<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q/A

(Mark One)

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

                  For the quarterly period ended June 30, 2003

                                       or

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

For the transition period from __________________ to _________________

                         Commission File Number 0-49952

                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


DELAWARE                                                             06-1504091
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation                  (I.R.S. Employer
or organization)                                            Identification No.)


12 E. BROAD STREET, HAZLETON, PENNSYLVANIA                                18201
--------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)


                                 (570) 459-3700
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                 Not Applicable
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

                                                      Yes   X    No
                                                          -----     -----

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).

                                                      Yes        No   X
                                                          -----     -----

         The Registrant had 4,176,593 shares of Common Stock outstanding as of
August 19, 2003.

                                       1

<PAGE>


Introductory Note:

This Form 10-Q/A is being filed to restate the financial results of Northeast
Pennsylvania Financial Corp. (the "Company"). Such restatement reflects the
further correction of accounting errors that were discovered in September 2003.
For other Items of Form 10-Q not included in this amendment, see the Form 10-Q
for June 30, 2003 as initially filed on August 19, 2003.

See Footnote 2 to the unaudited Consolidated Financial Statements which
describes the effects of the restatement on the current and prior
periods presented. In addition, the Company has prepared a revised Management
Discussion and Analysis of Financial Condition and Results of Operations for the
periods presented to reflect the changes made to the unaudited Consolidated
Financial Statements.

This Form 10-Q/A speaks as of June 30, 2003; except where otherwise specifically
indicated. The information subsequent to June 30, 2003 included in this Form
10-Q/A is presented for the convenience of the reader.









                                       2

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item
No.
---                                                                                                    Page
                                                                                                      Number
                                                                                                      ------
<S>       <C>                                                                                         <C>
PART  I - CONSOLIDATED FINANCIAL INFORMATION

Item 1   CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Statements of Financial Condition at
         June 30, 2003 and September 30, 2002 (unaudited, as restated)...............................    4

         Consolidated Statements of Operations for the Three and Nine Months
         Ended June 30, 2003 and 2002 (unaudited, as restated).......................................    5

         Consolidated Statements of Comprehensive Income for the Three and Nine
         Months Ended June 30, 2003 and 2002 (unaudited, as restated)................................    6

         Consolidated Statements of Cash Flows for the Nine Months Ended
         June 30, 2003 and 2002 (unaudited, as restated).............................................    7

         Notes to Consolidated Financial Statements (unaudited, as restated).........................    9

Item 2   Management Discussion and Analysis of Financial Condition
         and Results of Operations...................................................................   25

Item 4   Controls and Procedures.....................................................................   32

Part II - OTHER INFORMATION

Item 6   Exhibits and Reports on Form 8-K............................................................   33

Signatures
</TABLE>









                                       3

<PAGE>
                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       As Restated(1)     As Restated(1)
                                                                                          June 30,        September 30,
                                                                                            2003               2002
                                                                                     ----------------    ---------------
                                                                                                (in thousands)
<S>                                                                                  <C>                 <C>
ASSETS
      Cash and cash equivalents                                                      $         38,740    $        25,302
      Investment securities available for sale                                                295,980            327,886
      Investment securities held to maturity (estimated fair
          Market value of $3,624 at June 30, 2003 and                                           3,555              3,652
          $3,707 at September 30, 2002)
      Loans (less allowance for loan loss of $5,748 at
          June 30, 2003 and $5,449 at September 30, 2002)                                     493,930            489,186
      Accrued interest receivable                                                               3,792              4,298
      Assets acquired through foreclosure                                                         641                547
      Premises and equipment, net                                                              12,622             12,840
      Goodwill                                                                                  3,655              3,655
      Intangible assets                                                                         8,804              9,093
      Bank-owned life insurance                                                                10,749             10,303
      Other assets                                                                             12,585             15,183
                                                                                     ----------------    ---------------

               TOTAL ASSETS                                                          $        885,053    $       901,945
                                                                                     ================    ===============

LIABILITIES
      Deposits                                                                                578,765            606,412
      Federal Home Loan Bank advances                                                         208,406            208,421
      Other borrowings                                                                          1,061              3,184
      Trust-preferred debt                                                                     22,000              7,000
      Advances from borrowers for taxes and insurance                                           1,639                852
      Accrued interest payable                                                                  1,557              1,458
      Other liabilities                                                                         7,980              9,493
                                                                                     ----------------    ---------------
               TOTAL LIABILITIES                                                              821,408            836,820
                                                                                     ----------------    ---------------

STOCKHOLDERS' EQUITY
      Preferred stock ($.01 par value; 2,000,000 authorized shares;
       none issued)                                                                                 -                  -
      Common stock, $.01 par value; 16,000,000 shares authorized,
       6,427,350 shares issued                                                                     64                 64
      Additional paid-in capital                                                               61,956             62,047
      Retained earnings - substantially restricted                                             34,338             35,411
      Accumulated other comprehensive income, net                                               2,937              3,444
      Common stock acquired by stock benefit plans                                             (4,738)            (4,156)
      Treasury stock, at cost (2,250,756 shares at June 30, 2003 and 2,301,566
        shares at September 30, 2002)                                                         (30,912)           (31,685)
                                                                                     ----------------    ---------------
               TOTAL STOCKHOLDERS' EQUITY                                                      63,645             65,125
                                                                                     ----------------    ---------------

               TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $        885,053    $       901,945
                                                                                     ================    ===============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.
(1) See Footnote (2) which describes the restatement effects.

                                       4

<PAGE>
                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                              Three Months Ended                     Nine Months Ended
                                                                   June 30,                              June 30,
                                                              ------------------                     -----------------
                                                                As Restated(1)                        As Restated(1)
                                                                -----------                           -----------
                                                           2003                2002              2003               2002
                                                           ----                ----              ----               ----
                                                                        (in thousands, except per share data)
<S>                                                  <C>                 <C>                 <C>               <C>
 INTEREST INCOME
      Interest and fees on loans                     $     8,165        $      9,356        $     25,297      $     28,631
      Mortgage-related securities                          1,512               2,232               5,193             6,261
      Investment securities:
           Taxable                                         1,166               1,346               3,620             4,404
           Tax-exempt                                        233                 236                 700               711
                                                    ------------        ------------        ------------      ------------
                Total interest income                     11,076              13,170              34,810            40,007
                                                    ------------        ------------        ------------      ------------

 INTEREST EXPENSE
      Deposits                                             2,870               4,148               9,790            12,802
      Federal Home Loan Bank advances and
          other borrowings                                 2,978               2,990               8,934             8,835
      Trust-preferred debt                                   267                  96                 784                96
                                                    ------------        ------------        ------------      ------------
                Total interest expense                     6,115               7,234              19,508            21,733
                                                    ------------        ------------        ------------      ------------

 NET INTEREST INCOME                                       4,961               5,936              15,302            18,274

 Provision for loan losses                                   850                 726               1,830             1,969
                                                    ------------        ------------        ------------      ------------

 NET INTEREST INCOME AFTER
    PROVISION FOR LOAN LOSSES                              4,111               5,210              13,472            16,305
                                                    ------------        ------------        ------------      ------------

 NON-INTEREST INCOME
      Service charges and other fees                         684                 499               1,958             1,502
      Insurance premium income                             1,084                 822               2,911             2,264
      Trust income                                           215                 167                 660               515
      Gain (loss) on sale of:
           Assets acquired through foreclosure                70                 (10)                129               (30)
           Loans                                             562                 509               1,165               748
           Available-for-sale securities                     237                   4               1,379                (7)
      Impairment loss on equity investment                (1,488)                  -              (1,488)                -
      Other                                                  350                 244               1,346               430
                                                    ------------        ------------        ------------      ------------
                Total non-interest income                  1,714               2,235               8,060             5,422
                                                    ------------        ------------        ------------      ------------

 NON-INTEREST EXPENSE
      Salaries and employee benefits                       3,652               2,994              10,399             8,814
      Occupancy costs                                        797                 752               2,453             2,169
      Amortization of intangibles                            255                 296                 772               809
      Data processing costs                                  200                 182                 579               514
      Advertising                                            238                 165                 749               438
      Professional fees                                      345                 434               1,321             1,129
      Federal Home Loan Bank and other charges               240                 260                 702               742
      Other                                                1,226                 920               3,349             2,485
                                                    ------------        ------------        ------------      ------------
                Total non-interest expense                 6,953               6,003              20,324            17,100
                                                    ------------        ------------        ------------      ------------

 Income (loss) before income taxes                        (1,128)              1,442               1,208             4,627
 Income taxes                                                 65                 498                 813             1,612
                                                    ------------        ------------        ------------      ------------

 NET INCOME (LOSS)                                  $     (1,193)       $        944        $        395      $      3,015
                                                    ============        ============        ============      ============

 EARNINGS (LOSS) PER SHARE:
    Basic                                           $      (0.32)       $       0.24        $       0.10      $       0.73
    Diluted                                                (0.30)               0.22                0.10              0.69
</TABLE>



See accompanying notes to the unaudited consolidated financial statements.
(1) See Footnote (2) which describes the restatement effects.

                                       5

<PAGE>


                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          Three Months Ended                Nine Months Ended
                                                                               June 30,                         June 30,
                                                                          As                As             As              As
                                                                      Restated(1)       Restated(1)    Restated(1)     Restated(1)
                                                                    --------------     ------------    -----------     -----------
                                                                         2003              2002           2003            2002
                                                                    --------------     ------------    -----------     -----------
                                                                                            (in thousands)

<S>                                                                <C>                <C>             <C>             <C>
 Net income (loss)                                                  $       (1,193)    $        944    $       395     $     3,015

 Other comprehensive income (loss), net of tax
     Unrealized losses on securities and on retained
       interest on asset securitization:
     Unrealized holding losses arising during the period                      (155)           3,090          1,352             756
     Less:  Reclassification adjustment for gains (losses)
       included in net income                                                 (145)              (2)          (846)             (4)
                                                                    --------------     ------------    -----------     -----------
     Other comprehensive income (loss)                                         (10)           3,092          2,198             760

 Comprehensive income (loss)                                        $       (1,203)    $      4,036    $     2,593     $     3,775
                                                                    ==============     ============    ===========     ===========
</TABLE>






See accompanying notes to the unaudited consolidated financial statements.
(1) See Footnote (2) which describes the restatement effects.

                                       6

<PAGE>
                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                  Nine Months Ended
                                                                                   As Restated(1)                  As Restated(1)
                                                                                      June 30,                        June 30,
                                                                                        2003                            2002
                                                                                   --------------                  --------------
<S>                                                                                 <C>                             <C>
OPERATING ACTIVITIES
    Net income                                                                     $         395                   $      3,015
    Adjustments to reconcile net income to
       net cash provided by operating activities:
              Provision for loan losses                                                    1,830                          1,969
              Provision for assets acquired
                through foreclosure                                                          208                             90
              Depreciation                                                                 1,063                          1,079
              Amortization of intangibles                                                    772                            809
              Deferred income taxes                                                       (1,597)                         3,325
              ESOP expense                                                                   580                            619
              Stock award expense                                                            392                            373
              Bank-owned life insurance income                                              (446)                             -
              Amortization and accretion on:
                Held to maturity securities                                                   (1)                            (9)
                Available for sale securities                                              4,651                            519
              Amortization of deferred loan fees                                            (724)                          (439)
              (Gain) loss on sale of:
                Assets acquired through foreclosure                                         (129)                            30
                Loans                                                                     (1,165)                        (1,195)
                Available for sale securities                                             (1,379)                             7
                Impairment loss on equity investment                                       1,488
                Disposal of fixed assets                                                      19                              -

   Changes in assets and liabilities:
              Decrease (increase) in accrued interest receivable                             506                            297
              Increase (decrease) in other assets                                         (1,657)                        (5,432)
              Increase (decrease) in accrued interest payable                                 99                            479
              Increase (decrease) in accrued taxes payable                                 2,030                         (2,072)
              Increase in other liabilities                                                  877                          1,289
                                                                                   -------------                   ------------
                    Net cash provided by operating activities                              7,812                          4,753
                                                                                   -------------                   ------------

INVESTING ACTIVITIES
    Investment securities available for sale:
              Proceeds from repayments and maturities                                    128,727                         53,484
              Purchases                                                                 (193,289)                      (160,628)
              Proceeds from sales                                                         93,193                         16,837
    Investment securities held to maturity:
              Proceeds from repayments and maturities                                         98                         14,199
    Increase in loans, net                                                               (40,656)                       (40,461)
    Proceeds from sales of loans                                                          35,105                         62,073
    Purchase of regulatory stock                                                          (1,041)                          (450)
    Purchase of premises and equipment                                                      (864)                        (1,677)
    Proceeds from assets acquired through foreclosure                                        693                            775
    Purchase of bank-owned life insurance                                                      -                        (10,149)
                                                                                   -------------                   ------------
                    Net cash provided for (used for) investing activities          $      21,966                   $    (65,997)
                                                                                   -------------                   ------------
</TABLE>

                                       7

<PAGE>
                      NORTHEAST PENNSYLVANIA FINANCIAL CORP
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                   As Restated(1)          As Restated(1)
                                                                                      June 30,                June 30,
                                                                                       2003                     2002
                                                                                  ---------------          --------------
<S>                                                                              <C>                      <C>
FINANCING ACTIVITIES
     Net increase (decrease) in deposits                                           $     (27,647)          $      56,312
     Increase (decrease) in Federal Home Loan Bank
       short-term advances                                                                     -                  (6,000)
     Borrowings of Federal Home Loan Bank
       long-term advances                                                                      -                  10,000
     Repayments of Federal Home Loan Bank
       long-term advances                                                                    (15)                    (15)
     Net increase in advances from borrowers for
       taxes and insurance                                                                   787                     727
     Proceeds from other borrowings                                                            -                   1,599
     Repayment of other borrowings                                                        (2,123)                      -
     Proceeds from issuance of trust-preferred securities                                 15,000                   7,000
     Purchase of treasury stock                                                                -                  (9,087)
     Purchase of stock for stock employee
       compensation trust                                                                 (1,110)                      -
     Stock issued for purchase of Higgins                                                   1000                      85
         Insurance Associates, Inc.                                                         1388                     477
     Exercise of stock options
     Cash dividends                                                                       (1,470)                 (1,461)
                                                                                   -------------           -------------
                  Net cash provided by financing activities                              (16,340)                 59,637
                                                                                   -------------           -------------

                  Increase (decrease) in cash
                    and cash equivalents                                                  13,438                  (1,607)

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR                                                                   25,302                   9,060
                                                                                   -------------           -------------

CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                                $      38,740           $       7,453
                                                                                   =============           =============

SUPPLEMENTAL INFORMATION
     Cash paid during the year for:
         Interest on deposits and borrowings                                       $      19,409           $      21,254
         Income taxes                                                                      1,749                     482
Supplemental disclosures - non-cash and financing information:
     Transfer from loans to assets acquired
       through foreclosure                                                                   866                    1847
     Net change in unrealized gains on securities
       available for sale, net of tax                                                       (506)                    761
</TABLE>



See accompanying notes to the unaudited consolidated financial statements.
(1) See Footnote (2) which describes restatement effects.

