales of title insurance
policies and $50,000 in fees related to one loan pay-off. In addition, fees from
ATM/debit card transactions increased $50,000 due to an increase in the number
of cardholders and ATM locations. Gains on sales of loans held for sale were
$23,000 higher in 2001 due to an increase in loan originations and sales as a
result of lower interest rates.

<TABLE>
<CAPTION>

                         NON-INTEREST EXPENSE COMPARISON
                                                                          CHANGE
                                                                     ---------------
FOR THE YEARS ENDED DECEMBER 31,               2001       2000       AMOUNT       %
--------------------------------               ----       ----       ------      ---
                                                        (Dollars in thousands)
<S>                                         <C>        <C>          <C>           <C>
Salaries and employee benefits              $  4,337   $  3,873     $  464        12%
Occupancy costs                                  767        641        126        20%
Data processing                                  973        841        132        16%
Professional services                            323        377        (54)      (14%)
Marketing                                        424        484        (60)      (12%)
Minority interest in expense of subsidiary       873        873         --        --
Other                                          1,708      1,365        343        25%
                                            --------   --------     ------        --
   Total non-interest expense               $  9,405   $  8,454     $  951        11%
                                            ========   ========     ======        ==

</TABLE>

     Non-interest expense increased $951,000 during 2001 to $9,405,000. Overhead
expenses in 2000 included one time charges of $115,000 related to two
discontinued Internet 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 $1,134,000 or 14% in 2001 principally due
to the continued growth of the bank, which included the opening of two new
branches in October 2000. Salaries and employee benefits grew $464,000 or 12% in
2001 due to an increase in the number of employees and salary adjustments. The
number of full-time equivalent employees increased from 75 at December 31, 2000
to 81 at December 31, 2001. Occupancy costs grew $126,000 in 2001 primarily due
to the additional rent, maintenance and utility costs for new branches. Data
processing costs increased $132,000 principally due to the growth of the
institution and variable costs associated with item processing and account
volumes. Professional and marketing expenses were lower in 2001 due in part to
the one-time charges in 2000. Other expenses consist primarily of furniture and
equipment expense, loan expenses, employee travel and entertainment,
stationery/supplies, postage, Pennsylvania shares tax expense and Board of
Director fees. Other expenses in 2000 included $68,000 for the write-off of land
improvements related to a branch that was relocated. Exclusive of this one-time
charge, other expenses increased $411,000 or 32% in 2001 due principally to the
growth of the institution and increases in loan collection costs, other real
estate owned expenses, and Pennsylvania shares tax. Other expenses in 2001
included $158,000 in fair market value adjustments on derivatives related to the
IPCD product. This adjustment was due to falling interest rates in 2001 and will
reverse in future periods as IPCD's approach maturity or if interest rates
increase in the future.

                                       19

<PAGE>

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 management
deems 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, and composition of loan types within the portfolio. Net charge-offs
were $33,000 in 2001 and $7,000 in 2000. The bank's loan portfolio is relatively
immature given its recent growth rates. Therefore, charge-off and non-performing
trends may not be indicative of future performance.

     The provision for loan losses increased from $528,000 in 2000 to $818,000
in 2001. This increase is primarily due to a higher rate of loan growth in 2001
compared to 2000. Total gross loans grew $76,621,000 or 32% in 2001 compared to
$40,221,000 or 20% in 2000. The allowance for loan losses was $3,817,000 at
December 31, 2001, a 26% increase from the level reported at December 31, 2000.
The loan loss allowance as a percentage of total loans was 1.21% at December 31,
2001 versus 1.27% at December 31, 2000.

INCOME TAXES

     PBI recorded an $863,000 tax provision representing an effective tax rate
of 25.4% for the year ended December 31, 2001 compared to a $675,000 tax
provision and 24.7% effective tax rate for 2000. The effective tax rate was
higher in 2001 principally due to a lower ratio of tax-exempt interest to total
pre-tax income.

FINANCIAL CONDITION

     Consolidated assets grew $95,368,000 or 27% during the year to $450,569,000
at December 31, 2001. Total loans grew $76,621,000 or 32% while total
investments, exclusive of the SFAS 115 valuation allowance, decreased $2,675,000
or 3% during 2001. Premier funded its asset growth with a $54,989,000 or 18%
increase in deposits and a $35,201,000 or 244% increase in borrowings.
Shareholders' equity grew $3,154,000 or 19% to $19,609,000 at December 31, 2001.
This increase was attributable to $2,534,000 in earnings, $338,000 in stock
option exercises and a $282,000 increase in the estimated fair value of
investment securities available for sale, net of tax.

INVESTMENT SECURITIES

     Investment policies and applicable legal restrictions dictate permissible
investment categories, credit quality, maturity intervals and investment
concentrations. Management is responsible for making specific investment
purchases within these standards. The carrying value of investment securities at
December 31, 2001 totaled $98,351,000 or 22% of total assets. At December 31,
2001 approximately 44% of the investment portfolio was comprised of
mortgage-backed securities which amortize and provide monthly cash flow to
reinvest. Corporate bonds and municipal bonds comprised 33% and 20% of the
investment portfolio, respectively. Approximately 82% of the investment
portfolio were fixed rate.

     PBI buys and sells investment securities from time to time depending on
market conditions, business trends, liquidity and capital levels. Investment
purchases provide a way to add assets quickly and generate additional earnings.
While PBI's ultimate goal is loan growth, the development of a quality loan
portfolio requires significant time. The bank generally earns a positive
interest spread by assuming interest rate risk and using deposits/borrowings to
purchase securities with longer maturities.

     PBI classifies investment securities at the time of purchase by one of
three categories: trading, available for sale (AFS) or, held to maturity (HTM).
To date, PBI has not purchased any securities for trading purposes. PBI
classifies most of its securities as AFS even though it has no immediate intent
to sell them. The AFS designation affords management the flexibility to sell
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)."

     At December 31, 2001 the AFS portfolio had an estimated unrealized loss of
$4,548,000, before tax, and an equity adjustment of $3,001,000, net of tax. This
is a $282,000 or 9% improvement in the estimated fair value of AFS securities,
net of tax, compared to prior year-end. The majority of the unrealized losses on
AFS securities at December 31, 2001 related to corporate bonds.

                                       20

<PAGE>

     At December 31, 2001 corporate bonds were $32,322,000 or 33% of the total
investment portfolio. Approximately 70% of corporate bonds are fixed rate and
30% are variable rate. Following the issuance of PBI's $10,000,000 of capital
securities in August 1998, management began investing in similar type securities
issued by other banking companies. These investments are classified as corporate
bonds. The corporate bond portfolio experienced an unrealized loss in value
beyond that caused by interest rate changes alone as the market deeply
discounted these securities due to perceived credit risk in response to certain
world events. Management believes that the market valuations of certain
corporate bonds were discounted further because they were issued by non-rated or
below investment grade rated companies. The carrying value of non-rated or below
investment grade rated corporate bonds was $18,303,000 at December 31, 2001. The
unrealized loss on corporate bonds, before tax, was $3,862,000 at December 31,
2001.

     Management evaluated the credit quality of corporate bond issuers prior to
purchasing these securities and monitors them on an ongoing basis. Management
believes that the credit quality of the corporate bond portfolio is sound and
that the company will ultimately be repaid. Therefore, the unrealized loss in
the market value of corporate bonds is viewed as temporary. If, at some future
date, management believes that the recovery of the unrealized loss on corporate
bonds is not probable and other than temporary, PBI will recognize the loss
through earnings which will reduce regulatory capital.

     The bank classified corporate bonds as "available for sale" allowing
management the flexibility to sell them and adjust the portfolio as future
conditions change. During 2001, interest rates declined and the market values of
most fixed income securities improved. The corporate bonds have not yet
experienced a significant improvement in market value as credit spreads for
these issues are much larger today than when the securities were purchased.

     The following corporate bonds available for sale represent those issuers
with an aggregate amortized cost exceeding 10% of shareholders' equity at
December 31, 2001.

                                                         DECEMBER 31, 2001
                                                    ----------------------------
                                                    AMORTIZED       ESTIMATED
                          ISSUER                      COST          FAIR VALUE
                          ------                      ----          ----------
                                                         (In thousands)
Bank of America Corporation                         $  1,982         $  1,803
First Citizens Bancorporation of South Carolina        2,024            1,700
JP Morgan Chase and Company                            1,965            1,775
Manufacturers and Traders Trust Company                2,133            2,110
North Fork Bancorporation                              3,071            2,770
Patriot Bank Corporation                               2,231            1,930

                                       21


<PAGE>


     The composition and maturity of PBI's investment portfolio is as follows.

<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 2001
                                         ------------------------------------------------------------------
                                              HELD TO MATURITY                       AVAILABLE FOR SALE
                                         AMORTIZED            ESTIMATED           AMORTIZED      ESTIMATED
                                            COST              FAIR VALUE            COST         FAIR VALUE
                                            ----              ----------            ----         ----------
                                                              (In thousands)
<S>                                       <C>                 <C>                 <C>             <C>
Mortgage-backed securities                $     --            $     --            $ 43,286        $ 43,365
Municipal securities                            --                  --              20,796          20,031
Equity securities                               --                  --               2,023           2,023
Corporate bonds                                 --                  --              36,184          32,322
Other debt securities                          500                 500                 110             110
                                          --------            --------            --------        --------
   Total                                  $    500            $    500            $102,399        $ 97,851
                                          ========            ========            ========        ========
</TABLE>



<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 2000
                                         ------------------------------------------------------------------
                                              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        $  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>

<TABLE>
<CAPTION>
                                                                   DECEMBER 31, 1999
                                         ------------------------------------------------------------------
                                              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        $  4,997            $  4,976            $  5,000        $  4,998
Mortgage-backed securities                   1,384               1,366              50,010          47,250
Municipal securities                            --                  --              17,860          15,802
Equity securities                               --                  --               1,883           1,883
Corporate bonds                                 --                  --              29,618          27,028
Other debt securities                           --
                                               500                 500                 115             115
                                          --------            --------            --------        --------
   Total                                  $  6,881            $  6,842            $104,486        $ 97,076
                                          ========            ========            ========        ========
</TABLE>


                                       22

<PAGE>

<TABLE>
<CAPTION>

                                INVESTMENT SECURITIES MATURITIES AND WEIGHTED AVERAGE YIELDS

                                                  UNDER             1-5             5-10          OVER 10
DECEMBER 31, 2001                                 1 YEAR           YEARS            YEARS          YEARS            TOTAL
-----------------                                 ------           -----            -----          -----            -----
                                                                      (Dollars in thousands)
INVESTMENT SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities:
<S>                                             <C>             <C>               <C>            <C>               <C>
   Amortized cost                               $  9,621        $   16,474        $  5,923       $   11,268        $ 43,286
   Weighted average yield                           6.23%             6.11%           5.94%            6.08%           6.11%
Municipal securities
   Amortized cost                                     --                --              --           20,796          20,796
   Weighted average yield (1)                         --                --              --             7.61%           7.61%
Equity securities:
   Amortized cost                                     --                --              --            2,023           2,023
   Weighted average yield                             --                --              --             5.68%           5.68%
Corporate Bonds
   Amortized cost                                     --                --              --           36,184          36,184
   Weighted average yield                             --                --              --             6.61%           6.61%
Other debt securities:
   Amortized cost                                     --               110              --               --             110
   Weighted average yield                             --              7.09%             --               --            7.09%
                                                --------        ----------        --------       ----------        --------
TOTAL AMORTIZED COST                            $  9,621        $   16,584        $  5,923       $   70,271        $102,399
                                                ========        ==========        ========       ==========        ========
TOTAL FAIR VALUE                                $  9,639        $   16,614        $  5,934       $   65,664        $ 97,851
                                                ========        ==========        ========       ==========        ========
WEIGHTED AVERAGE YIELD                              6.23%             6.12%           5.94%            6.79%           6.58%


INVESTMENT SECURITIES HELD TO MATURITY
Other debt securities:
   Amortized cost                               $     --        $       --        $    500       $       --        $    500
   Weighted average yield                             --                --            5.88%              --            5.88%
                                                --------        ----------        --------       ----------        --------
TOTAL AMORTIZED COST                            $     --        $       --        $    500       $       --        $    500
                                                ========        ==========        ========       ==========        ========
                                                      --                --            5.88%              --            5.88%
WEIGHTED AVERAGE YIELD

</TABLE>

-----------------
(1)  Tax exempt yields on municipal securities were adjusted to a tax equivalent
     basis using a 34% tax rate.

LOANS HELD FOR SALE

     Premier uses an outside company to originate and sell residential mortgages
on its behalf. At December 31, 2001, loans held for sale totaled $127,000
compared to no loans held for sale at December 31, 2000.

     The bank sold $8,575,000 and $4,727,000 of residential mortgages in 2001
and 2000, respectively. Residential mortgage originations and sales were higher
in 2001 due in part to lower interest rates.

LOANS

     Gross loans increased $76,621,000 to $316,066,000 at December 31, 2001. The
majority of the loan portfolio is collateralized, at least in part, by real
estate in the greater Delaware and Lehigh Valleys of Pennsylvania and New
Jersey. Real estate values are subject to risks associated with the general
local economy. Loans secured by commercial properties increased $46,737,000 or
29% during 2001.

     Inherent within the lending function is the evaluation and acceptance of
credit risk and interest rate risk. PBI manages credit risk through portfolio
diversification, underwriting policies and procedures, and loan monitoring
practices. PBI manages interest rate risk using various asset/liability modeling
techniques and analyses. Most loans are adjustable rate that reset in intervals
of five years or less. When possible, the bank also originates variable rate
loans.

                                       23

<PAGE>

     Premier's commercial lending activity is focused on small and medium-sized
businesses and professionals within the local community.