                                       8

<PAGE>
                     Northeast Pennsylvania Financial Corp.
             Notes to Consolidated Financial Statements (unaudited)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Northeast Pennsylvania Financial Corp. (the "Company"), through its
subsidiaries, provides a wide range of financial products and services to
individual, corporate, and municipal customers through offices in Northeastern
and Central Pennsylvania. These products are offered through the Banking,
Insurance, Investment and Trust lines of business. Such products and services
offered through the Company's subsidiary, First Federal Bank (the "Bank"),
include checking accounts, savings accounts, certificates of deposit, commercial
and consumer loans, real estate loans and home equity loans. The Bank also
serves its loan customers through a loan production office located in Monroe
County, Pennsylvania. Insurance products, which are offered through the
Company's subsidiary, Higgins Insurance Associates, Inc. ("Higgins"), include
property and casualty, life, long-term care and employee benefit programs.
Investment products are offered through licensed Bank employees, Higgins agents
and Smith Barney financial consultants who rent space from the Bank. Trust
services, which are offered by the Company's subsidiary Northeast Pennsylvania
Trust Co. (the "Trust Co."), include estate management and trustee services. The
Company also provides title insurance through Abstractors, Inc., its
wholly-owned title agency. The Company and the Bank are subject to the
regulations of certain federal regulatory agencies and undergoes periodic
examinations by such regulatory authorities. The Trust Co. is subject to state
regulation.

Basis of Financial Statements Presentation

The accompanying consolidated financial statements were prepared in accordance
with instructions to Form 10-Q, and therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America ("GAAP"). However, all normal recurring
adjustments that, in the opinion of management, are necessary for a fair
presentation of the financial statements have been included. The results for the
nine months ended June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ended September 30, 2003.

Principles of Consolidation and Presentation

The accompanying financial statements of the Company include the accounts of the
Bank, Higgins, Abstractors, Inc., Trust Co., NEP Capital Trust I and NEP Capital
Trust II. The Bank, Higgins, Abstractors, Inc. and the Trust Co. are
wholly-owned subsidiaries of the Company. NEP Capital Trust I and NEP Capital
Trust II are statutory trusts all of the voting securities of which are owned by
the Company, which were created under the laws of the state of Delaware in
connection with two issuances of trust-preferred securities on April 10 and
October 29, 2002, respectively. All material inter-company balances and
transactions have been eliminated in consolidation. Prior period amounts are
reclassified, when necessary, to conform to the current year's presentation.

The Company follows accounting principles and reporting practices which are in
accordance with GAAP. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, the evaluation of the
realizability of deferred tax assets and the evaluation of other than temporary
impairment for certain non-marketable equity investments and residual interests
in the securitization trusts.

Recent Accounting Developments

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability

                                       9

<PAGE>
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
adoption of this Statement did not have an impact on its earnings, financial
condition or equity.

On October 1, 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions," effective for all business combinations initiated after
October 1, 2002. This Statement addresses the financial accounting and reporting
for the acquisition of all or part of a financial institution, except for a
transaction between two or more mutual enterprises. This Statement removes
acquisitions of financial institutions, other than transactions between two or
more mutual enterprises, from the scope of SFAS No. 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions," and FASB Interpretation No. 9,
"Applying APB Opinions No. 16 and 17, "When a Savings and Loan Association or a
Similar Institution Is Acquired in a Business Combination Accounted for by the
Purchase Method." The acquisition of all or part of a financial institution that
meets the definition of a business combination shall be accounted for by the
purchase method in accordance with SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 was adopted
on October 1, 2001. This Statement also provides guidance on the accounting for
the impairment or disposal of acquired long-term customer-relationship
intangible assets (such as depositor- and borrower-relationship intangible
assets and credit cardholder intangible assets), including those acquired in
transactions between two or more mutual enterprises. Upon early adoption of this
statement, as of October 1, 2001, the carrying amount of the previously
recognized unidentifiable intangible asset related to the Schuylkill Savings
branch acquisitions that was reclassified to goodwill was $200,000, while the
related 2002 amortization expense that was reversed was $81,000, pre-tax. The
Company will continue to review the remaining goodwill on an annual basis for
impairment. However, $10.9 million in core deposit intangible will continue to
be amortized and reviewed for impairment in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement No.
123." This statement amends FASB Statement No.123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. The Statement also amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. This statement is
effective for fiscal years ending after December 15, 2002, except for financial
reports containing condensed financial statements for interim periods for which
disclosure is effective for periods beginning after December 15, 2002. This
Statement announces, "in the near future, the Board plans to consider whether it
should propose changes to the U.S. standards on accounting for stock-based
compensation."

As permitted, the Company continues to account for stock options with the
methodology prescribed by Accounting Principles Board Opinion No. 25;
accordingly, no expense is recognized in the Consolidated Statement of
Operations. The following table represents the effect on net income and earnings
per share had the Company applied the fair value recognition provisions of SFAS
No. 123 to stock-based employee compensation:
<TABLE>
<CAPTION>
                                              Three Months Ended June 30,            Nine Months Ended June 30,
                                          As Restated (1)    As Restated (1)     As Restated (1)    As Restated (1)
                                               2003               2002                2003               2002
                                         -----------------  -----------------   -----------------  -----------------
                                                        (Dollars in thousands, except per share data)

<S>                                   <C>                 <C>                <C>                 <C>
Net income (loss), as reported:             $     (1,193)      $         944       $         395      $       3,015
Less: proforma expense related
      to stock options                               (44)                  -                (239)              (218)
                                            ------------       -------------       -------------      -------------
Proforma net income (loss)                        (1,237)                944                 156              2,797
                                            ============       =============       =============      =============


Basic net income (loss) per common share:
     As reported                            $      (0.32)      $        0.24       $        0.10      $        0.73
     Pro forma                                     (0.33)               0.23                0.04               0.67
Diluted net income (loss) per common share:
     As reported                            $      (0.30)      $        0.22       $        0.10      $        0.69
     Pro forma                                     (0.31)               0.22                0.04               0.64
</TABLE>

(1) See Footnote (2) which describes the restatement effects.

                                       10

<PAGE>
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. The amendments set forth in SFAS No. 149 require that contracts with
comparable characteristics be accounted for similarly. In particular, this
statement clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative as discussed in SFAS No.
133. In addition, it clarifies when a derivative contains a financing component
that warrants special reporting in the statement of cash flows. SFAS No. 149
amends certain other existing pronouncements. Those changes will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. This statement is
effective for contracts entered into or modified after June 30, 2003, except as
stated below and for hedging relationships designated after June 30, 2003. The
guidance should be applied prospectively. The provisions of this statement that
relate to SFAS No. 133 Implementation Issues that have been effective for fiscal
quarters that began prior to June 15, 2003, should continue to be applied in
accordance with their respective effective dates. In addition, certain
provisions relating to forward purchases or sales of when-issued securities or
other securities that do not yet exist, should be applied to existing contracts
as well as new contracts entered into after June 30, 2003. The adoption of this
statement is not expected to have a material effect on the Company's financial
position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes how an issuer classifies financial instruments with characteristics
of both liabilities and equity. It requires that an issuer classify these
financial instruments as a liability (or, in certain circumstances, an asset).
Previously these financial instruments would have been classified entirely as
equity, or between the liabilities section and equity section of the statement
of financial condition. This Statement also addresses questions about the
classification of certain financial instruments that embody obligations to issue
equity shares. The provisions of this Statement are effective for interim
periods beginning after June 15, 2003. Management does not expect the adoption
of this statement to have an impact on the Company's consolidated earnings,
financial condition, or equity.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." This interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. This interpretation
clarifies that a guarantor is required to disclose (a) the nature of the
guarantee, including the approximate term of the guarantee, how the guarantee
arose, and the events or circumstances that would require the guarantor to
perform under the guarantee; (b) the maximum potential amount of future payments
under the guarantee; (c) the carrying amount of the liability, if any, for the
guarantor's obligations under the guarantee; and (d) the nature and extent of
any recourse provisions or available collateral that would enable the guarantor
to recover the amounts paid under the guarantee. This interpretation also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the obligations it has undertaken in issuing the
guarantee, including its ongoing obligation to stand ready to perform over the
term of the guarantee in the event that the specified triggering events or
conditions occur. The objective of the initial measurement of that liability is
the fair value of the guarantee at its inception. The initial recognition and
initial measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements in
this interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The adoption of this interpretation did
not have a material effect on the Company's financial position or results of
operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," (FIN 46) in an effort to expand upon and strengthen
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity.
The objective of this interpretation is not to restrict the use of variable
interest entities but to improve financial reporting by companies involved with
variable interest entities. Until now, one company generally has included
another entity in its consolidated financial statements only if it controlled
the entity through voting interests. This interpretation changes that by
requiring a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. The consolidation requirements of this interpretation apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The adoption of
the interpretation did not have a material effect on the Company's financial
position or results of operations.

                                       11
<PAGE>
2.   EFFECTS OF RESTATEMENT

The unaudited consolidated financial statements as presented for the three and
nine month periods ended June 30, 2002 and the consolidated statement of
financial condition at September 30, 2002 had been restated to reflect the
correction of accounting errors for the Company's indirect auto, mortgage and
consumer loan portfolios. Such errors were primarily the result of computer
coding errors and do not impact any loan customers. These errors were identified
during July 2003 and were disclosed in the Form 10-Q for June 30, 2003 as
initially filed.

The consolidated financial statements as presented for the three and nine month
periods ended June 30, 2003 and the consolidated statement of financial
condition at June 30, 2003 and September 30, 2002 have been restated in this
amendment to reflect the correction of additional accounting errors related to
an adjustment to deferred loan fees, an underaccrual in the Company's health and
welfare benefit plans, the write off of improperly deferred advertising and
professional fees and the improper recording of a receivable related to the sale
of indirect automobile loans in 2002. Such errors resulted in a decrease in
interest and fees on loans, an increase in salaries and employee benefits,
advertising, professional fees and other expense. These errors were identified
in September 2003.

These errors had no material effect on the Company's cash flows for operating,
investing or financing activities.

The cumulative effect of these accounting errors reduced the Company's
stockholders' equity and aggregate net earnings as follows for the periods
presented:

<TABLE>
<CAPTION>
                                          Three months ended     Three months ended     Nine months ended      Nine months ended
                                            June 30, 2003          June 30, 2002          June 30, 2003          June 30, 2002
                                            -------------          -------------          -------------          -------------
                                                                  (in thousands, except per share data)

<S>                                        <C>                     <C>                     <C>                    <C>
Net income (loss) prior to restatements     $     (1,104)          $      1,551           $        644           $      4,059
Adjustment for interest and fees on loans,
   net of tax benefit                                  -                   (318)                     -                   (755)
Adjustment for gain on sale of loans,
   net of tax benefit                                  -                   (289)                     -                   (289)
                                            ------------           ------------           ------------           ------------
Net income (loss) after 1st restatement     $     (1,104)          $        944           $        644           $      3,015

Adjustment for salaries and employee
   benefits, net of tax benefit                      (82)                     -                   (236)                     -
Adjustment for advertising, net of tax
   benefit                                            (7)                     -                    (13)                     -
                                            ------------           ------------           ------------           ------------
NET INCOME (LOSS), AS ADJUSTED, BY
  2ND RESTATEMENT                           $     (1,193)          $        944           $        395           $      3,015
                                            ============           ============           ============           ============
EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS prior to restatements             $      (0.29)          $       0.39           $       0.17           $       0.98
Adjustment for interest and fees on loans,
  net of tax benefit                                   -                  (0.08)                     -                  (0.18)
Adjustment for gain on sale of loans,
   net of tax benefit                                  -                  (0.07)                     -                  (0.07)
                                            ------------           ------------           ------------           ------------
Basic EPS, as adjusted by 1st restatement,
   net of tax benefit                       $      (0.29)          $       0.24           $       0.17           $       0.73

Adjustment for salaries and employee
   benefits, net of tax benefit                    (0.02)                     -                  (0.06)                     -
Adjustment for advertising, net of tax
   benefit                                         (0.01)                     -                  (0.01)                     -
                                            ------------           ------------           ------------           ------------
Basic EPS, as adjusted by 2nd restatement,
   net of tax benefit                       $      (0.32)          $       0.24           $       0.10           $       0.73
                                            ============           ============           ============           ============

Diluted EPS prior to restatements           $      (0.28)          $       0.36           $       0.16           $       0.93
Adjustment for interest and fees on loans,
   net of tax benefit                                  -                  (0.07)                     -                  (0.17)
Adjustment for gain on sale of loans,
   net of tax benefit                                  -                  (0.07)                     -                  (0.07)
                                            ------------           ------------           ------------           ------------
Diluted EPS, as adjusted by 1st restatement,
   net of tax benefit                       $      (0.28)          $       0.22           $       0.16           $       0.69

Adjustment for salaries and employee
   benefits, net of tax benefit                    (0.02)                     -                  (0.06)                     -
Adjustment for advertising, net of tax
   benefits                                            -                      -                      -                      -
                                            ------------           ------------           ------------           ------------
Diluted EPS, as adjusted by 2nd restatement,
   net of tax benefit                       $      (0.30)          $       0.22           $       0.10           $       0.69
                                            ============           ============           ============           ============
</TABLE>

                                       12

<PAGE>
<TABLE>
<CAPTION>
                                                                         At June 30, 2003           At September 30, 2002
                                                                         ----------------           ---------------------

<S>                                                                       <C>                            <C>
Stockholders' Equity, prior to restatements                               $     64,462                   $     68,385
   Cumulative effect of interest and fees on loans, net of tax benefit               -                         (2,487)
   Cumulative effect of gain on sale of loans, net of tax benefit                    -                           (204)
                                                                          ------------                   ------------
Stockholders' Equity, as adjusted by 1st restatement                      $     64,462                   $     65,694

   Cumulative effect of interest and fees on loans, net of tax benefit             (20)                           (20)
   Cumluative effect of salaries and employee benefits, net of tax benefit        (479)                          (210)
   Cumluative effect of advertising, net of tax benefit                            (24)                           (45)
   Cumulative effect of professional fees, net of tax benefit                      (26)                           (26)
   Cumulative effect of other expenses, net of tax benefit                        (268)                          (268)
                                                                          ------------                   ------------
Stockholders' Equity, as adjusted by 2nd restatement                      $     63,645                   $     65,125
                                                                          ============                   ============
</TABLE>


In addition to the items above, the Company's Consolidated Statement of
Financial Condition for June 30, 2003 and September 30, 2002 contained the
following cumulative restatements and reclassifications:

<TABLE>
<CAPTION>
                                             Balance        Balance
                                         As Restated    As Reported
                                                June 30, 2003          Change   Description
                                                -------------          ------   -----------
                                                (in thousands)

---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>          <C>
Other assets                                $ 12,585       $ 13,318     $(733)  Reclassification of certain prepaid and
                                                                                other assets of ($306) and an improperly
                                                                                recorded receivable related to the
                                                                                automobile loan sale of ($427).
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Other liabilities                              7,980          7,896        84   Net adjustment for  correction of errors on
                                                                                health and welfare benefit plans, advertising
                                                                                and professional fees of $239 and the tax
                                                                                effect of the correction of errors of ($155).
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Retained earnings - substantially             34,338         35,155      (817)  Net adjustments to earnings for correction of
restricted                                                                      errors.
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       13


<PAGE>
<TABLE>
<CAPTION>
                                              Balance      Balance
                                          As Restated   As Reported
                                              September 30, 2002         Change   Description
                                              ------------------         ------   -----------
                                               (in thousands)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>     <C>
Loans, net of allowance for loan loss        $489,186      $489,373      $(187)  Carrying value adjusted to reflect changes in
                                                                                 amortization of premiums for purchased consumer
                                                                                 and mortgage loans.
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Accrued interest receivable                     4,298         7,632     (3,334)    Correction of error on indirect autos loans.
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Other assets                                   15,183         7,759      7,424    Reclassification for accrued/deferred taxes of
                                                                                  ($8,713) and correction of errors in other assets
                                                                                  of $667 and the tax effect of correction of errors
                                                                                  of $622.
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Deposits                                      606,412       604,966      1,446    Reclassification of borrowing/deposits
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Other borrowings                                3,184         4,630     (1,446)   Reclassification of deposits/borrowings
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Other liabilities                               9,493         2,330      7,164    Reclassification for accrued taxes of $5,909 and
                                                                                  the correction of errors on health and welfare
                                                                                  benefit plans, advertising and professional fees
                                                                                  of $212 and the tax effect of correction of
                                                                                  errors of $1,043.
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Retained earnings-substantially                35,411        38,671     (3,260)  Net adjustments to earnings for correction of error
restricted
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company expects to submit amended Forms 10-Q for the December 2002 and March
2003 quarters as soon as practical.

The attached Table 1.0/Annual describes the cumulative effects of the
restatements on net income and earnings per share for each of the prior fiscal
years.

The attached Table 1.0/Quarterly describes the cumulative effects of the
restatements on net income, earnings per share and stockholders' equity for each
of the prior quarters, where material.

Table 1.0/Annual
<TABLE>
<CAPTION>
                                                                   Twelve months ended   Twelve months ended    Twelve months ended
                                                                    September 30, 2002    September 30, 2001     September 30, 2000
                                                                    ------------------    ------------------     ------------------
<S>                                                                 <C>                   <C>                    <C>
Net income (loss) prior to restatements                             $            4,498    $            4,807     $            3,936

Adjustment for interest and fees on loans, net of tax benefit                   (1,029)                 (605)                  (389)

Adjustment for gain on sale of loans, net of tax benefit                          (204)                    -                      -
                                                                    ------------------    ------------------     ------------------

Net income (loss) after 1st restatement                                          3,265                 4,202                  3,547

Adjustment for interest and fees on loans, net of tax benefit                      (20)                    -                      -
Adjustment for salaries and employee benefits, net of
   tax benefit                                                                    (210)                    -                      -
Adjustment for advertising, net of tax benefit                                     (45)                    -                      -
Adjustment for professional fees, net of tax benefit                               (26)                    -                      -
Adjustment for other expense, net of tax benefit                                  (268)                    -                      -
                                                                    ------------------    ------------------     ------------------
NET INCOME (LOSS), AS ADJUSTED, AFTER 2ND  RESTATEMENT              $            2,696    $            4,202     $            3,547
                                                                    ==================    ==================     ==================
EARNINGS (LOSS) PER SHARE (EPS)
Basic EPS prior to restatements                                     $             1.11    $             1.03     $             0.84

   Adjustment for interest and fees on loans, net of tax benefit                 (0.25)                (0.13)                 (0.08)

   Adjustment for gains on sale of loans, net of tax benefit                     (0.05)                    -                      -
                                                                    ------------------    ------------------     ------------------
   Basic EPS after 1st restatement                                  $             0.81                  0.90                   0.76
   Adjustment for interest and fees on loans, net of tax benefit                     -                     -                      -
   Adjustment for salaries and employee benefits, net of
      tax benefit                                                                (0.05)                    -                      -
   Adjustment for advertising, net of tax benefit                                (0.02)                    -                      -
   Adjustment for professional fees, net of tax benefit                              -                     -                      -
   Adjustment for other expense, net of tax benefit                              (0.07)                    -                      -
                                                                     ------------------    ------------------     ------------------
Basic EPS, as adjusted, net of tax benefit, after 2nd restatement   $             0.67    $             0.90     $             0.76
                                                                    ==================    ==================     ==================
Diluted EPS prior to restatements                                   $             1.05    $             1.02     $             0.81

   Adjustment for interest and fees on loans, net of tax benefit                 (0.24)                (0.13)                 (0.08)

   Adjustment for gain on sale of loans, net of tax benefit                      (0.05)                    -                      -
                                                                    ------------------    ------------------     ------------------
   Diluted EPS after 1st restatement                                              0.76                  0.89                   0.73
   Adjustment for interest and fees on loans, net of tax benefit                     -                     -                      -
   Adjustment for salaries and employee benefits, net of
      tax benefit                                                                (0.05)                    -                      -
   Adjustment for advertising, net of tax benefit                                (0.01)                    -                      -
   Adjustment for professional fees, net of tax benefit                              -                     -                      -
   Adjustment for other expense, net of tax benefit                              (0.07)                    -                      -
                                                                    ------------------    ------------------     ------------------
Diluted EPS, as adjusted, net of tax benefit, after 2nd restatement $             0.63    $             0.89     $             0.73
                                                                    ==================    ==================     ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                   Twelve months ended    Twelve months ended
                                                                    September 30, 1999     September 30, 1998
                                                                    ------------------     ------------------
<S>                                                                 <C>                    <C>
Net income (loss) prior to restatements                             $            4,565     $              (47)

Adjustment for interest and fees on loans, net of tax benefit                     (321)                  (142)

Adjustment for gain on sale of loans, net of tax benefit                             -                      -
                                                                    ------------------     ------------------

Net income (loss) after 1st restatement                                          4,244                   (189)

Adjustment for interest and fees on loans, net of tax benefit                        -                      -
Adjustment for salaries and employee benefits, net of                                -                      -
   tax benefit                                                                       -                      -
Adjustment for advertising, net of tax benefit                                       -                      -
Adjustment for professional fees, net of tax benefit                                 -                      -
Adjustment for other expense, net of tax benefit                                     -                      -
                                                                    ------------------     ------------------

NET INCOME (LOSS), AS ADJUSTED, AFTER 2ND  RESTATEMENT              $            4,244     $             (189)
                                                                    ==================     ==================

EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS prior to restatements                                     $             0.84     $             (.20)

   Adjustment for interest and fees on loans, net of tax benefit                 (0.06)                 (0.02)

   Adjustment for gains on sale of loans, net of tax benefit                         -                      -
                                                                    ------------------     ------------------

   Basic EPS after 1st restatement                                                0.78                  (0.22)

Adjustment for interest and fees on loans, net of tax benefit                        -                      -
Adjustment for salaries and employee benefits, net of                                -                      -
   tax benefit                                                                       -                      -
Adjustment for advertising, net of tax benefit                                       -                      -
Adjustment for professional fees, net of tax benefit                                 -                      -
Adjustment for other expense, net of tax benefit                                     -                      -
                                                                    ------------------     ------------------

Basic EPS, as adjusted, net of tax benefit, after 2nd restatement   $             0.78     $            (0.22)
                                                                    ==================     ==================

Diluted EPS prior to restatements                                   $             0.80     $            (0.20)

   Adjustment for interest and fees on loans, net of tax benefit                 (0.06)                 (0.02)

   Adjustment for gain on sale of loans, net of tax benefit                          -                      -
                                                                    ------------------     ------------------

   Diluted EPS after 1st restatement                                              0.74                  (0.22)

Adjustment for interest and fees on loans, net of tax benefit                        -                      -
Adjustment for salaries and employee benefits, net of                                -                      -
   tax benefit                                                                       -                      -
Adjustment for advertising, net of tax benefit                                       -                      -
Adjustment for professional fees, net of tax benefit                                 -                      -
Adjustment for other expense, net of tax benefit                                     -                      -
                                                                    ------------------     ------------------

Diluted EPS, as adjusted, net of tax benefit, after 2nd restatement $             0.74     $            (0.22)
                                                                    ==================     ==================
</TABLE>

<PAGE>
Table 1.0/Quarterly
<TABLE>
<CAPTION>
                                 Three months ended  Three months ended  Three months ended  Three months ended  Three months ended
                                      June 30, 2003      March 31, 2003   December 31, 2002  September 30, 2002       June 30, 2002
                                      -------------      --------------   -----------------  ------------------       -------------
<S>                                          <C>                  <C>                   <C>                 <C>               <C>
Net Income (loss) prior to restatements      (1,104)              1,289                 943                 439               1,551
Adustment for interest and fees on
   loans, net of tax benefit                      -                (302)               (292)               (275)               (318)
Adjustment for gain on sale of loans,
   net of tax benefit                             -                  44                  66                  85                (289)
                                        --------------------------------------------------------------------------------------------

Net income (loss) after 1st restatement      (1,104)              1,031                 717                 249                 944

Adjustment for interest and fees on
   loans, net of tax benefit                      -                   -                   -                 (20)                  -
Adjustment for salaries and employee
   benefits, net of tax benefit                (100)               (122)                (48)               (210)                  -
Adjustment for advertising, net of
   tax benefit                                   11                  11                   -                 (45)                  -
Adjustment for professional fees,
   net of tax benefit                             -                   -                   -                 (26)                  -
Adjustment for other expense, net of
   tax benefit                                    -                   -                   -                (268)                  -
                                        --------------------------------------------------------------------------------------------
NET INCOME (LOSS), AS ADJUSTED, AFTER
   2nd RESTATEMENT                           (1,193)                920                 669                (320)                944
                                        ============================================================================================

EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS prior to restatements               (0.29)               0.34                0.25                0.12                0.39
     Adjustment for interest and fees
        on loans, net of tax benefit              -               (0.08)              (0.08)              (0.08)              (0.08)
     Adjustment for gain on sale of
        loans, net of tax benefit                 -                0.02                0.02                0.02               (0.07)
                                        --------------------------------------------------------------------------------------------