<TABLE>
<CAPTION>

                                                    LOAN PORTFOLIO

DECEMBER 31,                     2001             2000            1999             1998             1997
-------------                    ----             ----            ----             ----             ----
                                                            (In thousands)
<S>                           <C>              <C>              <C>              <C>              <C>
Real estate-farmland          $    214         $    230         $     --         $     --         $    500
Real estate-construction        15,911            4,395            3,850            2,161            1,188
Real estate-residential         30,188           25,401           30,330           30,770           22,966
Real estate-multi-family        15,011           13,667            9,738            5,135            1,949
Real estate-commercial         208,412          161,675          127,885           86,008           72,372
Commercial                      45,238           32,295           25,260           14,434            9,084
Consumer                         1,092            1,782            2,161            1,840              798
                              --------         --------         --------         --------         --------
Total                         $316,066         $239,445         $199,224         $140,348         $108,857
                              ========         ========         ========         ========         ========
</TABLE>

<TABLE>
<CAPTION>

                                      LOAN MATURITIES AND INTEREST SENSITIVITY

                                   UNDER                1-5                OVER
DECEMBER 31, 2001                 1 YEAR               YEARS              5 YEARS             TOTAL
-----------------                 ------               -----              -------             -----
                                                            (In thousands)
<S>                              <C>                 <C>                 <C>                 <C>
Real estate-farmland           $       19          $      195            $     --          $      214
Real estate-construction           13,989               1,922                  --              15,911
Real estate-residential            15,090              14,777                 321              30,188
Real estate-multi-family            2,215              12,215                 581              15,011
Real estate-commercial             43,477             159,003               5,932             208,412
Commercial                         25,704              16,800               2,734              45,238
Consumer                              254                 838                  --               1,092
                               ----------          ----------            --------          ----------
                               $  100,748          $  205,750            $  9,568          $  316,066
Total                          ==========          ==========            ========          ==========
</TABLE>

     The following shows, at December 31, 2001, the amount of loans due after
one year that have fixed, adjustable or variable interest rates:

Loans with fixed or predetermined interest rates     $  26,385,000
Loans with adjustable or variable interest rates     $ 188,933,000

ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses reflects management's best estimate of
losses, both known and inherent, in the existing loan portfolio. Management's
judgment is based on the evaluation of individual loans, past experience, the
assessment of current economic conditions, and other relevant factors. The
provision for loan losses charged to operating expenses represents the amount
necessary to maintain an appropriate allowance. Loan losses are charged directly
against the allowance for loan losses when loans are deemed to be uncollectible.
Recoveries on previously charged-off loans are added to the allowance when
received.

     Estimates are used to determine the allowance for loan losses. A variety of
factors are considered in establishing these estimates including current
economic conditions, diversification of the loan portfolio, delinquency
statistics, borrowers' perceived financial and managerial strengths, the
adequacy of underlying collateral, if collateral dependent, or present value of
future cash flows, and other relevant factors. 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 and other factors previously described. Borrower risk
ratings are determined by loan officers at the inception of each loan and are
subject to on-going 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.

                                       24

<PAGE>

     Because the bank is less than ten years old with a limited history of loan
losses, management also uses peer group analysis to gauge the overall
reasonableness of loan loss reserves. While management calculates the allowance
based on specific loans or loan categories, it considers the total allowance
available for losses in the entire loan portfolio. Changes in economic
conditions and the financial condition of borrowers can occur quickly, and as a
result, impact management's estimates.

     In 2001, a weak economy prompted the Federal Reserve to cut interest rates
eleven times for a total of 4.75%. Unemployment rates generally rose while
corporate profits and consumer confidence declined. In addition, the events of
September 11, 2001 placed additional stress on the economy. Management adjusted
the loan scoring system in 2001 to reflect these current economic conditions and
trends in risk ratings over the past several years. As a result, there are no
unallocated loan loss reserves at December 31, 2001.

     PBI maintained an unallocated loan loss reserve in 2000 based on a shift in
risk ratings following the hiring of an independent loan reviewer in the second
quarter of 1999. This unallocated reserve was based on the assumption that
additional risk factors would be identified and further changes to risk ratings
would be made as this independent review process was consistently applied to the
entire commercial loan portfolio over an extended period of time.

     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.

     Management considers the allowance for loan losses to be appropriate. To
comply with industry reporting requirements, management allocated the allowance
for loan losses by loan types at each year-end in the table below. Management
does not intend to imply that actual future charge-offs will necessarily follow
this allocation or that any portion of the allowance is restricted.

<TABLE>
<CAPTION>

                                                        ALLOWANCE FOR LOAN LOSS ALLOCATION


  DECEMBER 31,                     2001                 2000                  1999                 1998               1997
  ------------              -------------------   ------------------    ------------------   ------------------  ------------------
                                       % LOANS             % LOANS                % LOANS              % LOANS            % LOANS
                                       TO TOTAL            TO TOTAL               TO TOTAL             TO TOTAL           TO TOTAL
                             AMOUNT     LOANS     AMOUNT     LOANS      AMOUNT     LOANS     AMOUNT     LOANS    AMOUNT     LOANS
                            --------   --------   -------  ---------   --------   --------   -------   --------  ------   ---------
                                                                   (Dollars in thousands)
<S>                          <C>    <C>       <C>         <C>       <C>        <C>       <C>        <C>      <C>        <C>
Balance at end of period
  applicable to:
Real estate-farmland         $    2     0.07%    $     2      0.10%    $    --       --     $    --       --    $     5     0.46%
Real estate-construction        115     5.03%         30      1.83%         37     1.93%         20     1.54%        37     1.09%
Real estate-residential         266     9.55%        236     10.61%        428    15.22%        403    21.92%       272    21.10%
Real estate-multi-family        103     4.75%         76      5.71%        110     4.89%        125     3.66%        19     1.79%
Real estate-commercial        2,338    65.94%      1,419     67.52%      1,436    64.19%        999    61.28%       875    66.48%
Commercial                      982    14.31%        662     13.49%        481    12.69%        239    10.29%       142     8.35%
Consumer installment             11     0.35%         14      0.74%         19     1.08%         19     1.31%        10     0.73%
Unallocated                      --       --         593        --          --       --          --       --         --       --
                             ------   ------     -------    ------     -------   ------     -------   ------    --------  ------
Total                        $3,817   100.00%    $ 3,032    100.00%    $ 2,511   100.00%    $ 1,805   100.00%   $ 1,360   100.00%
                             ======   ======     =======    ======     =======   ======     =======   ======    =======   ======
</TABLE>

                                       25

<PAGE>


     Changes in the allowance for loan losses during the last five years
are as follows.

<TABLE>
<CAPTION>
                                                     ALLOWANCE FOR LOAN LOSSES

FOR THE YEAR ENDED DECEMBER 31,         2001              2000             1999             1998             1997
--------------------------------        ----              ----             ----             ----             ----
                                                         (Dollars in thousands)
<S>                                   <C>              <C>              <C>              <C>               <C>
Balance, January 1                    $   3,032        $   2,511        $   1,805        $   1,360         $    961
Charge-offs:
   Real estate-residential                   --                6               --               60               --
   Real estate-commercial                    29               --               --               --               --
   Commercial                                 4                1                2               --               --
   Consumer                                  --               --               11                8                1
                                      ---------        ---------        ---------        ---------         --------
Total charge-offs                            33                7               13               68                1

Recoveries:
   Consumer installment                      --               --               --                8               --
                                      ---------        ---------        ---------        ---------         --------
Total recoveries                             --               --               --                8               --


Net charge-offs                              33                7               13               60                1
Provision for loan losses                   818              528              719              505              400
                                      ---------        ---------        ---------        ---------         --------
Balance, December 31                  $   3,817        $   3,032        $   2,511        $   1,805         $  1,360
                                      =========        =========        =========        =========         ========

Total gross loans:
   Average                            $ 271,318        $ 217,128        $ 168,363        $ 122,526         $ 95,404
   Year-end                             316,066          239,445          199,224          140,348          108,857

Ratios:
Net charge-offs to:
   Average loans                           0.01%              --             0.01%            0.05%              --
   Loans at year-end                       0.01%              --             0.01%            0.04%              --
   Allowance for loan losses               0.86%            0.23%            0.52%            3.32%            0.04%
   Provision for loan losses               4.03%            1.33%            1.81%           11.88%            0.13%

Allowance for loan losses to:
   Total gross loans at year-end           1.21%            1.27%            1.26%            1.29%            1.25%
   Non-performing loans                  142.05%             N/M          1307.81%          106.74%          209.64%

------------------
N/M stands for "not meaningful." There were no non-performing loans at December 31, 2000.

</TABLE>
                                       26

<PAGE>

<TABLE>
<CAPTION>

                                                             NON-PERFORMING ASSETS

DECEMBER 31,                                                          2001        2000        1999          1998         1997
------------                                                          ----        ----        ----          ----         ----
                                                                                       (Dollars in thousands)
<S>                                   <C>              <C>              <C>              <C>               <C>
Loans past due 90 days or more and accruing
   Real estate-construction                                         $    --     $    --     $     --      $    --       $   --
   Real estate-residential                                               --          --           55          605          146
   Commercial                                                            --          --            1            6           --
   Consumer                                                              --          --           --           --            5
                                                                    -------     -------     --------      -------       -------
      Total loans past due 90 days or more and accruing                  --          --           56          611          151
Loans accounted for on a non-accrual basis
   Real estate-construction                                              --          --           --           --           --
   Real estate-residential                                               --          --          136           25          299
   Real estate-multi-family                                              --          --           --          890           --
   Real estate-commercial                                             2,201          --           --          165          192
   Commercial                                                           486
   Consumer                                                              --          --           --           --            7
                                                                    -------     -------     --------      -------       -------
      Total non-accrual loans                                         2,687          --          136        1,080          498
Other real estate owned                                                 475         252           --          200          638
                                                                    -------     -------     --------      -------       -------
Total non-performing assets                                         $ 3,162     $   252     $    192      $ 1,891       $ 1,287
                                                                    =======     =======     ========      =======       =======
Ratio of non-performing loans to total loans                           0.85%        N/M         0.10%        1.20%         0.60%
Ratio of non-performing assets to total assets                         0.70%       0.07%        0.06%        0.76%         0.67%
------------------
N/M stands for "not meaningful". There were no non-performing loans at December 31, 2000.

</TABLE>

     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 represented 0.70% of total assets at December 31, 2001
compared to 0.07% at December 31, 2000.

     Non-accrual loans are those where the accrual of interest has stopped.
Non-consumer loans are placed on non-accrual status immediately if management
believes that collection is doubtful or when principal or interest is past due
90 days or more. Management does not automatically place consumer loans on
non-accrual status when principal or interest payments are 90 days past due.
Instead, most consumer loans are charged-off when deemed uncollectible or after
reaching 120 days past due. Interest accrued, but not collected at the date a
loan is placed on non-accrual status, is reversed and charged against interest
income. The bank records subsequent cash receipts as either a reduction of the
outstanding principal or as interest income, depending on management's
assessment of the ultimate collectibility of principal and interest. At December
31, 2001, three unrelated borrowers with loan balances of $2,687,000 in the
aggregate were classified as non-accrual. In November 2001 one borrower was
defunct and placed on non-accrual. Loans to this borrower totaled $2,330,000 of
which $1,869,000 is secured by real estate. There were no non-accruing loans at
December 31, 2000. The bank recognized $51,000 in interest income on non-accrual
loans in 2001. Total interest income that would have been recognized on
non-accrual loans in 2001 was $94,000.

     Potential problem loans are those loans that management believes require
increased supervision and review and may, depending on the economic environment
and other factors, become non-performing assets in future periods. Potential
problem loans totaled $2,356,000 and $3,666,000 at December 31, 2001 and 2000,
respectively. Most of these loans are secured by real estate.

                                       27

<PAGE>


OTHER REAL ESTATE OWNED

     Other real estate owned totaled $475,000 at December 31, 2001 and 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 in the amount
of $252,000 was sold in May 2001 for a loss of $17,000.

PREMISES AND EQUIPMENT

     Premises and equipment decreased $255,000 during 2001 to $4,598,000. This
decrease represents the amount of depreciation in excess of capital
expenditures.

DEFERRED TAXES

     Deferred taxes increased $184,000 during 2001 to $2,887,000. This increase
relates primarily to the provision for loan losses, which was offset in part by
a $145,000 decrease in deferred taxes related to the change in the estimated
fair value of investment securities available for sale.

DEPOSITS

     Premier Bank, a traditional community-based bank, is largely dependent upon
its base of competitively priced core deposits to provide a stable source of
funding. 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. Core deposits, which exclude time deposits greater than
$100,000, grew $44,411,000 or 17% during 2001 to $304,280,000. Most of this
growth was due to the promotion of Golden Checking accounts, which increased
$31,895,000 in 2001. There was a significant shift in deposit mix as a result of
this promotion. However, deposit balances are still concentrated in time
deposits. Total time deposits at December 31, 2001 were $208,057,000 or 58% of
total deposits, of which $41,691,000 mature after one year.

     Total deposits increased $54,989,000 or 18% during 2001 to $358,282,000.
Golden checking accounts and time deposits increased $31,895,000 and
$14,321,000, respectively. Much of the growth in time deposits was due to the
new Index Powered SM Certificate of Deposit (IPCD) product described below.
Total average deposits increased $51,737,000 or 19% in 2001 and $56,593,000 or
26% in 2000. Non-interest-bearing deposits are an important source of funds for
a bank because they lower overall deposit costs. These accounts increased
$2,921,000 or 12% on average during 2001 to $26,561,000. The interest rates
offered on most deposit products were lowered in 2001 in response to overall
market conditions. Management expects the certificate of deposit portfolio to
reprice lower in 2002 as higher rate accounts mature.