Basic EPS after 1st restatement               (0.29)               0.28                0.19                0.06                0.24

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and
       employee benefits, net of
       tax benefit                            (0.03)              (0.04)              (0.01)              (0.05)                  -
     Adjustment for advertising, net
       of tax benefit                             -                   -                   -               (0.01)                  -
     Adjustment for professional fees,
       net of tax benefit                         -                   -                   -               (0.01)                  -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -               (0.07)                  -
                                        --------------------------------------------------------------------------------------------

Basic EPS, as adjusted, net of tax
   benefit after 2nd restatement              (0.32)               0.24                0.18               (0.08)               0.24
                                        ============================================================================================


Diluted EPS prior to restatement              (0.28)               0.33                0.24                0.11                0.36
     Adjustment for interest and fees
        on loans, net of tax benefit              -               (0.08)              (0.07)              (0.07)              (0.07)
     Adjustment for gain on sale of
        loans, net of tax benefit                 -                0.01                0.01                0.01               (0.07)
                                        --------------------------------------------------------------------------------------------

Diluted EPS after 1st restatement             (0.28)               0.26                0.18                0.05                0.22

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and
       employee benefits, net of
       tax benefit                            (0.02)              (0.03)              (0.01)              (0.05)                  -
     Adjustment for advertising, net
       of tax benefit                             -                   -                   -                   -                   -
     Adjustment for professional fees,
       net of tax benefit                         -                   -                   -               (0.06)                  -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
Diluted EPS, as adjusted, net of tax
   benefit after 2nd restatement              (0.30)               0.23                0.17               (0.06)               0.22
                                        ============================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 Three months ended  Three months ended  Three months ended  Three months ended  Three months ended
                                     March 31, 2002   December 31, 2001  September 30, 2001       June 30, 2001       March 31,2001
                                     --------------   -----------------  ------------------       -------------       -------------
<S>                                <C>                 <C>                 <C>                 <C>                 <C>
Net Income (loss) prior to restatements       1,230               1,278               1,237               1,256               1,023
Adustment for interest and fees on
   loans, net of tax benefit                   (226)               (211)               (180)               (160)               (135)
Adjustment for gain on sale of loans,
   net of tax benefit                             -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Net income (loss) after 1st restatement       1,004               1,067               1,057               1,096                 888

Adjustment for interest and fees on
   loans, net of tax benefit                      -                   -                   -                   -                   -
Adjustment for salaries and employee
   benefits, net of tax benefit                   -                   -                   -                   -                   -
Adjustment for advertising, net of
   tax benefit                                    -                   -                   -                   -                   -
Adjustment for professional fees, net of
   tax benefit                                    -                   -                   -                   -                   -
Adjustment for other expense, net of
   tax benefit                                    -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
NET INCOME (LOSS), AS ADJUSTED, AFTER
   2nd RESTATEMENT                            1,004               1,067               1,057               1,096                 888
                                        ============================================================================================

EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS prior to restatements                0.31                0.29                0.27                0.27                0.21
     Adjustment for interest and fees
        on loans, net of tax benefit          (0.06)              (0.05)              (0.04)              (0.03)              (0.03)
     Adjustment for gain on sale of loans,
        net of tax benefit                        -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Basic EPS after 1st restatement                0.25                0.24                0.23                0.24                0.18

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and
       employee benefits, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for advertising, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for professional fees,
       net of tax benefit                         -                   -                   -                   -                   -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
Basic EPS, as adjusted, net of tax
   benefit after 2nd restatement               0.25                0.24                0.23                0.24                0.18
                                        ============================================================================================

Diluted EPS prior to restatement               0.29                0.28                0.26                0.26                0.21
     Adjustment for interest and fees
        on loans, net of tax benefit          (0.05)              (0.05)              (0.04)              (0.03)              (0.03)
     Adjustment for gain on sale of
        loans, net of tax benefit                 -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Diluted EPS after 1st restatement              0.24                0.23                0.22                0.23                0.18

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and
       employee benefits, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for advertising, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for professional fees,
       net of tax benefit                         -                   -                   -                   -                   -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -                   -                   -

                                        --------------------------------------------------------------------------------------------
Diluted EPS, as adjusted, net of tax
   benefit after 2nd restatement               0.24                0.23                0.22                0.23                0.18
                                        ============================================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                 Three months ended  Three months ended  Three months ended  Three months ended  Three months ended
                                  December 31, 2000  September 30, 2000       June 30, 2000      March 31, 2000   December 31, 1999
                                  -----------------  ------------------       -------------      --------------   -----------------
<S>                                <C>                   <C>               <C>                 <C>                 <C>
Net Income (loss) prior to restatements       1,291                 515               1,176               1,099               1,146
Adustment for interest and fees on
   loans, net of tax benefit                   (130)               (117)                (99)                (92)                (81)
Adjustment for gain on sale of loans,
   net of tax benefit                             -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Net income (loss) after 1st restatement       1,161                 398               1,077               1,007               1,065

Adjustment for interest and fees on
   loans, net of tax benefit                      -                   -                   -                   -                   -
Adjustment for salaries and employee
   benefits, net of tax benefit                   -                   -                   -                   -                   -
Adjustment for advertising, net of
   tax benefit                                    -                   -                   -                   -                   -
Adjustment for professional fees, net of
   tax benefit                                    -                   -                   -                   -                   -
Adjustment for other expense, net of
   tax benefit                                    -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
NET INCOME (LOSS), AS ADJUSTED, AFTER
   2nd RESTATEMENT                            1,161                 398               1,077               1,007               1,065
                                        ============================================================================================

EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS prior to restatements                0.28                0.11                0.25                0.23                0.22
     Adjustment for interest and fees
        on loans, net of tax benefit          (0.03)              (0.03)              (0.02)              (0.02)              (0.01)
     Adjustment for gain on sale of
        loans, net of tax benefit                 -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Basic EPS after 1st restatement                0.25                0.08                0.23                0.21                0.21

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and employee
       benefits, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for advertising, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for fees, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
Basic EPS, as adjusted, net of tax
   benefit after 2nd restatement               0.25                0.08                0.23                0.21                0.21
                                        ============================================================================================


Diluted EPS prior to restatement               0.27                0.11                0.24                0.22                0.22
     Adjustment for interest and fees
        on loans, net of tax benefit          (0.03)              (0.03)              (0.02)              (0.02)              (0.02)
     Adjustment for gain on sale of
        loans, net of tax benefit                 -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------

Diluted EPS after 1st restatement              0.24                0.08                0.22                0.20                0.20

     Adjustment for interest and fees
       on loans, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for salaries and employee
       benefits, net of tax benefit               -                   -                   -                   -                   -
     Adjustment for advertising, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for fees, net of
       tax benefit                                -                   -                   -                   -                   -
     Adjustment for other expense,
       net of tax benefit                         -                   -                   -                   -                   -
                                        --------------------------------------------------------------------------------------------
Diluted EPS, as adjusted, net of tax
   benefit after 2nd restatement               0.24                0.08                0.22                0.20                0.20
                                        ============================================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                  At June 30, 2003  At March 31, 2003  At December 31, 2002  At September 30, 2002  At June 30, 2002
                                  ----------------  -----------------  --------------------  ---------------------  ----------------
<S>                                <C>                <C>               <C>                  <C>                     <C>
Stockholders' Equity, prior to
  restatements                      $       64,462    $        67,326    $           68,320    $            68,385    $      71,663

Cumulative effect interest and
  fees on loans, net of tax
  benefit                                        -             (3,081)               (2,779)                (2,487)          (2,212)
Cumulative effect gain on sale
  of loans, net of tax
  benefit                                        -                (94)                 (138)                  (204)            (289)
                                    -----------------------------------------------------------------------------------------------
Stockholders' Equity, as
  adjusted after 1st restatement            64,462             64,151                65,403                 65,694           69,162
Cumulative effect on interest and
  fees on loans, net of tax benefit            (20)               (20)                  (20)                   (20)               -
Cumulative effect of salaries and
  employee benefits, net of tax
  benefit                                     (480)              (380)                 (258)                  (210)               -
Cumulative effect of advertising,
  net of tax benefit                           (23)               (34)                  (45)                   (45)               -
Cumulative effect of professional
  fees, net of tax benefit                     (26)               (26)                  (26)                   (26)               -
Cumulative effect of other
  expense, net of tax benefit                 (268)              (268)                 (268)                  (268)               -
                                    -----------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY, AS
  ADJUSTED AFTER 2ND
  RESTATEMENT                       $       63,645    $        63,423    $           64,786    $            65,125    $      69,162
                                    ===============================================================================================
</TABLE>

Note:  The quarterly amounts for periods prior to 1999 are immaterial.

<PAGE>
<TABLE>
<CAPTION>
                                 At March 31, 2002   At December 31, 2001  At September 30, 2001   At June 30,2001 At March 31, 2001
                                 -----------------   --------------------  ---------------------   --------------- -----------------
<S>                                   <C>                <C>               <C>                  <C>                     <C>
Stockholders' Equity, prior to
  restatements                      $       67,258    $            74,204    $           75,837      $       74,701   $      78,675

Cumulative effect interest and
  fees on loans, net of tax
  benefit                                   (1,894)                (1,668)               (1,457)             (1,277)         (1,117)

Cumulative effect gain on sale
  of loas, net of tax
  benefit                                        -                      -                     -                   -               -
                                    -----------------------------------------------------------------------------------------------
Stockholders' Equity, as
  adjusted after 1st restatement            65,364                 72,536                74,380              73,424          77,558
Cumulative effect on interest and
  fees on loans, net of tax benefit              -                      -                     -                   -               -
Cumulative effect of salaries and
  employee benefits, net of tax
  benefit                                        -                      -                     -                   -               -
Cumulative effect of advertising,
  net of tax benefit                             -                      -                     -                   -               -
Cumulative effect of professional
  fees, net of tax benefit                       -                      -                     -                   -               -
Cumulative effect of other
  expense, net of tax benefit                    -                      -                     -                   -               -
                                    -----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY, AS
  ADJUSTED AFTER 2ND
  RESTATEMENT                       $       65,364    $            72,536    $           74,380      $       73,424   $      77,558
                                    ===============================================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                              At December31,2000  At September 30, 2000  At June 30, 2000   At March 31, 2000   At December 31, 1999
                              ------------------  ---------------------  ----------------   -----------------   --------------------
<S>                                                  <C>                   <C>                    <C>                  <C>
Stockholders' Equity, prior to
  restatements                      $     73,769    $          72,975    $        71,105      $       71,535     $           72,893
Cumulative effect interest and
  fees on loans, net of tax
  benefit                                   (982)                (852)              (735)               (636)                  (544)
Cumulative effect gain on sale
  of loans, net of tax
  benefit                                      -                    -                  -                   -                      -
                                    ------------------------------------------------------------------------------------------------
Stockholders' Equity, as
  adjusted after 1st restatement          72,787               72,123             70,370              70,899                 72,349
Cumulative effect on interest and
  fees on loans, net of tax benefit            -                    -                  -                   -                      -
Cumulative effect of salaries and
  employee benefits, net of tax
  benefit                                      -                    -                  -                   -                      -
Cumulative effect of advertising,
  net of tax benefit                           -                    -                  -                   -                      -
Cumulative effect of professional
  fees, net of tax benefit                     -                    -                  -                   -                      -
Cumulative effect of other
  expense, net of tax benefit                  -                    -                  -                   -                      -
                                    ------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY, AS
  ADJUSTED AFTER 2ND
  RESTATEMENT                       $     72,787    $          72,123    $        70,370      $       70,899     $           72,349
                                    ================================================================================================
</TABLE>

3. EARNINGS PER SHARE

Earnings (loss) per share ("EPS"), basic and diluted, were $(0.31) and $(0.30),
respectively, for the three months ended June 30, 2003 compared to $0.23 and
$0.22, respectively, for the three months ended June 30, 2002. EPS, basic and
diluted, were $0.10 and $0.10, respectively, for the nine months ended June 30,
2003 compared to $0.73 and $0.69, respectively, for the nine months ended June
30, 2002.

                                       14
<PAGE>

The following table presents the reconciliation of the numerators and
denominators of the basic and diluted EPS computations.
<TABLE>
<CAPTION>
                                                        Three Months Ended                   Nine Months Ended
                                                             June 30,                            June 30,
                                                As Restated(1)      As Restated(1)  As Restated(1)     As Restated(1)
                                                    2003                2002             2003              2002
                                                --------------      -------------   --------------    --------------
                                                              (Dollars in thousands, except per share data)
<S>                                              <C>                 <C>             <C>               <C>
Net income (loss)                                $    (1,193)        $       944     $        395      $      3,015
                                                 ===========         ===========     ============      ============

Weighted-average common shares
  outstanding                                      6,427,350           6,427,350        6,427,350         6,427,350

Average treasury stock shares                     (2,250,756)         (1,998,188)      (2,253,695)       (1,851,705)

Average common stock acquired by stock
  benefit plans:
    Stock employee compensation trust               (108,769)             (6,259)         (87,499)           (6,259)
    Stock awards unallocated, net                    (75,636)           (117,414)         (75,636)         (117,814)
    ESOP shares unallocated, net                    (237,808)           (289,228)        (250,663)         (302,083)
                                                 -----------         -----------     ------------      ------------

Weighted-average common shares used
  to calculate basic earnings per share            3,754,381           4,016,261        3,759,857         4,149,489

Dilutive effect of stock awards                        9,777              26,084           11,317            26,366

Dilutive effect of outstanding
  stock options                                      169,977             213,385          169,977           202,786
                                                 -----------         -----------     ------------      ------------

Weighted-average common shares used
  to calculate diluted earnings per share          3,934,135           4,255,730        3,941,151         4,378,641
                                                 ===========         ===========     ============      ============

Earnings (loss) per share-basic                  $     (0.32)        $      0.24     $       0.10      $       0.73
Earnings (loss) per share-diluted                $     (0.30)        $      0.22     $       0.10      $       0.69
</TABLE>

(1) See Footnote 2 which describes restatement effects.