     The growth of mutual funds over the past decade has made it increasingly
difficult for financial institutions to attract deposits. The continued flow of
cash into mutual funds, much of which is made through tax deferred investment
vehicles such as 401(k) plans, as well as a generally strong economy, have,
until recently, fueled high returns for these investments, and in particular,
certain equity funds. These returns perpetuated the flow of additional
investment dollars into mutual funds and other products not traditionally
offered by banks. In addition, insurance companies recently have become more
significant competitors for deposits through their thrift subsidiaries.

     Premier plans to continue to grow deposits through promotions, business
development programs, maturation of existing branches and branch expansion. In
October 2000, Premier opened its sixth and seventh Pennsylvania branches in
Montgomeryville and Bensalem, respectively. The bank also opened a limited
service branch at Heritage Towers in Doylestown, Pennsylvania in July 2000. In
addition, Premier introduced the IPCD product in the first quarter 2001. The
IPCD product 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
in place of a stated interest rate but, like other traditional certificates of
deposit, is insured by the FDIC to the extent provided by law. As of December
31, 2001, the bank generated $10,905,000 in IPCD deposits with an initial term
of five years. Approximately $8,775,000 of IPCD balances at December 31, 2001
are from institutional depositors. These depositors generally require Premier to
obtain letters of credit guaranteeing the principal amounts of IPCD's in excess
of FDIC insured levels. As of December 31, 2001, Premier obtained $7,100,000 in
letters of credit from the FHLB for this purpose. The amount of IPCD product,
net of embedded derivatives, included in total deposits in the Consolidated
Statement of Financial Condition at December 31, 2001 was $8,976,000. See the
section entitled "Derivative Financial Instruments."

                                       28

<PAGE>

<TABLE>
<CAPTION>

                                          AVERAGE DEPOSITS BY MAJOR CLASSIFICATION

FOR THE YEARS ENDED DECEMBER 31,             2001                     2000                      1999
--------------------------------   ----------------------   ------------------------   ---------------------
                                     BALANCE       RATE       BALANCE         RATE       BALANCE      RATE
                                     -------       ----       -------         ----       -------      ----
                                                             (Dollars in thousands)
<S>                                 <C>            <C>       <C>             <C>        <C>           <C>
Non-interest-bearing deposits       $  26,561        --      $  23,640         --       $  18,747       --
Interest checking                      31,180      2.59%        22,079       2.54%         18,365     2.58%
Money market deposit accounts          18,313      3.41%         6,512       5.05%          1,446     2.56%
Savings accounts                       43,936      2.95%        47,776       3.49%         55,138     3.42%
Time deposits                         202,819      5.96%       171,065       6.02%        120,783     5.32%
                                    ---------      ----      ---------       -----      ---------     ----
Total                               $ 322,809      4.59%     $ 271,072       4.74%      $ 214,479     4.11%
                                    =========      ====      =========       =====      =========     ====
</TABLE>


                  MATURITY OF TIME DEPOSITS OF $100,000 OR MORE

DECEMBER 31,                                   2001
------------                                   ----
                                          (In thousands)
Three months or less                       $  16,710
Over three through six months                 13,237
Over six through twelve months                10,032
Over twelve months                            14,023
                                           ---------
Total                                      $  54,002
                                           =========


SHORT-TERM BORROWINGS

     Short-term borrowings, which generally consist of customer repurchase
agreements and overnight federal funds purchased, fluctuate daily depending on
the bank's liquidity needs. Under customer repurchase agreements, deposit
customers agree to lend excess demand deposit balances to the bank overnight at
the rate of federal funds less 100 basis points. These overnight borrowings from
customers are collateralized by certain investment securities. Overnight federal
funds are purchased through a correspondent bank.

                                       29

<PAGE>

     At December 31, 2001, short-term borrowings were comprised entirely of
overnight borrowings from customers. At December 31, 2000 short-term borrowings
included $785,000 in overnight federal funds purchased and $13,619,000 in
overnight borrowings from customers.

<TABLE>
<CAPTION>
                                                        MAXIMUM                   WEIGHTED
                                                        AMOUNT        AVERAGE     AVERAGE
                              TOTAL                   OUTSTANDING     AMOUNT      INTEREST
                             BALANCE     WEIGHTED    AT MONTH END   OUTSTANDING     RATE
                             END OF      AVERAGE      DURING THE    DURING THE   DURING THE
                             PERIOD       RATE          PERIOD        PERIOD       PERIOD
                             ------       ----          ------        ------       ------
                                                (Dollars in thousands)
DECEMBER 31, 2001
-----------------
<S>                         <C>           <C>          <C>           <C>            <C>
Short-term borrowings       $ 19,605      0.75%        $ 25,692      $ 18,894       2.91%


DECEMBER 31, 2000
-----------------
Short-term borrowings       $ 14,404      5.59%        $ 58,807      $ 38,193       6.05%
</TABLE>


OTHER LIABILITIES

     Other liabilities decreased $403,000 during 2001 to $5,019,000. The
majority of this decrease relates to the settlement of a $2,000,000 investment
purchase, which was accrued at December 31, 2000. In addition, accrued expenses
and other operating accounts used in the normal course of business decreased
$1,132,000 in the aggregate. These decreases were offset by the recording of
$2,055,000 in derivatives related to the IPCD product and a $674,000 increase in
federal income taxes payable due to higher taxable income in 2001.

CAPITAL

     Capital Requirements

     A strong capital position is fundamental to support PBI's continued growth.
In addition, PBI is subject to various regulatory capital requirements.
Regulatory capital is defined in terms of Tier 1 capital (shareholders' equity
plus the allowable portion of the minority interest in equity of subsidiaries,
minus unrealized gains or plus unrealized losses on available for sale
securities, and minus certain intangible assets), Tier 2 capital (which
includes a portion of the allowance for loan losses, minority interest in equity
of subsidiaries and subordinated debt), and total capital (Tier 1 plus Tier 2).
Risk-based capital ratios are expressed as a percentage of risk-weighted assets.
Risk-weighted assets are determined by assigning various weights to all assets
and off-balance sheet financial instruments, such as letters of credit and loan
commitments, based on associated risk. Regulators have also adopted minimum Tier
1 leverage ratio standards, which measure the ratio of Tier 1 capital to total
assets.

     At December 31, 2001, management believes that PBI and the bank are "well
capitalized" and in compliance with all regulatory capital requirements.

     Premier Bancorp, Inc.'s capital components are depicted in the following
table.

<TABLE>
<CAPTION>

                               CAPITAL COMPONENTS

DECEMBER 31,                                                             2001       2000
-------------                                                            ----       ----
                                                                         (In thousands)
Tier 1
<S>                                                                   <C>         <C>
Shareholders' equity                                                  $ 19,609    $ 16,455
Allowable portion of minority interest in equity of subsidiary           7,537       6,580
Net unrealized losses on investment securities available for sale        3,001       3,283
                                                                      --------    --------
Total Tier 1 capital                                                  $ 30,147    $ 26,318
                                                                      ========    ========

Tier 2
Allowable portion of minority interest in equity of subsidiary        $  2,463    $  3,420
Allowable portion of the allowance for loan losses                       3,817       3,032
Allowable portion of subordinated debt                                   3,500       1,500
                                                                      --------    --------
Total Tier 2 capital                                                  $  9,780    $  7,952
                                                                      ========    ========

Total capital                                                         $ 39,927    $ 34,270

Risk-weighted assets
                                                                      $375,981   $284,544
</TABLE>

                                       30

<PAGE>


     The following table compares PBI's capital ratios to the "adequately
capitalized" and "well capitalized" regulatory requirements.

<TABLE>
<CAPTION>

                                 CAPITAL RATIOS

                                                                    "ADEQUATELY      "WELL
                                                                    CAPITALIZED"  CAPITALIZED"
DECEMBER 31,                                    2001        2000       RATIOS        RATIOS
------------                                    ----        ----       ------        ------

<S>                                            <C>         <C>          <C>          <C>
Total risk-based capital/risk-weighted assets  10.62%      12.04%       8.00%        10.00%
Tier 1 capital/risk-weighted assets             8.02%       9.25%       4.00%         6.00%
Tier 1 capital/average assets (leverage ratio)  6.83%       7.41%       4.00%         5.00%
</TABLE>

Capital Resources

     PBI's future dividend policy is subject to the discretion of the Board of
Directors and depends upon a number of factors, including future earnings,
financial condition, cash needs, and general business conditions. Holders of
common stock will be entitled to receive dividends as and when declared by the
Board of Directors out of funds legally available for that purpose. PBI's
ability to pay dividends depends on its ability to obtain dividends from the
bank.

     The bank's ability to pay dividends is subject to the regulatory
restrictions set forth in the Pennsylvania Banking Code of 1965, the Federal
Reserve Act and the Federal Deposit Insurance Act. Under the Pennsylvania
Banking Code, the bank can declare and pay cash dividends only out of
accumulated net earnings, which were $14,310,000 at December 31, 2001. Cash
dividends require Federal Reserve Board approval if the total of all cash
dividends declared by the bank in any calendar year, including the proposed cash
dividend, exceeds the total of the bank's net profits for that year plus its
retained net profits from the preceding two years less any required transfers to
surplus or to a fund for the retirement of preferred stock, if any. The Federal
Deposit Insurance Act generally prohibits all payments of dividends by any bank
that is in default of any FDIC assessment. As of December 31, 2001 and 2000,
Premier was not in default of any FDIC assessments.

     As a practical matter, PBI has not and does not plan to pay cash dividends
on its common stock in the foreseeable future. All earnings are being retained
to help finance the continued growth of the company. The growth rate of the
institution continues to exceed returns on equity. If this trend continues, PBI
will need additional capital.

     On December 31, 2001 the bank issued $2,000,000 in subordinated debt which
qualifies as Tier 2 capital.

     A Special Meeting of Shareholders will be held on March 28, 2002 to vote on
an amendment to PBI's Articles of Incorporation to authorize the issuance of up
to 20,000,000 shares of preferred stock for proper corporate purposes including
growth, acquisitions, repurchases of outstanding shares of common stock, and
other similar purposes. PBI's Board of Directors currently intends to raise up
to $15,000,000 from the issuance of a series of preferred stock in an
underwritten public offering commencing in the second quarter of 2002. The Board
of Directors makes no assurances that it will be able to raise such financing on
acceptable terms, if at all.

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. PBI's primary sources of funds are deposits, proceeds from
principal and interest payments on loans and investments, sales of investment
securities available for sale and borrowings. 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. Deposit
growth within the banking industry has been generally slow due to strong
competition from a variety of financial services companies. Competition for
deposits may require banks to increase deposit prices or expand their branch
office networks (increasing costs) to adequately grow deposits in the future.

                                       31

<PAGE>

     During 2001, operating and financing activities provided cash and cash
equivalents of $3,735,000 and $92,480,000, respectively, while investing
activities used $74,637,000. The cash provided by financing activities resulted
primarily from an increase in deposits and borrowings and the issuance of
$2,000,000 in subordinated debt. Deposits and borrowings increased by
$54,989,000 and $35,201,000, respectively. Other significant sources of cash
included principal repayments on loans and mortgage-backed securities and sales
and calls of investment securities. Together, this cash was used to finance loan
growth of $77,129,000.

     During 2000, operating and financing activities provided cash and cash
equivalents of $8,164,000 and $27,755,000, respectively, while investing
activities used $36,384,000. The cash provided by financing activities
principally came from a $65,812,000 increase in deposits. Other significant
sources of cash included principal repayments on loans and mortgage-backed
securities and sales and calls of investment securities. Together, this cash was
primarily used for loan originations and the repayment of borrowings. During
2000, loans grew $40,480,000 and borrowings decreased by $38,133,000.

     Premier 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 overnight
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 the use of one of the
following: $6,000,000 unsecured federal funds line of credit with a
correspondent bank and $74,898,000 borrowing limit at the Federal Home Loan Bank
of Pittsburgh. Premier could also sell or reverse repurchase investment
securities. At December 31, 2001, the bank had available borrowing capacity of
$37,798,000 and $6,000,000 with the Federal Home Loan Bank of Pittsburgh and a
correspondent bank, respectively.

     Regulation D of the Federal Reserve Regulations requires all depository
institutions to maintain reserves on transaction accounts. Under Regulation D,
the bank's reserve requirement was $3,002,000 as of December 31, 2001. In
addition, the bank was required to maintain $346,000 in cash reserves at its
correspondent bank as of December 31, 2001.

     At December 31, 2001, $20,866,000 in investment securities was pledged as
collateral for customer repurchase agreements.

DERIVATIVE FINANCIAL INSTRUMENTS

     PBI and its subsidiaries have limited involvement with derivative financial
instruments and currently use them only in relation to Premier'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(R) Index. This deposit product is unique in
that the customer may receive a return that is based on an equity market index
in place of a stated interest rate but, like other traditional certificates of
deposit, is insured in its principal amount by the FDIC to the extent provided
by law.

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

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

                                       32


<PAGE>


     The notional amount of derivative contracts was $10,905,000 at December 31,
2001. The fair value of derivatives is included in "Other liabilities" and
approximated $2,055,000 at December 31, 2001. During 2001, approximately
$158,000 was recorded in other expense for net changes in the fair value of
derivatives. The fair value adjustments are caused by changes in market
interest rates.

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 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.

                                       33

<PAGE>


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 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 Statement 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 No. 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 No. 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.

IMPACT OF INFLATION AND CHANGING PRICES

     The financial statements and accompanying notes presented in this Form
10-KSB have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of the bank's operations. Unlike
industrial companies, nearly all of the assets and liabilities of the bank are
monetary in nature. As a result, interest rates have a greater impact on the
bank's performance than do the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the
price of goods and services.

                                       34

<PAGE>


ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a) The following audited consolidated financial statements and related
documents are set forth in this Annual Report on Form 10-KSB on the following
pages:

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                     <C>
Independent Auditors' Report                                                            36
Consolidated Statements of Financial Condition                                          37
Consolidated Statements of Operations                                                   38
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)         39
Consolidated Statements of Cash Flows                                                   40
Notes to Consolidated Financial Statements                                              41
</TABLE>

(b) A summary of quarterly results for the years 2001 and 2000 is as follows.

<TABLE>
<CAPTION>
                       SUMMARY OF QUARTERLY FINANCIAL DATA

                                                              QUARTERS ENDED 2001
                                     -----------------------------------------------------------------------
                                     DECEMBER 31        SEPTEMBER 30          JUNE 30             MARCH 31
                                     -----------        ------------          -------             --------
                                                     (In thousands, except per share data)
<S>                                  <C>                 <C>                 <C>                 <C>
Interest income                      $  7,646            $  7,656            $  7,335            $  7,014
Interest expense                        4,107               4,197               4,213               4,108
                                     --------            --------            --------            --------
Net interest income                     3,539               3,459               3,122               2,906
Provision for loan losses                 300                 179                 239                 100
Non-interest income                       170                 138                 180                 106
Non-interest expense                    2,441               2,362               2,309               2,293
                                     --------            --------            --------            --------
Income before income tax                  968               1,056                 754                 619
Income tax expense                        253                 266                 189                 155
                                     --------            --------            --------            --------
Net income                           $    715            $    790            $    565            $    464
                                    =========            ========            ========            ========

Basic earnings per share             $   0.22            $   0.24            $   0.18            $   0.15
Diluted earnings per share               0.21                0.23                0.16                0.14
</TABLE>

<TABLE>
<CAPTION>

                                                              QUARTERS ENDED 2000
                                     -----------------------------------------------------------------------
                                     DECEMBER 31        SEPTEMBER 30          JUNE 30             MARCH 31
                                     -----------        ------------          -------             --------
                                                     (In thousands, except per share data)
<S>                                  <C>                 <C>                 <C>                 <C>
Interest income                      $  7,081            $  6,790            $  6,525            $  6,297
Interest expense                        4,210               3,950               3,654               3,480
                                     --------            --------            --------            --------
Net interest income                     2,871               2,840               2,871               2,817
Provision for loan losses                 128                 125                 125                 150
Non-interest income                        96                  89                  76                  58
Non-interest expense                    2,185               2,049               2,006               2,214
                                     --------            --------            --------            --------
Income before income tax                  654                 755                 816                 511
Income tax expense                        169                 186                 212                 108
                                     --------            --------            --------            --------
Net income                           $    485            $    569            $    604            $    403
                                     ========            ========            ========            ========

Basic earnings per share             $   0.16            $   0.18            $   0.19            $   0.13
Diluted earnings per share               0.14                0.17                0.18                0.12
</TABLE>

                                       35

<PAGE>

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Premier Bancorp, Inc.:


We have audited the accompanying consolidated statements of financial condition
of Premier Bancorp, Inc. and subsidiaries as of December 31, 2001 and 2000, and
the related consolidated statements of operations, shareholders' equity and
comprehensive income (loss), and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Premier Bancorp,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


/s/KPMG LLP

February 11, 2002
Philadelphia, Pennsylvania

                                       36

<PAGE>

<TABLE>
<CAPTION>

                              PREMIER BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,                                                                                 2001              2000
------------                                                                                 ----              ----
                                                                                             (Dollars in thousands)
<S>                                                                                        <C>              <C>
Assets
Cash and due from banks                                                                    $  14,383        $   7,970
Federal funds sold                                                                            14,137               --
Interest-bearing deposits                                                                      1,084               56
                                                                                           ---------        ---------
Cash and cash equivalents                                                                     29,604            8,026
Investment securities:
   Held to maturity (fair value $500 in 2001 and $5,912 in 2000)                                 500            6,026
   Available for sale (amortized cost $102,399 in 2001 and $99,548 in 2000)                   97,851           94,573
Loans held for sale                                                                              127               --
Loans receivable (net of allowance for loan losses of $3,817 in 2001
   and $3,032 in 2000)                                                                       310,876          235,552
Other real estate owned                                                                          475              252
Premises and equipment                                                                         4,598            4,853
Accrued interest receivable                                                                    2,939            2,517
Deferred taxes                                                                                 2,887            2,703
Other assets                                                                                     712              699
                                                                                           ---------        ---------
Total assets                                                                               $ 450,569        $ 355,201
                                                                                           =========        =========

Liabilities, minority interest in subsidiary and shareholders' equity
Deposits                                                                                   $ 358,282        $ 303,293
Borrowings                                                                                    49,605           14,404
Accrued interest payable                                                                       4,554            4,127
Other liabilities                                                                              5,019            5,422
Subordinated debt                                                                              3,500            1,500
                                                                                           ---------        ---------
Total liabilities                                                                            420,960          328,746

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

Commitments and contingencies (Note 16)

Shareholders' equity
Common stock- $0.33 par value; 30,000,000 shares authorized; issued and outstanding
   3,242,215 at December 31, 2001 and 3,105,248 at December 31, 2000                           1,070            1,025
Additional paid-in capital                                                                    12,085           11,792
Retained earnings                                                                              9,455            6,921
Accumulated other comprehensive loss                                                          (3,001)          (3,283)
                                                                                           ---------        ---------
Total shareholders' equity                                                                    19,609           16,455
                                                                                           ---------        ---------
Total liabilities, minority interest in subsidiary and shareholders' equity                $ 450,569        $ 355,201
                                                                                           =========        =========
</TABLE>

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

                                       37


<PAGE>

<TABLE>
<CAPTION>

                              PREMIER BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,                                              2001                   2000
--------------------------------                                              ----                   ----
                                                                         (In thousands, except per share data)
<S>                                                                       <C>                   <C>
Interest income:
   Loans                                                                  $    22,468            $    18,954
   Federal funds sold and interest-bearing deposits                               403                    499
   Investments:
      Taxable                                                                   5,807                  6,356
      Tax-exempt                                                                  973                    884
                                                                          -----------            -----------
Total interest income                                                          29,651                 26,693

Interest expense:
   Deposits                                                                    14,820                 12,854
   Borrowings                                                                   1,805                  2,440
                                                                          -----------            -----------
Total interest expense                                                         16,625                 15,294


Net interest income                                                            13,026                 11,399
Provision for loan losses                                                         818                    528
                                                                          -----------            -----------
Net interest income after loan loss provision                                  12,208                 10,871

Non-interest income:
   Service charges and other fees                                                 546                    287
   Gain, net, on sale of investment securities available for sale                  13                      3
   Loss on sale of other real estate owned                                        (17)                    --
   Gain on sale of loans held for sale                                             52                     29
                                                                          -----------            -----------
Total non-interest income                                                         594                    319

Non-interest expense:
   Salaries and employee benefits                                               4,337                  3,873
   Occupancy                                                                      767                    641
   Data processing                                                                973                    841
   Professional services                                                          323                    377
   Marketing                                                                      424                    484
   Minority interest in expense of subsidiary                                     873                    873
   Other                                                                        1,708                  1,365
                                                                          -----------            -----------
Total non-interest expense                                                      9,405                  8,454


Income before income tax                                                        3,397                  2,736
Income tax expense                                                                863                    675
                                                                          -----------            -----------
Net income                                                                $     2,534            $     2,061
                                                                          ===========            ===========

Earnings per share:
   Basic                                                                  $      0.79            $      0.67
   Diluted                                                                $      0.74            $      0.60

Weighted average number of shares outstanding:
   Basic                                                                    3,212,537              3,097,450
   Diluted                                                                  3,442,369              3,422,832

</TABLE>

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


                                       38

<PAGE>

<TABLE>
<CAPTION>

                              PREMIER BANCORP, INC.
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
                           COMPREHENSIVE INCOME (LOSS)

                                                                    FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
                                                -----------------------------------------------------------------------------------
                                                                                                      ACCUMULATED
                                                                           ADDITIONAL                  OTHER            TOTAL
                                                COMPREHENSIVE    COMMON      PAID-IN     RETAINED    COMPREHENSIVE    SHAREHOLDERS'
                                                INCOME (LOSS)    STOCK       CAPITAL     EARNINGS    INCOME (LOSS)       EQUITY
                                                -------------    -----       -------     --------    -------------       ------
                                                                                                     (In thousands)
<S>                                             <c>             <C>         <C>         <C>           <C>               <C>
Balance, December 31, 1999                                      $  1,016    $  11,662   $   4,860     $  (4,891)        $ 12,647

Comprehensive income
   Net income                                     $  2,061            --           --       2,061            --            2,061
   Other comprehensive income, net of tax
      Unrealized losses on investment
        securities available for sale                1,610            --           --          --            --               --
      Less: reclassification adjustment for
        gains included in net income                    (2)           --           --          --            --               --
                                                  --------
    Other comprehensive income                       1,608            --           --          --         1,608            1,608
                                                  --------
Comprehensive income                              $  3,669            --           --          --            --               --
                                                  ========
Stock issued for options exercised                                     9          130          --            --              139
                                                                --------    ---------   ---------     ---------         --------
Balance, December 31, 2000                                      $  1,025    $  11,792   $   6,921     $  (3,283)        $ 16,455
                                                                ========    =========   =========     =========         ========

Comprehensive income
   Net income                                     $  2,534      $     --    $      --   $   2,534     $      --         $  2,534
   Other comprehensive income, net of tax
      Unrealized gain on investment
        securities available for sale                  291            --           --          --            --               --
      Less: reclassification  adjustment for
        gains included in net income                    (9)           --           --          --            --               --
                                                  --------
   Other comprehensive income                          282            --           --          --           282              282
                                                  --------
Comprehensive income                              $  2,816            --           --          --            --               --
                                                  ========
Stock issued for options exercised                                    45          293          --            --              338
                                                                --------    ---------   ---------     ---------         --------
Balance, December 31, 2001                                      $  1,070    $  12,085   $   9,455     $  (3,001)        $ 19,609
                                                                ========    =========   =========     =========         ========

</TABLE>


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

                                       39

<PAGE>

<TABLE>
<CAPTION>

                              PREMIER BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,                                                            2001        2000
-------------------------------                                                             -----       ----
                                                                                              (In thousands)
<S>                                                                                       <C>         <C>
Operating activities:
   Net income                                                                             $  2,534    $  2,061
   Adjustments to reconcile net income to cash provided by operating activities:
     Depreciation expense                                                                      515         459
     Provision for loan losses                                                                 818         528
     Writedowns and losses on sale of other real estate owned                                   17          --
     Write-off of capitalized costs                                                             --          68
     Amortization of premiums and discounts on investment securities held to maturity           (2)          7
     Amortization of premiums and discounts on investment securities available for sale        173         120
     Gain on sales of investment securities available for sale                                 (13)         (3)
     Gain on sales of loans held for sale                                                      (52)        (29)
     Originations of loans held for sale                                                    (8,702)     (4,727)
     Proceeds from sales of loans held for sale                                              8,627       4,756
     Increase in accrued interest receivable                                                  (422)       (343)
     Increase in deferred tax asset                                                           (329)       (188)
     (Increase) decrease in other assets                                                       (13)         69
     Increase in deferred loan fees                                                            512         269
     Increase in accrued interest payable                                                      427       1,763
     (Decrease) increase in other liabilities                                                 (355)      3,354
                                                                                          --------    --------
Net cash provided by operating activities                                                    3,735       8,164
                                                                                          --------    --------
Investing activities:
   Proceeds from sales of investment securities available for sale                          29,569       5,474
   Repayment of investment securities available for sale                                    11,420       5,757
   Purchases of investment securities available for sale                                   (44,000)     (6,410)
   Repayment of investment securities held to maturity                                       5,528         848
   Net increase in loans receivable                                                        (77,129)    (40,480)
   Proceeds from sales of other real estate owned                                              235          --
   Purchases of premises and equipment                                                        (260)     (1,573)
                                                                                          --------    --------
Net cash used in investing activities                                                      (74,637)    (36,384)
                                                                                          --------    --------

Financing activities:
   Net increase in deposits                                                                 54,989      65,812
   Net increase (decrease) in borrowings less than 90 days                                   5,201     (28,133)
   Proceeds from borrowings greater than 90 days                                            30,000          --
   Repayment of borrowings greater than 90 days                                                 --     (10,000)
   Proceeds from subordinated debt                                                           2,000          --
   Proceeds from exercised stock options                                                       290          76
                                                                                          --------    --------
 Net cash provided by financing activities                                                  92,480      27,755
                                                                                          --------    --------
 Increase (decrease) in cash and cash equivalents                                           21,578        (465)

Cash and cash equivalents:
   Beginning of year                                                                         8,026       8,491
                                                                                          --------    --------
   End of year                                                                            $ 29,604    $  8,026
                                                                                          ========    ========

Supplemental disclosures:
   Cash payments for:
     Interest expense                                                                     $ 16,198    $ 13,531
     Taxes                                                                                     470         660


Supplemental disclosure of non-cash activities:
   Change in the estimated fair value of investment securities available for sale         $    427    $  2,435
   Change in deferred tax asset related to investment securities available for sale           (145)       (827)
   Tax effect of exercised stock options                                                        48          63
   Transfer of loans to other real estate owned                                                475         252
</TABLE>


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

                                       40

<PAGE>

                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business

     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 (Premier). PBI's
primary business is the operation of its wholly owned subsidiary, Premier Bank,
which is managed as a single business segment.

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

     Both PBI and Premier are regulated by certain federal and state agencies
and are periodically examined by them.