Diluted earnings (loss) per share include the dilutive effect of the Company's
weighted-average stock options/awards outstanding using the Treasury Stock
method. The Company had anti-dilutive common stock options outstanding of 10,485
and 8,100 for the three months ended June 30, 2003 and 2002, respectively, and
10,485 and 9,650 for the nine months ended June 30, 2003 and 2002, respectively.
These options are not included in the calculation of diluted earnings per share
for the periods presented.

4. INVESTMENT SECURITIES

The amortized cost and estimated market values of investment securities are
summarized as follows:
<TABLE>
<CAPTION>
                                                                       June 30, 2003
                                            -------------------------------------------------------------------
                                                                       (in thousands)
                                                                 Gross             Gross              Estimated
                                            Amortized          Unrealized        Unrealized             Market
Available-for-sale securities:                 Cost              Gains             Losses               Value
                                            ---------          ----------        ----------           ---------
<S>                                       <C>                <C>                 <C>                <C>
     U.S. Government agency
        securities                        $     28,186        $       489         $       -          $   28,675
     Municipal securities                       14,981                240                 -              15,221
     Corporate securities                       38,899              2,109                 -              41,008
     Trust Preferred securities                 12,762                674              (389)             13,047
     Mortgage-backed securities                176,398              1,910              (265)            178,043
                                          ------------        -----------         ---------          ----------
         Total debt securities                 271,226              5,422              (654)            275,994
                                          ------------        -----------         ---------          ----------

     FHLB Stock                                 11,693                  -                 -              11,693
     Freddie Mac stock                           2,241                134              (580)              1,795
     Fannie Mae stock                            6,000                189               (65)              6,124
     Other equity securities                       284                148               (58)                374
                                          ------------        -----------         ---------          ----------
         Total equity securities                20,218                471              (703)             19,986
                                          ------------        -----------         ---------          ----------

              Total                       $    291,444        $     5,893         $  (1,357)         $  295,980
                                          ============        ===========         =========          ==========
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                                       June 30, 2003
                                            -------------------------------------------------------------------
                                                                       (in thousands)
                                                                 Gross             Gross              Estimated
                                            Amortized          Unrealized        Unrealized             Market
Held-to-maturity securities:                   Cost              Gains             Losses               Value
                                            ---------          ----------        ----------           ---------
<S>                                       <C>                <C>                 <C>                <C>
     Municipal securities                 $      3,555        $        69         $       -          $    3,624
                                          ------------        -----------         ---------          ----------
              Total                       $      3,555        $        69         $       -          $    3,624
                                          ============        ===========         =========          ==========


                                                                     September 30, 2002
                                            -------------------------------------------------------------------
                                                                       (in thousands)
                                                                 Gross             Gross              Estimated
                                            Amortized          Unrealized        Unrealized             Market
Available-for-sale securities:                 Cost              Gains             Losses               Value
                                            ---------          ----------        ----------           ---------

     U.S. Government agency
        securities                        $     24,032        $       414         $       -          $   24,446
     Municipal securities                       16,247                197                 -              16,444
     Corporate securities                       32,545              1,442               (18)             33,969
     Trust Preferred securities                 12,604                336              (511)             12,429
     Mortgage-backed securities                221,383              4,047              (143)            225,287
                                          ------------        -----------         ---------          ----------
         Total debt securities                 306,811              6,436              (672)            312,575
                                          ------------        -----------         ---------          ----------

     FHLB Stock                                 10,971                  -                 -              10,971
     Freddie Mac stock                           2,241                151              (324)              2,068
     Fannie Mae stock                            2,000                100              (108)              1,992
     Other equity securities                       284                 24               (28)                280
                                          ------------        -----------         ---------          ----------
         Total equity securities                15,496                275              (460)             15,311
                                          ------------        -----------         ---------          ----------
              Total                       $    322,307        $     6,711         $  (1,132)         $  327,886
                                          ============        ===========         =========          ==========


                                                                     September 30, 2002
                                            -------------------------------------------------------------------
                                                                       (in thousands)
                                                                 Gross             Gross              Estimated
                                            Amortized          Unrealized        Unrealized             Market
Held-to-maturity securities:                   Cost              Gains             Losses               Value
                                            ---------          ----------        ----------           ---------
     Municipal securities                 $      3,553        $        55         $       -          $    3,608
     Certificates of deposit                        99                  -                 -                  99
                                          ------------        -----------         ---------          ----------
              Total                       $      3,652        $        55         $       -          $    3,707
                                          ============        ===========         =========          ==========
</TABLE>

                                       16
<PAGE>
5. LOANS

Loans consists of the following:
<TABLE>
<CAPTION>
                                                                         As Restated
                                                         June 30,       September 30,
                                                           2003             2002
                                                       -----------      -------------
                                                               (in thousands)
<S>                                                   <C>              <C>
Real Estate Loans:
  One-to four-family                                   $   159,354      $     198,225
  Multi-family and commercial                               71,009             75,912
  Construction                                              17,275              7,157
                                                       -----------      -------------
    Total real estate loans                                247,638            281,294
                                                       -----------      -------------

Consumer Loans:
  Home equity loans and lines of credit                     74,760             79,167
  Automobile                                               122,315             80,016
  Unsecured lines of credit                                  3,073              2,297
  Other                                                      9,572             10,376
                                                       -----------      -------------
    Total consumer loans                                   209,720            171,856
                                                       -----------      -------------

Commercial Loans                                            43,895             43,014
                                                       -----------      -------------
    Total loans                                            501,253            496,164

Less:
  Deferred loan fees, net                                    1,575              1,529
  Allowance for loan losses                                  5,748              5,449
                                                       -----------      -------------
          Net loans                                    $   493,930      $     489,186
                                                       ===========      =============
</TABLE>

The activity in the allowance for loan losses is as follows (in thousands):
<TABLE>
<CAPTION>
                                                           Nine Months                            Nine Months
                                                              Ended            Year Ended            Ended
                                                             June 30,        September 30,         June 30,
                                                               2003               2002               2002
                                                           -----------       -------------        -----------
                                                                             (in thousands)
<S>                                                        <C>                  <C>               <C>
Balance, Beginning of Period                               $     5,449          $   4,497         $     4,497
Add:
     Provisions charged to operations                            1,830              3,001               2,204
     Sale of indirect automobile loans                               -               (235)               (235)
     Recoveries                                                    320                179                 104
Less: loans charged off                                          1,851              1,993               1,686
                                                           -----------          ---------         -----------
Balance, End of Period                                     $     5,748          $   5,449         $     4,884
                                                           ===========          =========         ===========
</TABLE>

                                       17
<PAGE>
6. ASSET SECURITIZATION

In June 2002, the Bank sold $50.0 million in automobile loan receivables through
a securitization transaction. In the transaction, automobile loan receivables
were transferred to an independent trust (the "Trust") that issued certificates
representing ownership interests in the Trust, primarily to institutional
investors. Although the Bank continues to service the underlying accounts and
maintain the customer relationships, this transaction is treated as a sale for
financial reporting purposes to the extent of the investors' interest in the
Trust. Accordingly, the receivables associated with the investors' interests are
not reflected on the Statement of Financial Condition. In connection with this
transaction, the Bank enhanced the credit protection of the certificate holders
by funding a cash reserve account.

In connection with this June 2002 transaction, the Bank originally recorded a
pre-tax gain on the sale of automobile loans of $854,000, which was included in
gain on sale of loans in the consolidated statement of operations. In July 2003,
the Company discovered that computer coding errors related to the indirect
automobile loan portfolio also impacted the original gains related to this
securitization. As such, the Company has retroactively adjusted the original
gain, as well as several key assumptions, to collectively reflect a pre-tax gain
of $406,000. The Bank has recognized a retained interest related to the loan
sale, which, in aggregate, totaled $3.0 million at June 30, 2003. The retained
interest includes an interest-only strip and cash reserve account. The cash
reserve account is subject to liens by the providers of the credit enhancement
facilities for the securitizations.

The key assumptions used in measuring the fair value of the retained
interest-only strip and cash collateral account for the transaction is shown in
the following table:
<TABLE>
<CAPTION>
                                                                                                        June 30,
                                                                                    June 30,              2002
                                                                                      2003            As Restated
                                                                                    --------          -----------
<S>                                                                                <C>                <C>
Retained interest
     Average annual repayment rate                                                     1.5%                1.5%
     Average annual expected default rate                                              1.5                 1.5
     Discount rate                                                                    10.0                10.0
     Weighted average remaining life of underlying automobile loans
         (in months)                                                                    37                  48
</TABLE>

The key economic assumptions and the sensitivity of the fair value of the
retained interest asset to an immediate adverse change of 10% and 20% to those
assumptions are as follows for the period indicated:
<TABLE>
<CAPTION>
                                                                       June 30, 2003
                                                                       -------------
                                                                  (dollars in thousands)

<S>                                                               <C>
Fair value of retained interest                                           $ 3,083

Weighted-average repayment rate assumption:
      Pre-tax decrease to fair value due to a 10% adverse change          $    44
      Pre-tax decrease to fair value due to a 20% adverse change          $    83

Weighted-average expected default rate:
      Pre-tax decrease to fair value due to a 10% adverse change          $    44
      Pre-tax decrease to fair value due to a 20% adverse change          $    87

Weighted-average discount rate:
      Pre-tax decrease to fair value due to a 10% adverse change          $    31
      Pre-tax decrease to fair value due to a 20% adverse change          $    62
</TABLE>


As of June 30, 2003, the weighted-average remaining life of the underlying
automobile loans in the Trust was 37 months. The terms of the transaction
included provisions related to the performance of the underlying receivables and
other specific conditions that could result in an early payout of invested
amounts to the certificate holders.

                                       18
<PAGE>
6. ASSET SECURITIZATION (Continued)

Changes in fair value based on a 10% adverse variation in assumptions generally
cannot be extrapolated because the relationship of the change in assumption to
the change in fair value may not be linear. Also, the effect of an adverse
variation on a particular assumption on the fair value of the retained interest
is calculated without changing any other assumption. However, changes in one
factor may result in changes in another (for example, increases in market
interest rates may result in lower prepayments and increased credit losses),
which might magnify or counteract the sensitivities.

7. DEPOSITS

Deposits consist of the following major classifications:
<TABLE>
<CAPTION>
                                                June 30, 2003                           September 30, 2002
                                         ----------------------------               ---------------------------
                                                              Percent                                  Percent
                                           Amount            of Total                Amount            of Total
                                         ----------          --------               ---------          --------
                                                                     (in thousands)
<S>                                      <C>                     <C>                <C>                    <C>
Noninterest-bearing                      $   34,668              5.99%              $  32,428              5.35%
                                         ----------            ------               ---------            ------
Interest-bearing:
     Savings                                 99,878             17.26                  95,779             15.78
     NOW accounts                            93,266             16.11                  78,684             12.98
     Money market                           103,333             17.85                 100,274             16.54
                                         ----------            ------               ---------            ------
                                            296,477             51.22                 274,737             45.30
                                         ----------            ------               ---------            ------

Certificates of deposit greater
  than $100,000:                             45,679              7.90                  71,379             11.77
Certificates of deposit less
  than $100,000:                            201,941             34.89                 227,868             37.58
                                         ----------            ------               ---------            ------
                                            247,620             42.79                 299,247             49.35
                                         ----------            ------               ---------            ------
               Total                     $  578,765            100.00%              $ 606,412            100.00%
                                         ==========            ======               =========            ======
</TABLE>

                                       19

<PAGE>

8. FEDERAL HOME LOAN BANK ADVANCES

Under terms of its collateral agreement with the Federal Home Loan Bank of
Pittsburgh ("FHLB"), the Bank maintains otherwise unencumbered qualifying assets
(principally one-to four-family residential mortgage loans and U.S. Government
and Agency notes and bonds) in the amount of at least as much as its advances
from the FHLB. The Bank's FHLB stock is also pledged to secure these advances.
At June 30, 2003 and September 30, 2002, such advances mature as follows:


                                                                   June 30,
                                           Weighted                  2003
      Due by June 30,                    Average Rate           (in thousands)
      ---------------                    ------------           --------------

            2004                             5.60%                $   59,000
            2005                             6.34                     52,000
            2006                             5.33                     42,000
            2007                             5.05                      5,086
            2008                                -                          -
         Thereafter                          5.29                     50,320
                                           ------                 ----------
Total FHLB advances                          5.64%                $  208,406
                                           ======                 ==========

                                                                September 30,
                                           Weighted                  2002
    Due by September 30,                 Average Rate           (in thousands)
    --------------------                 ------------           --------------

            2003                                -%                $        -
            2004                             5.60                     59,000
            2005                             6.34                     52,000
            2006                             5.33                     42,000
            2007                             5.05                      5,089
         Thereafter                          5.29                     50,332
                                           ------                 ----------
Total FHLB advances                          5.64%                $  208,421
                                           ======                 ==========

9. TRUST PREFERRED SECURITIES

On March 25, 2002, the Company sponsored the creation of NEP Capital Trust I, a
Delaware statutory business trust. The Company is the owner of all of the common
securities of the Trust. On April 10, 2002, the Trust issued $7.0 million of
floating rate capital securities through a pooled trust preferred securities
offering. The proceeds from this issuance, along with the Company's $217,000
payment for the Trust's common securities, were used to acquire $7.2 million
aggregate principal amount of the Company's floating rate junior subordinated
deferrable interest debentures due April 22, 2032 (the "Debentures"), which
constitute the sole asset of the Trust. The interest rate on the Debentures and
the distribution rate on the capital securities are variable and adjust
semi-annually at 3.70% over the six-month LIBOR, with an initial rate of 6.02%.
A rate cap of 11% is effective through April 11, 2007. The Company has, through
the Trust agreement establishing the Trust, a Guarantee Agreement, the
Debentures and the related Indenture, taken together, fully irrevocably and
unconditionally guaranteed all of the trust's obligations under the capital
securities.