     Basis of Financial Statement Presentation

     The consolidated financial statements include the accounts of PBI and its
wholly owned subsidiaries: Premier Bank, PBI Capital Trust and Lenders Abstract,
LLC. These statements were prepared in accordance with accounting principles
generally accepted in the United States of America as applied to the banking
industry. All significant intercompany accounts and transactions were eliminated
in the consolidated financial statements. Certain previously reported amounts
were reclassified to conform to current presentation standards.

     Use of Estimates

     In preparing the consolidated financial statements, management is 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.

     Investment Securities

     Debt and equity securities are classified as either held to maturity (HTM)
securities, trading or as available for sale (AFS) securities. Investments are
classified as HTM securities if there is a positive intent and ability to hold
to maturity. HTM securities are reported at amortized cost. Investment
securities that are not HTM or held for trading purposes are classified as AFS
securities. AFS securities are reported at fair value, with unrealized gains and
losses, net of tax, excluded from earnings and reported as a separate component
of shareholders' equity. PBI and its subsidiaries do not engage in any trading
activities. The appropriate classification of securities is determined at the
time of purchase.

     AFS securities include securities that are intended to be used as part of
Premier's asset/liability management strategy and that may be sold in response
to changes in market interest rates and related changes in the securities'
prepayment risk or to meet liquidity needs. The majority of the investment
portfolio is classified as available for sale.

     Premiums and discounts on debt securities are recognized in interest income
using a constant yield method. Gains and losses on sales of investment
securities are computed on the specific identification basis and included in
non-interest income based on trade date.

                                       41

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Investment Securities - (continued)

     Equity securities are limited to stocks owned in the Federal Reserve Bank,
the Federal Home Loan Bank of Pittsburgh and the Atlantic Central Bankers Bank.
These securities are reported at cost, which approximates liquidation value.

     Loans

     Loans are stated at the principal amount outstanding, net of deferred loan
fees and costs. Interest income is accrued on the principal amount outstanding.
Loan origination fees and related direct costs are deferred and amortized to
income over the term of the respective loan and loan commitment period as a
yield adjustment.

     Non-accrual loans are those on which the accrual of interest has stopped.
Non-consumer loans are generally placed on non-accrual status if it is believed
that collection is doubtful, or when principal or interest is past due 90 days
or more. Interest accrued, but not collected at the date a loan is placed on
non-accrual status, is reversed and charged against interest income. Subsequent
cash receipts are recorded as either a reduction of outstanding principal or as
interest income depending on management's assessment of the ultimate
collectibility of principal and interest. Loans are returned to accrual status
when the borrower's ability to make periodic principal and interest payments
returns to normal (i.e., brought current with respect to principal and interest
or restructured) and the paying capacity of the borrower and/or the underlying
collateral is deemed sufficient to cover principal and interest. Consumer loans
are not automatically placed on non-accrual status when principal or interest
payments are 90 days past due. Instead, most consumer loans are charged-off when
deemed uncollectible or after reaching 120 days past due.

     Impaired loans are measured based on the present value of expected future
discounted cash flows, the market price of the loan or the fair value of the
underlying collateral if the loan is collateral dependent. Interest income is
recognized on impaired loans in the same manner as for non-accrual loans
discussed above.

     Loans Held for Sale

     Residential mortgages held for sale are carried at the lower of aggregate
cost or market value. Gains and losses on residential mortgages held for sale
are included in non-interest income. Servicing rights are released to purchasers
when the loans are sold.

     Allowance for Loan Losses

     The allowance for loan losses reflects management's best estimate of
losses, both known and inherent, in the existing loan portfolio. Management's
judgment is based on the evaluation of individual loans, past experience, the
assessment of current economic conditions, and other relevant factors. The
provision for loan losses charged to operating expenses represents the amount
necessary to maintain an appropriate allowance. Loan losses are charged directly
against the allowance for loan losses when loans are deemed to be uncollectible.
Recoveries on previously charged-off loans are added to the allowance when
received.

     Estimates are used to determine the allowance for loan losses. A variety of
factors are considered in establishing these estimates including current
economic conditions, diversification of the loan portfolio, delinquency
statistics, borrowers' perceived financial and managerial strengths, the
adequacy of underlying collateral, if collateral dependent, or present value of
future cash flows, and other relevant factors.

     In addition, 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.

                                       42

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Premises and Equipment

     Premises and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are calculated on a
straight-line basis over the estimated useful lives of the assets as follows:
buildings--15 to 40 years; leasehold improvements--lesser of the useful life or
lease term; equipment--5 to 10 years; and software--3 years. Expenditures for
maintenance and repairs are charged to operations as incurred. Gains or losses
on the sale of these assets are recorded when realized. Land is carried at cost.

     Other Real Estate Owned

     Other real estate owned consists of properties acquired through foreclosure
proceedings or acceptance of a deed in lieu of foreclosure. Other real estate
owned is reported at the lower of the carrying value of the loan or the fair
value of the property, net of estimated selling costs. Costs relating to the
development or improvement of properties are capitalized. Costs relating to the
operation and maintenance of properties are expensed as incurred. Gains and
losses are recorded through earnings when the property is sold.

     Derivative Financial Instruments

     PBI and its subsidiaries have limited involvement with derivative financial
instruments and currently use them only in relation to Premier'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(R) Index. This deposit product is unique in
that the customer may receive a return that is based on an equity market index
in place of a stated interest rate but, like other traditional certificates of
deposit, is insured by the FDIC to the extent provided by law.

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

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

     Income Taxes

     PBI files a consolidated federal income tax return. The asset and liability
method, under which deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the difference between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, is used to provide for income taxes. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the
enactment date.

     Earnings Per Share

     Basic earnings per common share is calculated using the weighted-average
number of shares outstanding, after giving retroactive effect to the 5% common
stock dividend declared on February 17, 2000 and paid on March 10, 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.

                                       43

<PAGE>

                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Stock Options

     PBI's stock option plan is accounted for in accordance with the provisions
of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations, as permitted by Statement No.
123, "Accounting for Stock-Based Compensation." Accordingly, compensation is
recorded on the date of grant only if the current market price of the underlying
stock exceeds the exercise price. Statement No. 123 requires entities that
continue to apply the provisions of APB Opinion No. 25 to provide pro-forma net
income and pro-forma earnings per share disclosures for stock option grants made
in 1995 and subsequent years as if the fair value based method defined in
Statement No. 123 had been applied. PBI elected to continue to apply the
provisions of APB Opinion No. 25 and provides the pro-forma disclosure
provisions of Statement No. 123.

     Statement of Cash Flows

     Cash and cash equivalents for purposes of this statement consist of cash
and due from banks, interest-bearing deposits, and overnight federal funds sold.

     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.

                                       44

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Recent Accounting Pronouncements - (continued)

     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 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.

                                       45


<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Recent Accounting Pronouncements - (continued)

     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 Statement 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 No. 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.


NOTE 2 - STOCK DIVIDEND

     On February 17, 2000, PBI declared a 5% common stock dividend to
shareholders of record as of February 29, 2000 and paid on March 10, 2000. The
number of shares and earnings per share amounts were restated to reflect this
event as of the earliest date presented herein.


NOTE 3 - CASH AND DUE FROM BANKS

     Premier is required to maintain certain daily average reserve balances in
accordance with Federal Reserve Board requirements. At December 31, 2001 and
2000 the FRB reserve requirement was $3,002,000 and $2,114,000, respectively. In
addition, Premier was required to maintain $346,000 in cash reserves at its
correspondent bank at both December 31, 2001 and 2000.

                                       46

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INVESTMENT SECURITIES

     The amortized cost and estimated fair values of investment securities at
December 31, 2001 and 2000 were as follows.

<TABLE>
<CAPTION>
                                                                  GROSS         GROSS       ESTIMATED
                                                  AMORTIZED    UNREALIZED     UNREALIZED      FAIR
DECEMBER 31, 2001                                   COST          GAINS         LOSSES       VALUE
-----------------                                   ----          -----         ------       -----
                                                                    (In thousands)
<S>                                               <C>           <C>           <C>           <C>
HELD TO MATURITY:
Other debt securities                             $    500      $     --      $     --      $    500
                                                  --------      --------      --------      --------
Total investment securities held to maturity      $    500      $     --      $     --      $    500
                                                  ========      ========      ========      ========

AVAILABLE FOR SALE:
Mortgage-backed securities                        $ 43,286      $    220      $   (141)     $ 43,365
Municipal securities                                20,796             3          (768)       20,031
Equity securities                                    2,023            --            --         2,023
Corporate bonds                                     36,184            --        (3,862)       32,322
Other debt securities                                  110            --            --           110
                                                  --------      --------      --------      --------
Total investment securities available for sale    $102,399      $    223      $ (4,771)     $ 97,851
                                                  ========      ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                  GROSS         GROSS       ESTIMATED
                                                  AMORTIZED    UNREALIZED     UNREALIZED      FAIR
DECEMBER 31, 2000                                   COST          GAINS         LOSSES       VALUE
-----------------                                   ----          -----         ------       -----
                                                                    (In thousands)
<S>                                               <C>           <C>           <C>           <C>
HELD TO MATURITY:
Mortgage-backed securities                        $    529      $     --      $     (5)     $    524
U.S. government agency obligations                   4,997            --          (109)        4,888
Other debt securities                                  500            --            --           500
                                                  --------      --------      --------      --------
                                                  $  6,026      $     --      $   (114)     $  5,912
Total investment securities held to maturity      ========      ========      ========      ========


AVAILABLE FOR SALE:
Mortgage-backed securities                        $ 45,764      $     23      $   (645)     $ 45,142
U.S. government agency obligations                   4,344            26            (7)        4,363
Municipal securities                                17,856            --          (564)       17,292
Equity securities                                    1,933            --            --         1,933
Corporate bonds                                     29,536            --        (3,808)       25,728
Other debt securities                                  115            --            --           115
                                                  --------      --------      --------      --------
 Total investment securities available for sale   $ 99,548      $     49      $ (5,024)     $ 94,573
                                                  ========      ========      ========      ========
</TABLE>


     At December 31, 2001, Premier pledged $20,866,000 in investment securities
as collateral for customer repurchase agreements.


                                      47

<PAGE>

NOTE 4 - INVESTMENT SECURITIES - (CONTINUED)

     The amortized cost and estimated fair value of investment securities AFS
and HTM by contractual maturity at December 31, 2001 are shown in the following
table. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
penalties.

<TABLE>
<CAPTION>
                                          INVESTMENT SECURITIES     INVESTMENT SECURITIES
                                            HELD TO MATURITY         AVAILABLE FOR SALE
                                            ----------------         ------------------
                                         AMORTIZED    ESTIMATED    AMORTIZED     ESTIMATED
DECEMBER 31, 2001                          COST      FAIR VALUE      COST       FAIR VALUE
-----------------                          ----      ----------      ----       ----------
                                                         (In thousands)
<S>                                      <C>          <C>          <C>           <C>
Due in one year or less                  $     --     $     --     $   9,621     $  9,639
Due after one year through five years          --           --        16,584       16,614
Due after five years through ten years        500          500         5,923        5,934
Due after 10 years                             --           --        70,271       65,664
                                         --------     --------     ---------     --------
   Total                                 $    500     $    500     $ 102,399     $ 97,851
                                         ========     ========     =========     ========
</TABLE>


Proceeds from sales of investment securities available for sale are as follows.

FOR THE YEARS ENDED DECEMBER 31,                    2001          2000
--------------------------------                    ----          ----
                                                        (In thousands)
Proceeds                                          $ 29,569      $ 5,474
Gross gains                                             62            7
Gross losses                                            49            4


NOTE 5 - LOANS

     Loan categories and their respective balances are as follows.

DECEMBER 31,                                        2001          2000
-------------                                       ----          ----
                                                       (In thousands)
Real estate-farmland                             $     214      $     230
Real estate-construction                            15,911          4,395
Real estate-residential                             30,188         25,401
Real estate-multifamily                             15,011         13,667
Real estate-commercial                             208,412        161,675
Commercial                                          45,238         32,295
Consumer                                             1,092          1,782
                                                 ---------      ---------
   Total loans                                     316,066        239,445
Deferred loan fees                                  (1,373)          (861)
Allowance for loan losses                           (3,817)        (3,032)
                                                 ---------      ---------
Total loans, net                                 $ 310,876      $ 235,552
                                                 ==========     =========

     Premier generally lends in the Greater Delaware and Lehigh Valleys of
Pennsylvania and New Jersey with a majority of its borrowers living in
communities surrounding its branch offices. Most loans are collateralized in
part by real estate. Accordingly, lending activities could be affected by
changes in the general economy, the regional economy or real estate values.

                                       48

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 5 - LOANS - (CONTINUED)

     Non-accrual and impaired loans were one in the same at December 31, 2001
and 2000. Non-accrual/impaired loans were $2,687,000 at December 31, 2001
compared to no non-accrual/impaired loans at December 31, 2000. The average
recorded investment in non-accrual/impaired loans was $458,000 and $106,000 for
2001 and 2000, respectively.

     Interest income recognized on non-accrual/impaired loans was $51,000 in
2001. Foregone interest on non-accrual loans was $43,000 in 2001.

     Potential problem loans are those loans believed to require increased
supervision and review; and may, depending on the economic environment and other
factors, become non-performing assets in future periods. Potential problem loans
totaled $2,356,000 and $3,666,000 at December 31, 2001 and 2000, respectively.
Most of these loans are secured by real estate.


NOTE 6 - ALLOWANCE FOR LOAN LOSSES

     Activity in the allowance for loan losses is shown below.

DECEMBER 31,                                              2001          2000
-------------                                             ----          ----
                                                             (In thousands)
Balance at begining of year                             $ 3,032        $ 2,511
Charge-offs                                                 (33)            (7)
Provision for loan losses                                   818            528
                                                        -------        -------
Balance at end of year                                  $ 3,817        $ 3,032
                                                        =======        =======

NOTE 7 - PREMISES AND EQUIPMENT

     Premises and equipment, stated at cost less accumulated depreciation and
amortization, are summarized below.

DECEMBER 31,                                              2001           2000
-------------                                             ----           ----
                                                             (In thousands)
Building                                                $ 2,464        $ 2,434
Land                                                      1,061          1,002
Leasehold improvements                                      382            387
Furniture, fixtures and equipment                         2,087          2,454
                                                        -------        -------
Cost                                                      5,994          6,277
Accumulated depreciation and amortization                (1,396)        (1,424)
                                                        -------        -------
Carrying value                                          $ 4,598        $ 4,853
                                                        =======        =======


     Depreciation and amortization expenses on premises and equipment are
$515,000 and $459,000 for the years ended December 31, 2001, and 2000,
respectively.

     As of December 31, 2001 both the Bensalem branch and the Southampton branch
and operations center are leased. In addition, the land occupied by our
Montgomeryville branch is also leased. The Bensalem and Montgomeryville branches
opened in the fourth quarter of 2000. All leases include options for renewal.

                                       49

<PAGE>

                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7 - PREMISES AND EQUIPMENT - (CONTINUED)

     Required minimum annual rentals due on non-cancelable leases expiring after
one year were approximately $2,905,000 in the aggregate at December 31, 2001.
Future minimum payments under these leases are as follows.

                                                     FUTURE
                                                     MINIMUM
FOR YEARS ENDING DECEMBER 31,                       PAYMENTS
-----------------------------                       --------
                                                 (In thousands)
2002                                                 $   241
2003                                                     189
2004                                                     181
2005                                                     186
2006                                                     194
2007 and thereafter                                    1,914
                                                     -------
                                                     $ 2,905
                                                     =======

NOTE 8 - DEPOSITS

     Deposit categories and their respective balances and weighted average
interest rates are as follows:

<TABLE>
<CAPTION>

DECEMBER 31,                                         2001                                      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                      2.69%       $  58,826         16.42%     2.53%        $  25,690        8.47%
Money market                           2.32%          16,997          4.74%     5.37%           15,347        5.06%
Savings                                2.25%          44,059         12.30%     3.50%           40,682       13.41%
Time                                   5.31%         208,057         58.07%     6.50%          193,736       63.88%
                                       ----        ---------        ------      ----         ---------      ------
Total interest-bearing deposits        4.27%         327,939         91.53%     5.62%          275,455       90.82%
                                       ====                                     ====
Non-interest-bearing deposits                         30,343          8.47%                     27,838        9.18%
                                                   ---------        ------                   ---------      ------
Total deposits                                     $ 358,282        100.00%                  $ 303,293      100.00%
                                                   =========        ======                   =========      ======
</TABLE>

                                       50
<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - DEPOSITS - (CONTINUED)

     Time deposits mature as follows:

                                   AMOUNTS           AMOUNTS
                                  $100,000          LESS THAN
                                 OR GREATER          $100,000           TOTAL
                                 ----------         ---------           -----
                                                (In thousands)
2002                             $  39,979          $ 126,387         $ 166,366
2003                                 3,204             13,632            16,836
2004                                 2,203              8,477            10,680
2005                                   719              3,134             3,853
2006                                 7,897              2,375            10,272
2007 and thereafter                     --                 50                50
                                 ---------          ---------         ---------
                                 $  54,002          $ 154,055         $ 208,057
                                 =========          =========         =========

     Interest expense on deposits is as follows:

FOR THE YEARS ENDED DECEMBER 31,                       2001              2000
--------------------------------                       ----              ----
                                                            (In thousands)
Interest checking                                    $    809          $    560
Money market                                              624               329
Savings                                                 1,294             1,666
Time                                                   12,093            10,299
                                                     --------          --------
Total interest expense on deposits                   $ 14,820          $ 12,854
                                                     ========          ========

                                       51

<PAGE>

                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - BORROWINGS

<TABLE>
<CAPTION>
                                                                  MAXIMUM                             WEIGHTED
                                                                   AMOUNT             AVERAGE          AVERAGE
                                       TOTAL                    OUTSTANDING           AMOUNT          INTEREST
                                      BALANCE     WEIGHTED      AT MONTH END       OUTSTANDING          RATE
                                      END OF      AVERAGE        DURING THE         DURING THE       DURING THE
                                      PERIOD        RATE           PERIOD             PERIOD           PERIOD
                                      ------        ----           ------             ------           ------
                                                         (Dollars in thousands)
<S>                                 <C>             <C>          <C>                <C>                 <C>
DECEMBER 31, 2001
-----------------
Short-term borrowings               $   19,605      0.75%        $  25,692          $  18,894           2.91%
Long-term FHLB borrowings               30,000      5.85%           30,000             19,288           5.93%
                                    ----------      ----                             --------           -----
                                    $   49,605      3.83%                           $  38,182           4.44%
                                    ==========      ====                            =========           ====

DECEMBER 31, 2000
-----------------
Short-term borrowings               $   14,404      5.59%        $  58,807          $  38,193           6.05%
                                    ==========      ====                            =========           ====
</TABLE>

     At December 31, 2001 short-term borrowings were comprised entirely of
overnight borrowings from customers. At December 31, 2000 short-term borrowings
included $785,000 in overnight federal funds purchased and $13,619,000 in
overnight borrowings from customers. Long-term FHLB borrowings are fixed rate
and mature in 2008.

     All borrowings from the FHLB are secured by a blanket lien against all of
Premier's assets. In addition, the FHLB's collateral policies require borrowers
who exceed certain borrowing levels to deliver certain investment securities to
them as collateral. Under this policy, Premier was not required to deliver
investment securities as collateral to the FHLB at December 31, 2001. Customer
repurchase agreements are collateralized by investment securities in an amount
equal to or exceeding such borrowings. Premier controls investment securities
pledged as collateral for customer repurchase agreements.

     At December 31, 2001, Premier had a $6,000,000 unsecured federal funds line
of credit with its correspondent bank and a $74,898,000 borrowing limit with the
FHLB. At December 31, 2001, Premier had unused borrowing capacity of $6,000,000
and $37,798,000 with its correspondent bank and the FHLB, respectively.

                                       52

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10- SUBORDINATED DEBT

     Premier borrowed a total of $3,500,000 from other financial institutions
for the purpose of funding its continued growth and maintaining certain
regulatory capital ratios. These borrowings, which are unsecured, were issued on
two separate dates. Premier can prepay these notes with regulatory approval. The
terms of these borrowings are summarized below.

<TABLE>
<CAPTION>

   ISSUE       MATURITY                     INTEREST RATE       INTEREST RATE AT   INTEREST RATE AT
    DATE         DATE        AMOUNT        CHARACTERISTICS      DECEMBER 31, 2001  DECEMBER 31, 2000        REPAYMENT SCHEDULE
    ----         ----        ------        ---------------      -----------------  -----------------        ------------------
                                                    (Dollars in thousands)
  <S>       <C>        <C>              <C>                            <C>               <C>          <C>
  12/31/2001  12/31/2016    $ 2,000     adjusts quarterly based        6.13%               --         interest payable quarterly;
                                        on the LIBOR index plus                                       principal due at maturity.
                                        425 basis points.

   1/9/1997   1/12/2012     $ 1,500     adjusts annually based         7.29%              8.49%       interest payable monthly for
                                        on the 1 year Treasury                                        the first 10 years; principal
                                        index plus 240 basis                                          and interest payments begin in
                                        points.                                                       year 11 with full amortization
                                                                                                      by maturity.
</TABLE>

NOTE 11 - DERIVATIVE INSTRUMENTS

     PBI and its subsidiaries have limited involvement with derivative financial
instruments and currently use them only in relation to Premier'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 in place of a stated interest rate but, like other traditional
certificates of deposit, is insured by the FDIC to the extent provided by law.

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

     The notional amount of derivative contracts was $10,905,000 at December 31,
2001. The fair value of derivatives is included in "Other liabilities" and
approximated $2,055,000 at December 31, 2001. During 2001, approximately
$158,000 was recorded in other expense for net changes in the fair market value
of derivatives.

                                       53

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - EARNINGS PER SHARE

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

FOR THE YEAR ENDED DECEMBER 31,                       2001
------------------------------      -------------------------------------------
                                    (Dollars in thousands, except share data)

                                                                    PER SHARE
                                    NET INCOME        SHARES          AMOUNT
                                    ----------        ------          ------
Basic earnings per share             $  2,534        3,212,537      $   0.79
Effect of dilutive stock options           --          229,832         (0.05)
                                     --------        ---------      --------
Diluted earnings per share           $  2,534        3,442,369      $   0.74
                                     ========        =========      ========


FOR THE YEAR ENDED DECEMBER 31                        2000
------------------------------       -------------------------------------------
                                    (Dollars in thousands, except share data)

                                                                    PER SHARE
                                    NET INCOME        SHARES          AMOUNT
                                    ----------        ------          ------
Basic earnings per share             $  2,061        3,097,450      $   0.67
Effect of dilutive stock options           --          325,382         (0.07)
                                     --------        ---------      --------
Diluted earnings per share           $  2,061        3,422,832      $   0.60
                                     ========        =========      ========

     Basic earnings per share is calculated using the weighted average number of
shares outstanding after giving retroactive effect to the 5% common stock
dividend declared on February 17, 2000. Options to purchase 539,023 and 700,325
shares of common stock were outstanding at December 31, 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 were
anti-dilutive for all quarters of 2001 and, therefore, excluded from the
calculation of earnings per diluted common share for 2001.


NOTE 13 - INCOME TAXES

     The components of the provision for income taxes are as follows.

FOR THE YEARS ENDED DECEMBER 31,                2001       2000
--------------------------------                ----       ----
                                                (In thousands)
Current tax expense                           $ 1,192    $   863
Deferred income tax benefit                      (329)      (188)
                                              -------    -------
Income tax expense                            $   863    $   675
                                              =======    =======

                                       54

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - INCOME TAXES - (CONTINUED)

     At December 31, 2001 and 2000, the tax effects of temporary differences
that represent the significant portion of deferred tax assets and liabilities
are as follows.

<TABLE>
<CAPTION>

FOR THE YEARS ENDED DECEMBER 31,                                          2001                2000
--------------------------------                                          ----                ----
                                                                                 (In thousands)
<S>                                                                     <C>                  <C>
Deferred tax assets:
  Unrealized net loss on investment securities available for sale       $ 1,547              $ 1,692
  Allowance for loan loss                                                 1,298                1,031
  Non-accrued interest                                                       27                   --
  Depreciation                                                               13                   28
  Other                                                                      26                   --
                                                                        -------              -------
Total deferred tax assets                                                 2,911                2,751

Deferred tax liabilities:
  Depreciation                                                               --                  (26)
  Tax bad debt reserve                                                      (24)                 (22)
                                                                        -------              -------
Total deferred tax liabilities                                              (24)                 (48)

Net deferred tax asset                                                  $ 2,887              $ 2,703
                                                                        =======              =======
</TABLE>

     The realizability of deferred tax assets is dependent upon a variety of
factors, including the generation of future taxable income, the existence of
taxes paid and recoverable, the reversal of deferred tax liabilities and tax
planning strategies. Based upon these and other factors, it is believed more
likely than not that the benefits of these deferred tax assets will be realized.

     A reconciliation of income tax expense in the accompanying statements of
operations with the amount computed by applying the statutory federal income tax
rate to earnings before income taxes is as follows.

FOR THE YEARS ENDED DECEMBER 31,                         2001           2000
--------------------------------                         ----           ----
                                                           (In thousands)
Tax expense at 34% rate                               $  1,155        $   930
Interest from tax exempt loans and investments            (305)          (268)
Other, net                                                  13             13
                                                      --------        -------
Income tax expense                                    $    863        $   675
                                                      ========        =======

NOTE 14 - EMPLOYEE BENEFIT PLANS

     Premier maintains a defined contribution savings plan covering
substantially all employees. The plan allows eligible employees to make
contributions by salary reduction pursuant to the provisions of 401(k) of the
Internal Revenue Code. Approximately $88,000 and $81,000 in discretionary
matching 401(k) contributions were expensed in 2001 and 2000, respectively.

                                       55

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - STOCK OPTION PLAN

     The number of options and strike prices in the following discussion are
provided after giving retroactive effect to the 5% common stock dividend
declared on February 17, 2000 and paid on March 10, 2000. In connection with the
initial stock offering, 486,497 options were issued to purchase common stock to
certain incorporators, directors, officers, and institutional investors. The
options are exercisable at a price of $2.89 per share and expire April 23, 2002.
The options are transferable and contain certain customary anti-dilution clauses
in the case of certain events. At December 31, 2001 and 2000, there were 234,488
and 397,446 of such options outstanding, respectively.

     In addition, a stock option program was adopted in 1995 whereby up to
315,000 options may be granted to employees or directors based on a
discretionary incentive program. The exercise price of options granted under
this program will be at the fair value of common stock as of the grant date.
Options expire ten years from the date of grant. Options granted under this
program, with the exception of 85,050 options granted in 1997, were vested
immediately. The 85,050 options granted in 1997 were fully vested in 2001. As of
December 31, 2001 a total of 306,674 options were granted under this program. At
December 31, 2001 and 2000 there were 304,535 and 302,879 of such options
outstanding, respectively.

     A summary of stock option activity for the years ended December 31, 2001
and 2000 is as follows.

FOR THE YEARS ENDED DECEMBER 31,              2001                   2000
--------------------------------    ---------------------   --------------------
                                                 WEIGHTED              WEIGHTED
                                                 AVERAGE               AVERAGE
                                                 EXERCISE              EXERCISE
                                     SHARES       PRICE      SHARES     PRICE
                                     ------       -----      ------     -----
Outstanding at beginning of year     700,325     $  4.22    688,326    $  3.72
Granted                                2,600        6.25     38,333      12.26
Exercised                           (163,902)       2.89    (26,334)      2.89
                                    ---------    -------    --------   -------
Outstanding at end of of year        539,023     $  4.63    700,325    $  4.22
                                    ========     =======    ========   =======
Options exercisable at end of year   539,023                666,305

                                     56

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - STOCK OPTION PLAN - (CONTINUED)

     The following summarizes information about stock options outstanding and
exercisable at December 31, 2001 and 2000.