The stated maturity of the Debentures is April 22, 2032. In addition, the
Debentures are subject to redemption at par at the option of the Company,
subject to prior regulatory approval, in whole or in part on any interest
payment date after April 22, 2007. The Debentures are also subject to redemption
prior to April 22, 2007 after the occurrence of certain events that would either
have a negative tax effect on the Trust or the Company or would result in the
trust being treated as an investment company that is required to be registered
under the Investment Company Act of 1940. Upon repayment of the Debentures at
their stated maturity or following their redemption, the Trust will use the
proceeds of such repayment to redeem an equivalent amount of outstanding trust
preferred securities and trust common securities.

                                       20
<PAGE>

9.  TRUST PREFERRED SECURITIES (Continued)

The Company has the right, at one or more times, to defer interest payments on
the Debentures for up to ten consecutive semi-annual periods. All deferrals will
end on an interest payments date and will not extend beyond April 22, 2032, the
stated maturity date of the Debentures. If the Company defers interest payments
on the Debentures, the Trust will also defer distributions on the capital
securities. During any deferral period, each installment of interest that would
otherwise have been due and payable will bear additional interest (to the extent
payment of such interest would be legally enforceable) at the applicable
distribution rate, compounded quarterly. Furthermore in 2002, the Company
recognized an amortizable intangible asset with a value of $220,000 relating to
the issuance costs of these trust preferred securities.

On October 15, 2002, the Company sponsored the creation of NEP Capital Trust II,
a Delaware statutory business trust. The Company is the owner of all of the
common securities of the Trust. On October 29, 2002, the Trust issued $15.0
million in the form of floating rate capital securities through a pooled trust
preferred securities offering. The proceeds from this issuance, along with the
Company's $464,000 payment for the Trust's common securities, were used to
acquire $15.5 million aggregate principal amount of the Company's floating rate
junior subordinated deferrable interest debentures due November 7, 2032 (the
"Debentures"), which constitute the sole asset of the Trust. The interest rate
on the Debentures and the distribution rate on the capital securities are
variable and adjust quarterly at 3.45% over the three-month LIBOR, with an
initial rate of 5.27%. A rate cap of 12.5% is effective through November 7,
2007. The Company has, through the Trust agreement establishing the Trust, a
Guarantee Agreement, the Debentures and the related Indenture, taken together,
fully irrevocably and unconditionally guaranteed all of the trust's obligations
under the capital securities.

The stated maturity of the Debentures is November 7, 2032. In addition, the
Debentures are subject to redemption at par at the option of the Company,
subject to prior regulatory approval, in whole or in part on any interest
payment date after August 7, 2007. The Debentures are also subject to redemption
after the occurrence of certain events that would either have a negative tax
effect on the Trust or the Company would result in the trust being treated as an
investment company that is required to be registered under the Investment
Company Act of 1940. Upon repayment of the Debentures at their stated maturity
or following their redemption, the Trust will use the proceeds of such repayment
to redeem an equivalent amount of outstanding trust preferred securities and
trust common securities.

The Company has the right, at one or more times, to defer interest payments on
the Debentures for up to twenty consecutive quarterly periods. All deferrals
will end on an interest payment date and will not extend beyond November 7,
2032, the stated maturity date of the Debentures. If the Company defers interest
payments on the Debentures, the Trust will also defer distributions on the
capital securities. During any deferral period, each installment of interest
that would otherwise have been due and payable will bear additional interest (to
the extent payment of such interest would be legally enforceable) at the
applicable distribution rate, compounded quarterly. The Company recognized an
amortizable intangible asset with a value of $450,000 relating to the issuance
costs of these trust preferred securities.

A summary of the trust securities issued and outstanding at June 30, 2003 is as
follows:
<TABLE>
<CAPTION>
                                 Amount
                             Outstanding at                   Prepayment                            Distribution
                                June 30,                        Option                                Payment
Name                              2003           Rate            Date              Maturity          Frequency
--------------------         -------------      ------        ----------           --------         ------------
<S>                          <C>                 <C>          <C>  <C>             <C>  <C>
NEP Capital Trust I          $   7,000,000       5.32%        4/22/2007            4/22/2032       Semi-annually
NEP Capital Trust II         $  15,000,000       4.79%         8/7/2007            11/7/2032         Quarterly
</TABLE>

                                       21
<PAGE>
10. GOODWILL AND OTHER INTANGIBLE ASSETS

A summary of goodwill and other intangible assets is as follows:
<TABLE>
<CAPTION>
                                                                                 At June 30, 2003
                                                               --------------------------------------------------
                                                                 Gross                                      Net
                                                                Carrying           Accumulated           Carrying
     Goodwill                                                    Amount            Amortization           Amount
     ----------------------------------                        --------------------------------------------------
                                                                                  (in thousands)
<S>                                                           <C>                  <C>                 <C>
     Acquisition of:
       Abstractors                                             $     248            $    (160)          $     88
       Security Savings Association of Hazleton                      571                  (28)               543
       Higgins Insurance Associates, Inc.                          2,919                  (95)             2,824
       Schuylkill Savings and Loan Association                       200                    -                200
                                                               ---------            ---------           --------
     Total goodwill                                            $   3,938            $    (283)             3,655
                                                               =========            =========           ========

                                                                 Gross                                      Net
                                                                Carrying           Accumulated           Carrying
     Other Intangible Assets                                     Amount            Amortization           Amount
     ----------------------------------                        --------------------------------------------------
                                                                                  (in thousands)
     Amortizing:
       Omega core deposit intangible                           $   1,537            $    (918)          $    619
       Security Savings Association of Hazleton
         core deposit intangible                                   9,086               (1,933)             7,153
       Schuylkill Savings and Loan Association
         core deposit intangible                                     255                  (43)               212
       Other intangibles                                             929                 (184)               745

     Nonamortizing intangible assets
       Other intangible assets                                        75                    -                 75
                                                               ---------            ---------           --------
     Total other intangible assets                             $  11,882            $  (3,078)          $  8,804
                                                               =========            =========           ========
</TABLE>


Nonamortizing intangible assets consist of title plant of $75,000 at June 30,
2003 and 2002.


                                       22
<PAGE>
10. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

Amortization expense of other amortizing intangible assets for the three and
nine months ended June 30, 2003 and June 30, 2002 is as follows:
<TABLE>
<CAPTION>
                                             For the Three Months Ended             For the Nine Months Ended
                                                      June 30,                               June 30,
                                               2003              2002                2003               2002
                                             ----------------------------------------------------------------
                                                                   (Dollars in thousands)
<S>                                          <C>               <C>                 <C>                <C>
     Core deposit intangibles                $  204            $  230              $  619             $  708
     Other amortizing intangibles                51                66                 153                101
                                             ------            ------              ------             ------
     Total amortizing intangibles            $  255            $  296              $  772             $  809
                                             ======            ======              ======             ======
</TABLE>

The estimated amortization expense of amortizing intangible assets for each of
the five succeeding fiscal years is as follows:
<TABLE>
<CAPTION>
                                                                  Core               Other              Total
                                                                 Deposit           Amortizing         Amortizing
                                                               Intangibles         Intangibles        Intangibles
                                                               --------------------------------------------------
                                                                                 (in thousands)
<S>                                                           <C>                  <C>                <C>
     Estimated Annual Amortization Expense
     ----------------------------------------
     For the year ended September 30, 2003                     $     849            $     176          $   1,025
     For the year ended September 30, 2004                           750                  176                926
     For the year ended September 30, 2005                           644                  176                820
     For the year ended September 30, 2006                           586                  145                731
     For the year ended September 30, 2007                           558                   90                648
</TABLE>

Intangible assets acquired during the nine months ended June 30, 2003 are as
follows:
<TABLE>
<CAPTION>
                                                                                        Weighted
                                                                                         Average
                                                                                      Amortization
                                                  Amount             Residual            Period
                                                 Assigned              Value            in Years
                                                -----------------------------------------------------
                                                              (dollars in thousands)
<S>                                              <C>                  <C>                    <C>
     Other intangibles                           $   450              $    -                 5
</TABLE>


11. IMPAIRMENT LOSS ON EQUITY INVESTMENT

The Company has a $1.5 million equity investment in the convertible preferred
stock of a private entity, which makes loans to and provides services to
residential construction builders in the Eastern United States. The Company had
previously been accounting for such investment on a cost method. During the June
2003 quarter, the Company recognized an impairment loss to write-off its entire
$1.5 million investment in this entity since efforts to raise additional equity
capital have proven unsuccessful. While this entity and its lending programs
continue to operate, the Bank is no longer a lender in such programs.
Additionally, no tax benefit has been recognized in the current impairment loss
since such loss is a capital loss and is deductible only against other capital
gains.

                                       23
<PAGE>

Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS

In addition to historical information, this Form 10-Q includes certain
forward-looking statements based on current management expectations. These
forward-looking statements are generally identified by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project" or similar
expressions. The Company intends such forward-looking statements to be covered
by the safe harbor provisions of the Private Securities Reform Act of 1995 and
is including this statement for purposes of such safe harbor provisions. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Bank's loan
and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. These factors should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. The
Company does not undertake - and specifically disclaims any obligation - to
publicly revise any forward - looking statements to reflect events or
circumstances after the date of the statements to reflect the occurrence of
anticipated or unanticipated events. Further description of the risks and
uncertainties to the business are included in detail in Section B, Management
Strategy, Section C, Critical Accounting Policies, and Section E, Liquidity and
Capital Resources.

A. General

The Company's results of operations are dependent primarily on the results of
operation of the Bank and thus are dependent to a significant extent on net
interest income, which is the difference between the income earned on its loan
and investment portfolios and its cost of funds, consisting of the interest paid
on deposits and borrowings. However, non-interest income has become a meaningful
component of the Company's operations mainly due to fees earned by non-bank
subsidiaries. Results of operations are also affected by the Company's provision
for loan losses, loan and security sales activities, service charges and other
fee income, and non-interest expense. The Company's non-interest expense
principally consists of compensation and employee benefits, office occupancy and
equipment expense, data processing, professional fees, and advertising and
business promotion expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.

The Company's results of operations are being restated for the fiscal years 1998
through 2002 and for the December 2002 and March 2003 quarters to reflect the
correction of accounting errors primarily related to the Company's indirect
auto, mortgage and consumer loan portfolios. The net effect of such restatements
was to reduce interest income and retained earnings for prior periods. See
Footnote 2 to the unaudited Consolidated Financial Statements for a description
of the effect during the periods presented in the Company's current report on
Form 10-Q/A.

In September 2003, the Company identified additional accounting errors for
fiscal year 2002 and the December 2002, March 2003 and June 2003 quarters. These
errors primarily relate to accrued expenses related to employee benefit plans
and improperly recording an asset related to the indirect automobile loan sale
in 2002. The net effect of such changes was to increase non-interest expenses
for these restated periods and reduce retained earnings.

On January 2, 2002, the Company purchased three banking offices from Schuylkill
Savings and Loan Association of Schuylkill Haven, Pa. The Company purchased
$11.4 million of loans and assumed $12.8 million of deposits from these offices.
On January 8, 2002, Higgins acquired the DeAndrea Agency, which specializes in
personal and commercial insurance.

On September 4, 2002, the Bank formed a relationship with Smith Barney under
which Smith Barney Investment Centers provides retail brokerage products and
services at all of the First Federal offices. This is Smith Barney's first
relationship with a bank in the Commonwealth of Pennsylvania. Smith Barney, an
independent, registered broker-dealer, is not affiliated with the Bank.

                                       24
<PAGE>
B. Management Strategy

The Company's operating strategy is that of a community-based financial services
company, offering a wide variety of financial products to its retail customers,
while concentrating on residential and consumer lending and, to a lesser extent,
multi-family and commercial real estate lending, construction lending and small
business and municipal commercial lending. In order to promote long-term
financial strength and profitability, the Company has focused on: (i)
maintaining strong asset quality by originating one- to four-family loans
located in its market area; (ii) emphasizing higher yielding consumer loans,
specifically indirect automobile loans, and commercial loans, primarily to small
businesses and municipalities; (iii) managing its interest rate risk by
emphasizing shorter-term, fixed-rate, one- to four-family loans, in addition to
consumer and commercial loans; limiting its retention of newly originated
longer-term fixed-rate one- to four-family loans; soliciting longer-term
deposits; utilizing longer-term advances from the Federal Home Loan Bank of
Pittsburgh (the "FHLB") and proceeds from the issuance of Trust Preferred
securities; and investing in investment and mortgage-related securities having
shorter estimated durations; (iv) meeting the financial needs of its customers
through expanded products, such as personal and business insurance from Higgins,
trust and investment management services from the Trust Co., title insurance
from Abstractors, Inc., all with improved delivery systems through technological
advances and integration of products; and (v) maintaining a strong regulatory
capital position.