<TABLE>
<CAPTION>

                                                     DECEMBER 31, 2001
                             -------------------------------------------------------------------
                                        OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                             ----------------------------------------   ------------------------
                                              WEIGHTED-
                                               AVERAGE      WEIGHTED-                  WEIGHTED-
                                              REMAINING      AVERAGE                    AVERAGE
                                NUMBER       CONTRACTUAL     EXERCISE       NUMBER      EXERCISE
 RANGE OF EXERCISE PRICES    OUTSTANDING  LIFE (IN YEARS)    PRICE      EXERCISABLE     PRICE
 ------------------------    -----------  ---------------    -----      -----------     -----
      <S>                      <C>              <C>          <C>          <C>           <C>
           $2.89                234,488          0.33         $2.89        234,488       $2.89
            3.50                 12,502          4.00          3.50         12,502        3.50
            4.76                221,502          5.00          4.76        221,502        4.76
            5.71                 15,933          6.00          5.71         15,933        5.71
            6.25                  2,600          9.00          6.25          2,600        6.25
           10.48                 13,665          7.00         10.48         13,665       10.48
           12.26                 38,333          8.00         12.26         38,333       12.26
          ------                -------          ----         -----        -------       -----
      $2.89 to $12.26           539,023          3.26         $4.63        539,023       $4.63
      ===============           =======          ====         =====        =======       =====


</TABLE>

<TABLE>
<CAPTION>

                                                    DECEMBER 31, 2000
                             -------------------------------------------------------------------
                                        OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                             ----------------------------------------   ------------------------
                                               WEIGHTED-
                                               AVERAGE      WEIGHTED-                  WEIGHTED-
                                              REMAINING      AVERAGE                    AVERAGE
                                NUMBER       CONTRACTUAL     EXERCISE       NUMBER      EXERCISE
 RANGE OF EXERCISE PRICES    OUTSTANDING  LIFE (IN YEARS)    PRICE      EXERCISABLE     PRICE
 ------------------------    -----------  ---------------    -----      -----------     -----
      <S>                      <C>              <C>          <C>          <C>           <C>
           $2.89               397,446           1.33         $2.89        397,446       $2.89
            3.50                12,911           5.00          3.50         12,911        3.50
            4.76               222,037           6.00          4.76        188,017        4.76
            5.71                15,933           7.00          5.71         15,933        5.71
           10.48                13,665           8.00         10.48         13,665       10.48
           12.26                38,333           9.00         12.26         38,333       12.26
           -----               -------           ----         -----        -------       -----
      $2.89 to $12.26          700,325           3.56         $4.22        666,305       $4.19
      ===============          =======           ====         =====        =======       =====

</TABLE>

     Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" encourages, but does not require, the adoption of fair
value accounting for stock-based compensation to employees. PBI elected not to
adopt the fair value accounting provisions of Statement No. 123 and instead
applies APB Opinion 25 and related interpretation in accounting for the plan.
Pro-forma disclosures of Statement No. 123 have been provided.

     The fair value of each option granted using the Black Scholes options
pricing model was $3.36 in 2001 and $7.50 in 2000. Significant assumptions used
in the model for 2001 and 2000 grants include: a weighted average risk-free rate
of return of 5.25% in both 2001 and 2000; volatility of 35% in both 2001 and
2000; ten year expected option life for both 2001 and 2000; and no dividends for
either 2001 or 2000. Had the grant date fair value provisions of Statement No.
123 been adopted, PBI would have recognized additional compensation expense of
$121,000 and $371,000 in 2001 and 2000, respectively.

                                       57

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - STOCK OPTION PLAN - (CONTINUED)

     As a result, net income and earnings per share would have been reduced to
the pro-forma amounts indicated below.

FOR THE YEARS ENDED DECEMBER 31,             2001                 2000
---------------------------------            ----                 ----
                                       (In thousands, except per share data)
Net income
          As reported                     $  2,534             $  2,061
          Pro forma                          2,413                1,690

Basic earnings per share
          As reported                     $   0.79             $   0.67
          Pro forma                           0.75                 0.55

Diluted earnings per share
          As reported                     $   0.74             $   0.60
          Pro forma                           0.70                 0.49


NOTE 16 - COMMITMENTS AND CONTINGENCIES

     Premier is a party to financial instruments with off-balance sheet risk in
the normal course of business. These financial instruments include commitments
to extend credit and stand-by letters of credit to meet the financing needs of
its customers. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated
statements of financial condition. The contract or notional amounts of those
instruments reflect Premier's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument.

     Financial instruments whose contract amounts represent credit risk at
December 31, 2001 and 2000 were as follows.

                                    CONTRACT OR NOTIONAL AMOUNT
                                  -----------------------------------
DECEMBER 31,                           2001              2000
------------                           -----             -----
                                            (In thousands)
Commitments to extend credit        $ 42,397           $ 32,340
Stand-by letters of credit             3,242              3,006

                                       58

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - COMMITMENTS AND CONTINGENCIES - (CONTINUED)

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any conditions established in the contract. Premier
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary upon extension of credit, is based
on management's credit evaluation of the counter-party. Collateral held varies
but may include inventory, property, plant and equipment, and income producing
commercial properties. The commitments at December 31, 2001 were principally to
originate commercial loans and other loans secured by real estate. At December
31, 2001, fixed and adjustable/variable rate commitments totaled $7,857,000 and
$34,540,000, respectively.

     Premier issues stand-by letters of credit to guarantee the performance of a
customer to a third party. Most guarantees extend for one year or less. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.

     The amount of collateral received on loan commitments and on stand-by
letters of credit is dependent upon the individual transaction and the
creditworthiness of the customer.

Concentrations of Credit Risk

     Premier generally lends in the Greater Delaware and Lehigh Valleys of
Pennsylvania and New Jersey with a majority of its borrowers living in
communities surrounding its branches. The majority of the loan portfolio is
secured by residential and commercial real estate. Accordingly, the primary
concentration of credit risk is related to the real estate market in these
areas. The ultimate collectibility of loans is susceptible to changes in local
market conditions, and therefore, dependent upon the local economic environment.
In addition, loan concentrations are also considered to exist when there are
amounts loaned or committed to be loaned to a multiple number of borrowers
engaged in similar activities which would cause their ability to meet
contractual obligations to be similarly impacted by economic or other
conditions. The loan portfolio contains many borrowers who are employed in
various professions such as the medical, dental, legal, restaurant, hotel, and
real estate professions.

     Premier's investment portfolio includes a concentration of corporate bonds
issued by other financial institutions. Corporate bonds totaled $32,322,000 or
33% of the investment portfolio at December 31, 2001.

Legal Proceedings

     As of December 31, 2001, there were no known material legal proceedings
pending against PBI, its subsidiaries or its property. In addition, no material
proceedings are known to be contemplated by governmental authorities against
PBI, its subsidiaries or its property.


NOTE 17 - RELATED PARTY TRANSACTIONS

     As a matter of policy, Premier does not extend credit to employees,
officers or directors.

     Premier incurred $111,000 and $115,000 in expenses for management and
financial consulting services rendered by the Chairman of the Board of Directors
in 200l and 2000, respectively.

                                       59

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     PBI is required to disclose the estimated fair values of financial
instruments, whether or not recognized in the balance sheet. For PBI, as for
most financial institutions, substantially all of our assets and liabilities are
considered financial instruments.

     Estimates of fair value are made at a specific point in time, based upon,
where available, relevant market prices and information about the financial
instrument. Such estimates do not include any premium or discount that could
result from offering for sale at one time the entire holdings of a particular
financial instrument. For a substantial portion of financial instruments, no
quoted market exists. Therefore, estimates of fair value are necessarily based
on a number of significant assumptions regarding the amount and timing of
estimated future cash flows, which are discounted to reflect varying degrees of
risk. Given the uncertainties surrounding these assumptions, the reported fair
values may not represent actual values of financial instruments that could have
been realized as of year end or that will be realized in the future. Use of
different assumptions or methodologies is likely to result in significantly
different fair value estimates.

     The fair value of non-interest-bearing demand deposits, interest checking
accounts, money market accounts and savings accounts is assumed equal to the
carrying amount. This approach to estimating fair value excludes the significant
benefit that results from the low-cost funding provided by such deposit
liabilities, as compared to alternative sources of funding. As a consequence,
the values below distort the actual fair value of a banking organization that is
a going concern.

     The estimated fair values and carrying amounts of financial assets and
liabilities are summarized as follows.

<TABLE>
<CAPTION>

                                       DECEMBER 31, 2001          DECEMBER 31, 2000
                                       -----------------          -----------------
                                     ESTIMATED     CARRYING     ESTIMATED      CARRYING
                                     FAIR VALUE     AMOUNT      FAIR VALUE      AMOUNT
                                     ----------     ------      ----------      ------
                                                       (In thousands)
<S>                                  <C>          <C>            <C>          <C>
FINANCIAL ASSETS:
 Cash and due from banks             $  14,383    $  14,383      $   7,970    $   7,970
 Federal funds sold                     14,137       14,137             --           --
 Interest-bearing deposits               1,084        1,084             56           56
 Investment securities:
   Available for sale                   97,851       97,851         94,573       94,573
   Held to maturity                        500          500          5,912        6,026
 Net loans                             335,966      310,876        232,246      235,552
 Accrued interest receivable             2,939        2,939          2,517        2,517


FINANCIAL LIABILITIES:
 Deposits with no stated maturities  $ 150,225    $ 150,225      $ 109,557    $ 109,557
 Deposits with stated maturities       210,554      208,229        195,528      193,736
 Borrowings                             50,120       49,605         14,402       14,404
 Subordinated debt                       3,505        3,500          1,500        1,500
 Accrued interest payable                4,554        4,554          4,127        4,127
 Derivative financial instruments        2,055        2,055             --           --
</TABLE>

                                       60

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 18 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

     The following methods and assumptions were used to estimate the fair value
of each major classification of financial instruments at December 31, 2001 and
2000.

     Cash and due from banks, Federal funds sold and Interest-bearing deposits:
Current carrying amounts approximate estimated fair values.

     Investment securities: Current quoted market prices were used to estimate
fair value.

     Net loans and Loans held for sale: Fair values were estimated using the
present value of the estimated cash flows, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit quality.

     Accrued interest receivable and Accrued interest payable: Current carrying
amounts approximate estimated fair values.

     Deposit liabilities: The fair value of deposits with no stated maturity
(i.e., demand deposits, interest checking accounts, money market accounts and
savings accounts) are by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). Deposits with a stated
maturity (time deposits), excluding IPCD's, have been valued using the present
value of cash flows discounted at rates approximating the current market for
similar deposits. The fair value of IPCD's was reported at face value net of the
estimated fair value of embedded derivatives. Premier obtains estimated fair
values of embedded derivatives from a third party financial institution.

     Borrowings: Borrowings have been valued using the present value of cash
flows discounted at rates approximating the current market for similar
liabilities.

     Subordinated debt: Fair values were estimated using the present value of
the estimated cash flows using interest rates currently being offered for
similar liabilities.

     Derivative Instruments: Derivative instruments are used only in relation to
Premier's Index Powered SM Certificate of Deposit (IPCD) product. These
derivatives are carried at fair value in accordance with Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended.
Premier obtains estimated fair values from a third party financial institution.

     Off-balance-sheet instruments: Off-balance-sheet instruments are primarily
comprised of loan commitments that are generally priced at market at the time of
funding. Fees on commitments to extend credit and stand-by letters of credit are
deemed to be immaterial and these instruments are expected to be settled at face
value or expire unused. It is impractical to assign any fair value to these
instruments. At December 31, 2001 and 2000 loan commitments were $42,397,000 and
$32,340,000, respectively. Stand-by letters of credit were $3,242,000 and
$3,006,000 at December 31, 2001 and 2000, respectively.