As a result of its policy to limit its retention of newly originated
longer-term, fixed-rate one- to four-family loans to 25% of total loan
originations during a fiscal year, and in light of the low interest rate
environment, the Company is selling conforming mortgage loan originations with
interest rate adjustments of fifteen years or greater. These loan products are
sold at origination in the secondary market.

C. Critical Accounting Policies

Other Investment. The Company has a $1.5 million equity investment in the
convertible preferred stock of a private entity, which makes loans to and
provides services to residential construction builders in the Eastern United
States. The Company had previously been accounting for such investment on a cost
method. During the June 2003 quarter, the Company recognized an impairment loss
to write-off its entire $1.5 million investment in this entity since efforts to
raise additional equity capital have proven unsuccessful. While this entity and
its lending programs continue to operate, the Bank is no longer a lender in such
programs. Additionally, no tax benefit has been recognized in the current
impairment loss since such loss is a capital loss and is deductible only against
other capital gains.

Allowances for Loan Losses. The allowance for loan losses is maintained at a
level representing management's best estimate of known and inherent losses in
the portfolio, based upon management's evaluation of the portfolio's
collectibility. Management's evaluation is based upon an analysis of the
portfolio, past loss experience, current economic conditions and other relevant
factors. While management uses the best information available to make
evaluations, such evaluations are highly subjective, and future adjustments to
the allowance may be necessary if conditions differ substantially from the
assumptions used in making the evaluations. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for losses on loans. Such agencies may require the
Company to recognize additions to the allowance. The allowance is increased by
the provision for loan losses, which is charged to operations. Loan losses are
charged directly against the allowance, and recoveries on previously charged-off
loans are added to the allowance.

Loans are deemed to be "impaired" if upon management's assessment of the
relevant facts and circumstances, it is probable that the Company will be unable
to collect all proceeds due according to the contractual terms of the loan
agreement. For purposes of applying the measurement criteria for impaired loans,
the Company excludes large groups of smaller balance homogeneous loans,
primarily consisting of residential real estate and consumer loans, as well as
commercial loans with balances of less than $100,000. The uncollected portion of
impaired loans are charged off when the Company determines that foreclosure is
probable, and the fair value of the collateral is less than the recorded
investment of the impaired loan or in the case of unsecured loans that
management determines the loan to be uncollectable.

Intangible Assets. Intangible assets include core deposit intangibles and
certain other miscellaneous intangibles. The core deposit intangibles are being
amortized to expense over a 10 to 31-year life on an accelerated basis and other
intangible assets are being amortized to expense on an accelerated basis over a
period of 3.7 to 5 years. The recoverability of the carrying value of intangible
assets is evaluated on an ongoing basis, and permanent declines in value, if
any, are charged to expense.

                                       25
<PAGE>

Goodwill. Goodwill is the excess of cost over the fair value of assets acquired
in connection with business acquisitions and was being amortized on the
straight-line method over 5, 6 and 20 years, prior to October 1, 2001. On
October 1, 2001, the Company adopted SFAS No. 142, Goodwill and Other Intangible
Assets, which eliminated the regularly scheduled amortization of goodwill and
replaced this method with a two-step process for testing the impairment of
goodwill on at least an annual basis and to the extent goodwill is impaired, its
carrying value will be written down and a charge will be made to earnings. This
approach could cause more volatility in the Company's reported net income
because impairment losses, if any, could occur irregularly and in varying
amounts. The Company, upon adoption of this Statement, stopped amortizing
existing goodwill of $3.0 million. In addition, the Company performed its
initial impairment analysis of goodwill and other intangible assets and
determined that the estimated fair value exceeded the carrying amount.

Income Taxes. The Company accounts for income taxes under the asset/liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss and tax credit carryforwards. 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 on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established against deferred tax assets
when in the judgment of management, it is more likely than not that such
deferred tax assets will not become available. Because the judgment about the
level of future taxable income is dependent to a great extent on matters that
may, at least in part go beyond the Company's control, it is at least reasonably
possible that management's judgment about the need for a valuation allowance for
deferred taxes could change in the near term.

D. Nonperforming Assets and Impaired Loans

The following table presents information regarding the Bank's nonperforming
loans, real estate owned and other repossessed assets at the dates indicated
(unaudited):
<TABLE>
<CAPTION>
                                                                                   June 30,         September 30,
                                                                                     2003                2002
                                                                                  ------------------------------
                                                                                      (dollars in thousands)
<S>                                                                              <C>                <C>
Nonperforming loans:
     Nonaccrual loans                                                             $  6,270            $  4,200
     Real estate owned and other repossessed assets                                    641                 547
                                                                                  --------            --------
         Total nonperforming assets                                                  6,911               4,747
     Troubled debt restructurings                                                        -                  55
                                                                                  --------            --------

         Troubled debt restructurings and total nonperforming assets              $  6,911            $  4,802
                                                                                  ========            ========

     Total nonperforming loans as a percentage of total loans                         1.26%               0.85%
     Total nonperforming assets as a percentage of total assets                       0.78                0.53
</TABLE>

The increase in nonperforming assets was primarily due to the addition of a $1.7
million commercial loan. Such loan was placed on nonaccrual status when the
borrower filed bankruptcy during 2003. The Bank has previously written-off
$100,000 of this loan, established additional reserves and believes this loan is
adequately collateralized by the U.S. Department of Agriculture and other
collateral.

E. Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations. The
Bank further defines liquidity as the ability to respond to deposit outflows as
well as maintain flexibility to take advantage of lending and investment
opportunities. The Bank's primary sources of funds are deposits, principal and
interest payments on loans, sales and maturities of mortgage-backed and
investment securities, and FHLB advances. The Bank uses the funds generated to
support its lending and investment activities as well as any other demands for
liquidity such as deposit outflows. While maturities and scheduled amortization
of loans and securities are predictable sources of funds, deposit flows,
mortgage prepayments and the exercise of call features are greatly influenced by
general interest rates, economic conditions and competition.

The Bank's most liquid assets are cash and cash equivalents and its investment
and mortgage-related securities available-for-sale. The levels of these assets
are dependent on the Bank's operating, financing, lending and investing
activities during any given period. At June 30, 2003, cash and cash equivalents
and investment and mortgage-related securities available-for-sale totaled $334.7
million, or 37.8% of total assets.

                                       26
<PAGE>
The Bank has other sources of liquidity if a need for additional funds arises,
including FHLB advances. At June 30, 2003, the Bank had $208.4 million in
advances outstanding from the FHLB under its overall borrowing capacity from the
FHLB of $264.4 million. The Bank plans to use the proceeds from the sale of
current investments to pay the $59.0 million of fixed-rate FHLB borrowings that
will mature within the next twelve months. Depending on market conditions, the
pricing of deposit products and FHLB advances, the Bank may continue to rely on
FHLB borrowings to fund asset growth. In addition to these traditional funding
sources, the Bank may use alternative funding sources, such as the sale and
securitization of automobile loans.

At June 30, 2003, the Bank had commitments to originate and purchase loans and
unused outstanding lines of credit and undisbursed proceeds of construction
mortgages totaling $120.5 million. The Bank anticipates that it will have
sufficient funds available to meet these commitments. Certificate accounts,
including Individual Retirement Account and KEOGH accounts, which are scheduled
to mature in less than one year from June 30, 2003 totaled $89.8 million. Based
on past experience, the Bank expects that substantially all of these maturing
certificate accounts, with the exception of jumbo certificates of deposit, will
be retained by the Bank at maturity. At June 30, 2003, the Bank had $18.0
million in jumbo certificates, the majority of which are deposits from local
school districts and municipalities that mature in less than one year.

The primary sources of funding for the Company are dividend payments from the
Bank, sales and maturities of investment securities, the issuance of
trust-preferred securities and, to a lesser extent, earnings on investments and
deposits of the Company. Dividend payments by the Bank have primarily been used
to fund the Company's repurchase of its stock, to pay cash dividends, and to pay
interest on the trust-preferred securities. The Bank's ability to pay dividends
and other capital distributions to the Company is generally limited by the
regulations of the Office of Thrift Supervision. During April 2002, the Company
obtained $7.0 million through a trust-preferred offering, and in October 2002,
the Company obtained an additional $15.0 million through a trust-preferred
offering. Approximately $5.0 million of these proceeds was used to further
capitalize the Bank, and the remaining amount at the Company level was used for
general corporate purposes, including to fund the trust established to purchase
the Company's stock, which would be used to satisfy obligations under employee
benefit plans. To date, the Company has contributed $1.8 million to the trust,
which has used such funds to purchase 114,174 shares of common stock.

At June 30, 2003, the Bank exceeded all of its regulatory capital requirements
with a tangible capital level of $57.5 million, or 6.7% of total adjusted
assets, which is above the required level of $12.9 million, or 1.5%; a core
capital level of $57.5 million, or 6.7% of total adjusted assets, which is above
the required level of $25.8 million, or 3.0%; and a risk-based capital of $59.8
million, or 10.5% of risk-weighted assets, which is above the required level of
$45.5 million, or 8.0%. An institution with a ratio of tangible capital to total
assets of greater than or equal to 5% is considered to be "well-capitalized"
pursuant to OTS regulations. After all such adjustments related to the
restatement effects, the Bank remained well-capitalized under applicable OTS
regulations.

F. Comparison of Financial Condition at June 30, 2003 and September 30, 2002

Total assets decreased $16.9 million from $901.9 million at September 30, 2002
to $885.0 million at June 30, 2003. The decrease was generated by an $85.3
million sale of mortgage-backed securities, offset by security purchases, loan
originations and a $13.4 million increase in cash and cash equivalents.
Securities classified as available-for-sale decreased $31.9 million, from $327.9
million at September 30, 2002 to $296.0 million at June 30, 2003. The decrease
was attributable to the sale in the March 2003 quarter of $60.3 million of
mortgage-backed securities with an average yield of 2.89% and an average life of
1.18 years, with a portion of the proceeds reinvested in securities with average
lives of 4.5 years and an average yield of 3.48%. The restructuring continued
into the June 2003 quarter with the sale of $25.0 million of mortgage-backed
securities. These securities had an average yield of 1.10%, and an average life
of .28 years. This restructuring was done to minimize the effect of prepayments
of mortgage-backed securities in the lower market interest rate environment.

Net loans increased $4.7 million from September 30, 2002. Consumer loans
increased $37.9 million due to a $42.3 million increase in indirect automobile
loan originations within the Company's market area offset by a decrease in other
consumer loan balances. Total real estate loans decreased $33.7 million due to a
$38.9 million decrease in one- to four-family residential real estate loans
primarily the result of prepayments of mortgages due to the lower interest rate
environment, offset by a $10.1 million increase in commercial construction
loans.

Total liabilities decreased $15.4 million from $836.8 million at September 30,
2002 to $821.4 million at June 30, 2003, due primarily to a $27.6 million
decrease in deposits offset by the issuance of $15.0 million in trust-preferred
debt.

                                       27
<PAGE>
Deposits decreased $27.6 million from $606.4 million as of September 30, 2002 to
$578.8 million at June 30, 2003. The largest decrease was in certificates of
deposit, which decreased $51.6 million as a result of matured certificates being
rolled into checking and other interest-bearing accounts as well as
municipalities and local school districts withdrawing funds for use in
operations.

In October 2002, the Company issued $15.0 million of trust-preferred securities.
The interest rate on such trust-preferred securities is variable based on
three-month LIBOR and adjusts quarterly with a rate as of June 30, 2003 of
4.79%. The trust preferred securities are subject to an interest rate cap of
12.5% through November 7, 2007.

Total equity decreased by $1.5 million primarily due to a $506,000 decrease in
accumulated other comprehensive income as a result of a decrease in unrealized
gains on securities. Because of interest rate volatility, accumulated other
comprehensive income could materially fluctuate from period to period depending
on economic and interest rate conditions. Equity also decreased due to the
purchase of 69,133 shares for the stock employee compensation trust at a cost of
$1.1 million and dividend payments of $1.5 million. These decreases were offset
by net income for the nine months of $395,000, the release of shares under the
employee stock ownership plan and the vesting of previously granted shares of
restricted stock.

G. Comparison of Operating Results for the Three Months ended June 30, 2003 and
   June 30, 2002

General. The Company had a net loss of $1.2 million and net income of $944,000
for the three months ended June 30, 2003 and June 30, 2002, respectively. Basic
and diluted earnings (loss) per share decreased to $(0.32) and $(0.30) per
share, respectively, for the three months ended June 30, 2003 as compared to
$0.24 and $0.22 per share, respectively, for the same period in 2002.

Interest Income. Total interest income decreased $2.1 million, or 15.9%, from
$13.2 million for the three months ended June 30, 2002 to $11.1 million for the
three months ended June 30, 2003. This decrease was primarily due to a 120 basis
point decline on the tax-equivalent yield on earning assets to 5.34% for the
three months ended June 30, 2003 as compared to 6.54% for the same period ended
2002 due to the lower interest rate environment. Interest income on loans
decreased $1.2 million primarily due to a 78 basis point decrease in the yield
due to lower rates, combined with an $11.6 million decrease in the average
balance of loans. Interest income on mortgage related securities decreased
$720,000 as the yield on such securities declined 231 basis points, offset by an
increase in the average balance of $13.0 million. Interest income on taxable
investment securities increased $180,000 despite a 70 basis point decline. Rapid
repayment of mortgage-backed securities has occurred while reinvestment options
are at substantially lower rates than the previous year.