                                       61

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19 - PARENT COMPANY FINANCIAL INFORMATION

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,                                                      2001           2000
------------                                                      ----           ----
                                                                    (In thousands)
Assets
<S>                                                             <C>            <C>
Cash on deposit with subsidiary bank                            $     91       $  1,359
Investment securities available for sale                              --          1,844
Investment in subsidiaries                                        29,562         23,269
Deferred issuance costs on capital securities                        424            440
Accrued interest receivable                                           10             52
Other                                                                243            239
                                                                --------       --------
Total assets                                                    $ 30,330       $ 27,203
                                                                ========       ========
Liabilities and shareholders' equity
Borrowings from subsidiary trust                                $ 10,310       $ 10,310
Accrued interest payable                                             334            334
Other                                                                 77            104
                                                                --------       --------
  Total liabilities                                               10,721         10,748

Shareholders' equity
Common stock                                                       1,070          1,025
Additional paid-in capital                                        12,085         11,792
Retained earnings                                                  9,455          6,921
Accumulated other comprehensive loss                              (3,001)        (3,283)
                                                                --------       --------
   Total shareholders' equity                                     19,609         16,455

Total liabilities and shareholders' equity                      $ 30,330       $ 27,203
                                                                ========       ========
CONDENSED STATEMENT OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,                                  2001           2000
--------------------------------                                  -----          -----
                                                                   (In thousands)
Interest income on investment securities available for sale     $     88       $    145
Interest income on capital securities of subsidiary trust             27             27
Equity in undistributed income of subsidiaries                     3,556          3,072
                                                                --------       --------
Total income                                                       3,671          3,244
                                                                --------       --------

Interest expense                                                     884            884
Other expense                                                        253            299
                                                                --------       --------
Total expense                                                      1,137          1,183
                                                                --------       --------

Income before income tax                                           2,534          2,061
Income tax expense                                                    --             --
                                                                --------       --------
Net income                                                      $  2,534       $  2,061
                                                                ========       ========
</TABLE>

                                       62

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 19 - PARENT COMPANY FINANCIAL INFORMATION - (CONTINUED)

     CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

FOR THE YEARS ENDED DECEMBER 31,                                  2001           2000
--------------------------------                                  -----          -----
                                                                     (In thousands)
<S>                                                             <C>             <C>
Cash flows from operating activities:
Net income                                                      $  2,534        $ 2,061
Deduct items not affecting cash flows:
   Equity in undistributed income of subsidiaries                 (3,556)        (3,072)
   Amortization of deferred issuance costs on capital securities      16             16
   Increase in accrued interest receivable                           (20)           (22)
   (Increase) decrease in other assets                                (5)            23
   (Decrease) increase in other liabilities                          (27)            36
                                                                --------        -------
Net cash used in operating activities                             (1,058)          (958)

Cash flows from investing activities:
Capital investment in subsidiary bank                               (500)            --
                                                                --------        -------
Net cash used in investing activities                               (500)            --

Cash flows from financing activities:
Proceeds from exercised stock options                                290             76
                                                                --------        -------
Net cash provided by financing activities                            290             76

Net decrease in cash and cash equivalents                         (1,268)          (882)

Cash and cash equivalents at beginning of year                     1,359          2,241
                                                                --------        -------
Cash and cash equivalents at end of year                        $     91        $ 1,359
                                                                ========        =======
</TABLE>


NOTE 20- REGULATORY RESTRICTIONS

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

                                       63

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 - REGULATORY RESTRICTIONS - (CONTINUED)

     PBI and Premier must maintain certain minimum capital amounts and ratios to
be considered adequately capitalized as set forth in the table below. Management
believes that PBI and Premier met all relevant capital adequacy requirements at
December 31, 2001 and 2000. Management also believes that PBI and Premier are
"well capitalized" at December 31, 2001 and 2000 under the regulatory framework
for prompt corrective action provisions of Section 38 of the Federal Deposit
Insurance Act.

     To be categorized as "well capitalized," PBI and Premier must maintain the
minimum ratios listed in the table below. Capital amounts and ratios are
presented in the following table.

<TABLE>
<CAPTION>
                                                                          REQUIRED TO BE             REQUIRED TO BE
                                                    ACTUAL           "ADEQUATELY CAPITALIZED"      "WELL CAPITALIZED"
                                                    ------            ----------------------        ----------------
                                            AMOUNT        RATIO         AMOUNT       RATIO       AMOUNT          RATIO
                                            -------       -----         -------      -----       -------         -----
                                                                   (Dollars in thousands)
DECEMBER 31, 2001
-----------------
<S>                                        <C>           <C>         <C>             <C>       <C>              <C>
Total capital to risk-weighted assets
   Premier Bancorp, Inc.                 $    39,927     10.62%      $    30,078     8.00%     $    37,598      10.00%
   Premier Bank                               39,569     10.54%           30,044     8.00%          37,555      10.00%
Tier 1 capital to risk-weighted assets
   Premier Bancorp, Inc.                      30,147      8.02%           15,039     4.00%          22,559       6.00%
   Premier Bank                               32,252      8.59%           15,022     4.00%          22,533       6.00%
Tier 1 capital to average assets
   Premier Bancorp, Inc.                      30,147      6.83%           17,668     4.00%          22,085       5.00%
   Premier Bank                               32,252      7.32%           17,630     4.00%          22,038       5.00%

DECEMBER 31, 2000
-----------------
Total capital to risk-weighted assets
   Premier Bancorp, Inc.                 $    34,272     12.04%      $    22,763     8.00%     $    28,454      10.00%
   Premier Bank                               30,681     10.88%           22,566     8.00%          28,208      10.00%
Tier 1 capital to risk-weighted assets
   Premier Bancorp, Inc.                      26,319      9.25%           11,382     4.00%          17,073       6.00%
   Premier Bank                               26,148      9.27%           11,283     4.00%          16,925       6.00%
Tier 1 capital to average assets
   Premier Bancorp, Inc.                      26,319      7.41%           14,201     4.00%          17,751       5.00%
   Premier Bank                               26,148      7.42%           14,105     4.00%          17,632       5.00%

 </TABLE>


                                       64

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 - DIVIDEND POLICY

     PBI's ability to pay dividends is dependent upon its ability to obtain
dividends from its subsidiaries, principally Premier. PBI's future dividend
policy is subject to the discretion of its Board of Directors and will depend
upon a number of factors, including future earnings, financial conditions, cash
needs, and general business conditions. Holders of common stock will be entitled
to receive dividends as and when declared by PBI's Board of Directors out of
funds legally available for that purpose.

     In accordance with the Pennsylvania Banking Code, Premier can only declare
and pay dividends out of its accumulated net earnings which were $14,310,000 at
December 31, 2001. Cash dividends require Federal Reserve Board approval if the
total of all cash dividends declared in any calendar year, including the
proposed cash dividend, exceeds the total of Premier's net profits for that year
plus its retained net profits from the preceding two years less any required
transfers to surplus or to a fund for the retirement of preferred stock, if any.
The Federal Deposit Insurance Act generally prohibits all payments of dividends
by any bank which is in default of any FDIC assessment. As of December 31, 2001
and 2000, Premier was not in default of any FDIC assessments.


NOTE 22 - CAPITAL SECURITIES

     On August 11, 1998, PBI's subsidiary, PBI Capital Trust, issued $10,000,000
of 8.57% capital securities due August 15, 2028. The trust is a Delaware
statutory business trust. PBI is the sole owner of the trust. The trust used the
proceeds from the capital securities to acquire $10,000,000 in 8.57% junior
subordinated deferrable interest debentures issued by PBI. The junior
subordinated debentures are the sole assets of the trust, and payments under the
junior subordinated debentures are the sole revenue of the trust. PBI Capital
Trust used the proceeds from the sale of the junior subordinated debentures for
general corporate purposes, including, but not limited to, investments in and
advances to Premier, branch expansion, and funding loans. Proceeds from the
capital securities provide PBI with additional Tier 1 and Tier 2 capital.

     Capital securities are reported in the Consolidated Statements of Financial
Condition under the caption "Corporation-obligated mandatorily redeemable
capital securities of subsidiary trust holding solely junior subordinated
debentures of the corporation." Interest payments on these securities are
reported in the Consolidated Statements of Operations under the caption
"Minority interest in expense of subsidiary."

                                       65

<PAGE>


                              PREMIER BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 23 - OTHER COMPREHENSIVE INCOME (LOSS)

     Other comprehensive income components and their related tax benefit/expense
are as follows.

<TABLE>
<CAPTION>

                                                                           BEFORE-TAX      TAX BENEFIT      NET-OF-TAX
FOR THE YEAR ENDED DECEMBER 31, 2001                                         AMOUNT         (EXPENSE)         AMOUNT
------------------------------------                                         ------         ---------         ------
                                                                                        (In thousands)
<S>                                                                          <C>             <C>              <C>
Unrealized gains on investment securities available for sale
   Unrealized holding gains arising during the period                        $   440         $  (149)         $   291
   Less: reclassification adjustment for gains included in net income            (13)              4               (9)
                                                                             -------         -------          -------
Other comprehensive income                                                   $   427         $  (145)         $   282
                                                                             =======         =======          =======
</TABLE>


<TABLE>
<CAPTION>
                                                                           BEFORE-TAX      TAX BENEFIT      NET-OF-TAX
FOR THE YEAR ENDED DECEMBER 31, 2000                                         AMOUNT         (EXPENSE)         AMOUNT
------------------------------------                                         ------         ---------         ------
                                                                                        (In thousands)
<S>                                                                          <C>             <C>              <C>
Unrealized gains on investment securities available for sale
   Unrealized holding gains arising during the period                        $ 2,438         $  (828)         $ 1,610
   Less: reclassification adjustment for gains included in net income             (3)              1               (2)
                                                                             -------         -------          -------
Other comprehensive income                                                   $ 2,435         $  (827)         $ 1,608
                                                                             =======         =======          =======
</TABLE>

                                       66

<PAGE>


ITEM 8 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

     None.

                                    PART III


ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT

     The information required by this Item, relating to directors, executive
officers and control persons is set forth under the sections captioned
"Directors and Executive Officers," "Information as to Nominees and Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance" of the
Registrant's definitive Proxy Statement to be used in connection with the 2002
Annual Meeting of Shareholders, which sections are incorporated herein by
reference.


ITEM 10 - EXECUTIVE COMPENSATION

     The information required by Item 10 is incorporated by reference to the
information appearing under the caption "Executive Compensation" in the
Registrant's definitive Proxy Statement to be used in connection with the 2002
Annual Meeting of Shareholders.


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 11 is incorporated by reference to the
information appearing under the caption "Beneficial Ownership by Directors,
Nominees and Officers" in the Registrant's definitive Proxy Statement to be used
in connection with the 2002 Annual Meeting of Shareholders.


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 12 is incorporated by reference to the
information appearing under the caption "Certain Relationships and Related
Transactions" in the Registrant's definitive Proxy Statement to be used in
connection with the 2002 Annual Meeting of Shareholders.

                                       67

<PAGE>



ITEM 13 - EXHIBITS LIST AND REPORTS ON FORM 8-K

(a)  1.   The consolidated financial statements listed on the index set forth in
          Item 7 of this Annual Report on Form 10-KSB are filed as part of this
          Annual Report.

     2.   Financial Statement Schedules
          All schedules are omitted because they are either not applicable, the
          data are not significant or the required information is shown in the
          financial statements or the notes thereto or elsewhere herein.

     3.   Exhibits
          The following exhibits are incorporated by reference herein or annexed
          to this Form 10-KSB:

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

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

          10.1 Premier Bank's 1995 Incentive Stock Option Plan (Incorporated by
               reference to Exhibit 99.6 to PBI's Registration Statement No.
               333-34243 on Form S-4 filed with the SEC on August 22,1997 and
               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 PBI's 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 PBI's 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 PBI's Quarterly Report on Form 10-QSB filed with
               the SEC on November 13, 1998).

          11   Statement re: Computation of Earnings per share (Included at Note
               12 to the 2001 Consolidated Financial Statements).

          21   Subsidiaries of the Registrant.

          23   Consent of Independent Auditors.


(b)  Reports on Form 8-K
     None.

                                       68

<PAGE>


SIGNATURES

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

<TABLE>
<CAPTION>

Premier Bancorp, Inc.

<S>                                         <C>                                         <C>
By: /s/ John C. Soffronoff                  President, Chief Executive Officer,         March 20, 2002
----------------------------------------    (Principal Executive Officer), Director
John C. Soffronoff


By: /s/ Bruce E. Sickel                     Chief Financial Officer, (Principal         March 20, 2002
----------------------------------------    Financial Officer), Director
Bruce E. Sickel


By: /s/ Joanne M. Calibeo                   Controller (Principal Accounting Officer)   March 20, 2002
---------------------------------------
Joanne M. Calibeo


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.


By: /s/ John C. Soffronoff                  President, Chief Executive Officer,         March 20, 2002
----------------------------------------    (Principal Executive Officer), Director
John C. Soffronoff


By: /s/ Clark S. Frame                      Chairman of the Board, Director             March 20, 2002
----------------------------------------
Clark S. Frame


By: /s/ Bruce E. Sickel                     Chief Financial Officer, (Principal         March 20, 2002
----------------------------------------    Financial Officer), Director
Bruce E. Sickel


By: /s/ Barry J. Miles, Sr.                 Vice Chairman of the Board, Director        March 20, 2002
----------------------------------------
Barry J. Miles, Sr.


By: /s/ Daniel E. Cohen                     Director                                    March 20, 2002
----------------------------------------
Daniel E. Cohen


By: /s/ John J. Ginley                      Senior Lending Officer, Director            March 20, 2002
----------------------------------------
John J. Ginley


By: /s/ Dr. Thomas E. Mackell               Director                                    March 20, 2002
----------------------------------------
Dr. Thomas E. Mackell


By: /s/ Dr. Daniel A. Nesi                  Director                                    March 20, 2002
----------------------------------------
Dr. Daniel A. Nesi


By: /s/ Neil W. Norton                      Director                                    March 20, 2002
----------------------------------------
Neil W. Norton


By: /s/ Thomas M. O'Mara                    Director                                    March 20, 2002
----------------------------------------
Thomas M. O'Mara


By:                                         Director                                    March __, 2002
----------------------------------------
Michael J. Perrucci


By: /s/ Brian R. Rich                       Director                                    March 20, 2002
----------------------------------------
Brian R. Rich

                                       69

<PAGE>

By: /s/ Ezio U. Rossi                       Director                                    March 20, 2002
----------------------------------------
Ezio U. Rossi


By: /s/ Richard F. Ryon                     Director                                    March 20, 2002
----------------------------------------
Richard F. Ryon


By: /s/ Gerald Schatz                       Director                                    March 20, 2002
----------------------------------------
Gerald Schatz


By: /s/ Irving N. Stein                     Director                                    March 20, 2002
----------------------------------------
Irving N. Stein


By: /s/ Thomas P. Stitt                     Director                                    March 20, 2002
----------------------------------------
Thomas P. Stitt


By: /s/ HelenBeth Garofalo Vilcek           Director                                    March 20, 2002
---------------------------------
HelenBeth Garofalo Vilcek


By: /s/ John A. Zebrowski                   Director                                    March 20, 2002
----------------------------------------
John A. Zebrowski
</TABLE>

                                       70

<PAGE>