Interest Expense. Interest expense decreased $1.1 million, or 15.3%, from $7.2
million for the three months ended June 30, 2002 to $6.1 million for the three
months ended June 30, 2003. The decrease in interest expense was primarily
attributable to a declining interest rate environment that resulted in the cost
of deposits decreasing to 2.08% for the three months ended June 30, 2003 from
3.11% for the same period ended 2002. Offsetting the declining rates was an
increase in the average balance of interest-bearing liabilities of $35.0 million
to $785.9 million for the three months ended June 30, 2003. The decrease in
interest expense on deposits of $1.3 million was primarily due to a $1.2 million
decrease in interest expense on certificates of deposit, which was the result of
an 89 basis point decrease in interest rates and a $56.1 million decrease in the
average balance, offset by a $70.9 million increase in the average balance on
checking accounts. Interest expense on trust-preferred debt increased $171,000
due to the issuance of $15.0 million trust-preferred debt in October 2002.

Provision for Loan Losses. The provision for loan losses increases the allowance
for loan losses. The Bank's provision for loan losses for the three months ended
June 30, 2003 increased $124,000 compared to the comparable 2002 period. The
increase was due to increased mortgage and consumer charge offs and an increase
in nonperforming loans and classified assets. During the preceding quarter, the
Company enhanced its loan servicing function to promote the prompt resolution of
delinquencies and employed a new collections and recovery manager to address the
risk of deterioration in loan quality. As a result, total delinquencies for
mortgage and consumer loans were reduced during the quarter to 0.73% and 0.28%
of total loans, respectively, at June 30, 2003, from 1.13% and 0.40% at June 30,
2002. Net loan charge-offs of $672,000 for the quarter ended June 30, 2003,
compared to net loan charge-offs of $879,000 for the quarter ended June 30,
2002. Net loan charge-offs, as a percentage of total loans for the current
quarter, were 13 basis points. At June 30, 2003, delinquent commercial loans
were 0.81% of total loans, an increase from the 0.48% level at June 30, 2002,
due to a $1.7 million commercial loan being placed on nonaccrual as the borrower
went into bankruptcy.

                                       28
<PAGE>
Non-interest Income. Non-interest income decreased $521,000, or 23.3% from $2.2
million for the three months ended June 30, 2002 to $1.7 million for the three
months ended June 30, 2003. This decrease was due to the recognition of a $1.5
million impairment loss for the Company's equity investment in the convertible
preferred stock of a start-up mortgage banking firm specializing in multi-state,
small builder loans. Insurance premium income increased $262,000, due to
continued growth in insurance related services. Service charges and other fees
increased $185,000 due to a larger customer base. Gain on sale of
available-for-sale securities increased $233,000 due primarily to the gain on
the sale of $25.0 million in mortgage-backed securities as part of the
restructuring of the investment portfolio.

Non-interest Expense. Total non-interest expense increased $950,000, or 15.8%,
from $6.0 million for the three months ended June 30, 2002 to $7.0 million for
the three months ended June 30, 2003. This increase was due primarily to an
increase in salaries and benefits of $658,000 due to the increased cost of
employee benefits and new employees to staff expanding lines of business. An
additional expense of $166,000 was recorded as part of the earnings restatement
to reflect increased liabilities related to the Company's employee benefit
plans. Other non-interest expense increased $306,000 due to one of the Bank's
commercial loan customers that had significant cash flow difficulty during the
quarter which required the Bank to provide cash flow and other support. The
expenses associated with the workout of this loan totaled $156,000. In late
March 2003, the Bank decided to close three retail offices, sell the buildings
occupied by two of these offices and reduce the office hours at a fourth office.
These actions are expected to result in savings of $330,000 per year beginning
with the fourth fiscal quarter of 2003. Deposit services will be provided by
nearby First Federal offices. The Company recognized a $108,000 impairment loss
in connection with the closure of these offices. Non-interest expense also
increased due to costs associated with foreclosed properties combined with
general increases in operating expenses such as supplies and telephone and other
incremental increases that resulted from operating a larger organization.
Installation of a new telephone system was completed in the Hazleton offices in
June 2003 with the remaining office installations to be completed by September
30, 2003. The new system is expected to reduce annual long distance telephone
costs by approximately $125,000 by transmitting over inter-office data lines.
Advertising costs increased $73,000 over the previous year quarter as the
Company continued the promotion of a new branding campaign. Occupancy expenses
increased $45,000 due to seasonal operating expenses such as utilities and
maintenance. The increase in non-interest expense was offset by an $89,000
decrease in professional fees due to prior year quarter engagement of
consultants to assist in the continuation of a branding campaign to integrate
all lines of business.

Income Taxes. The Company had an income tax provision of $65,000 for the three
months ended June 30, 2003, compared to a provision of $498,000 for the three
months ended June 30, 2002. This decrease was due to a decrease in income before
taxes, offset by an increase to a deferred tax asset valuation allowance related
to the Company's inability to use a charitable contribution carryforward. Even
though the Company reported a net loss before taxes for the June 2003 quarter,
it still provided for income tax expense due to the $1.5 million impairment loss
the Company recognized. Such loss is a capital loss for income tax purposes and
is not expected to result in a tax deduction for the Company.

H. Comparison of Operating Results for the Nine Months ended June 30, 2003 and
   June 30, 2002

General. The Company had net income of approximately $395,000 and $3.0 million
for the nine months ended June 30, 2003 and June 30, 2002, respectively. Basic
and diluted earnings per share were $0.10 and $0.10 per share, respectively, for
the nine months ended June 30, 2003 and $0.73 and $0.69, respectively, for the
nine months ended June 30, 2002.

Interest Income. Total interest income decreased $5.2 million, or 13.0%, from
$40.0 million for the nine months ended June 30, 2002 to $34.8 million for the
nine months ended June 30, 2003. This decrease was primarily due to a 124 basis
point decline on the tax-equivalent yield on earning assets to 5.53% for the
nine months ended June 30, 2003 as compared to 6.77% for the same period ended
2002 due to lower rates. Interest income on loans decreased $3.3 million
primarily due to a 78 basis point decrease in the yield. Interest income on
mortgage-related securities decreased $1.1 million as the yield on such
securities declined 182 basis points, offset by an increase in average balance
of $46.6 million. Rapid repayment of mortgage-backed securities has occurred
while reinvestment options are at substantially lower rates than the previous
year. Interest income on taxable investment securities decreased $784,000 as a
result of a 141 basis point decline.

                                       29
<PAGE>
Interest Expense. Interest expense decreased $2.2 million, or 10.2%, from $21.7
million for the nine months ended June 30, 2002 to $19.5 million for the nine
months ended June 30, 2003. The decrease in interest expense was primarily
attributable to a declining interest rate environment that resulted in the cost
of deposits decreasing to 2.31% for the nine months ended June 30, 2003 as
compared to 3.30% for the same period in 2002. Offsetting the declining rates
was an increase in the average balance of interest-bearing liabilities of $65.4
million to $795.9 million for the nine months ended June 30, 2003. In
particular, the average balance of interest-bearing transaction accounts
increased $77.2 million to $200.0 million. This increase was the result of the
competitively priced products being marketed throughout the Company's market
area. The decrease in interest expense on deposits of $3.0 million was primarily
due to a $3.3 million decrease in interest expense on certificates of deposit,
which was the result of a 103 basis point decrease in interest rates. Interest
expense on trust-preferred debt increased $688,000 as a result of the issuance
of $15.0 million trust-preferred securities in October 2002.

Provision for Loan Losses. The Company's provision for loan losses for the nine
months ended June 30, 2003 decreased $139,000 compared to the comparable 2002
period. Nonperforming assets at June 30, 2003 were $6.9 million, or 0.78% of
total assets, up from $4.9 million, or 0.57% of total assets as of June 30,
2002. The Company enhanced its loan servicing function to promote the prompt
resolution of delinquencies and employed a new collections and recovery manager
to address the risk of deterioration in loan quality. As a result, total
delinquencies for mortgage and consumer loans were reduced to 0.73% and 0.28% of
total loans, respectively, at June 30, 2003, from 1.13% and 0.40% at June 30,
2002. The Bank also completed a full review of its mortgage and consumer loan
portfolios and charged-off loans where the fair value of assets fell below the
book value. This analysis led to net loan charge-offs of $1.2 million for the
nine months ended June 30, 2003, compared to net loan charge-offs of $702,000
for the nine months ended June 30, 2002. Net loan charge-offs, as a percentage
of total loans for the fiscal year-to-date were 31 basis points. At June 30,
2003, delinquent commercial loans were 0.81% of total loans, an increase from
the 0.48% level at June 30, 2002.

Non-Interest Income. Non-interest income increased $2.6 million, or 48.7%, from
$5.4 million for the nine months ended June 30, 2002 to $8.1 million for the
nine months ended June 30, 2003. During the nine months ended June 30, 2003
there was an $85.3 million sale of mortgage-backed securities, which resulted in
gains on sale of securities of $1.4 million. Insurance premium income increased
$647,000 due to continued growth in insurance related services. Service charges
and other fees increased $456,000 due to a larger customer base. Gain-on-sale of
loans increased $417,000 as $35.1 million of originations of fixed-rate
mortgages, in excess of the Bank's retention policy, were sold in the nine
months ended June 30, 2003 compared to $10.6 million of such loans sold in the
same period in 2002. Non-interest income was negatively impacted by the
recognition of a $1.5 million impairment loss on an equity investment as
previously discussed in Footnote 11 to the Consolidated Financial Statements.

Non-interest Expense. Total non-interest expense increased $3.2 million, or
18.9%, from $17.1 million for the nine months ended June 30, 2002 to $20.3
million for the nine months ended June 30, 2003. This increase was due primarily
to an increase in salaries and employee benefits of $1.6 million for increased
benefit costs and new employees to staff the growth in the Company's business
lines. Other non-interest expense increased $864,000 due to the $156,000 expense
of providing cash flow support to a commercial loan customer who had significant
cash flow difficulty. Other non-interest expense increased due to an impairment
loss in connection with the closure of three bank offices as well as costs
associated with foreclosed properties combined with general increases in
operating expenses such as supplies and telephone and other incremental
increases that resulted from operating a larger organization. Advertising costs
increased $311,000 over the comparable prior year nine month period as the
Company continued the promotion of a new branding campaign. Occupancy costs
increased $284,000 period over period due to Company expansion. Professional
fees increased $192,000 as a result of increased accounting fees coupled with an
increase in consulting services during the transition between chief financial
officers.

Income Taxes. The Company had an income tax provision of $813,000 for the nine
months ended June 30, 2003, compared to a provision of $1.6 million for the nine
months ended June 30, 2002 resulting in effective tax rates of 67.3%, and 34.8%,
respectively. The decline in income tax expense was primarily attributable to a
decrease in income before taxes, offset by the increase in tax expense as a
result of an increase in a deferred tax asset valuation allowance related to the
Company's ability to use a charitable contribution carryforward. In addition,
the large increase in the effective tax rate during the nine month period ended
June 30, 2003 was due to the $1.5 million impairment loss the Company
recognized. Such loss is a capital loss for tax purposes and is not expected to
result in a tax deduction for the Company, since it can only be used to offset
capital gains.

                                       30
<PAGE>
Item 4. CONTROLS AND PROCEDURES

        (a) Evaluation of disclosure controls and procedures. The Company
        maintains controls and procedures designed to ensure that information
        required to be disclosed in the reports that the Company files or
        submits under the Securities Exchange Act of 1934 is recorded,
        processed, summarized and reported within the time periods specified in
        the rules and forms of the Securities and Exchange Commission. Based
        upon her evaluation of those controls and procedures performed June 30,
        2003, the former chief executive officer and chief financial officer of
        the Company concluded that the Company's disclosure controls and
        procedures were not effective, as further described below.

        In September 2003, the President/Chief Executive Officer and Chief
        Financial Officer resigned. A new President and CEO was appointed in
        September 2003. Also, a new Chief Financial Officer was appointed at
        that time. During September 2003, an exhaustive analysis of the
        Company's accounting records was undertaken. This review discovered
        additional accounting errors as described in Note 2 to the unaudited
        Consolidated Financial Statements included in this Quarterly Report.
        Such accounting errors required the restatement of this Quarterly Report
        on Form 10-Q/A for the June 30, 2003 period.

        During the initial preparation and review of the Form 10-Q Quarterly
        Report for the June 30, 2003 period, the Registrant discovered that its
        financial statements for its fiscal years 1998 through 2002 and for the
        December 2002 and March 2003 quarters required restatement as discussed
        under Management's Discussion and Analysis and Note 2 to the unaudited
        Consolidated Financial Statements included in this Quarterly Report. The
        Company believes that it maintained effective controls and procedures
        designed to ensure that information required to be disclosed in its
        reports filed under the Securities Exchange Act of 1934 with respect to
        those prior periods, except that the individuals responsible for
        implementing such controls and procedures, including reviewing the work
        performed and authorizing the final results, failed to detect material
        errors, including a computer coding error related to the Company's
        indirect automobile loan portfolio, which required the restatement.
        Subsequent to the discovery of the errors, Management has implemented
        staffing, system and procedural changes designed to improve the training
        of the individuals involved in implementing and reviewing the controls
        and procedures to strengthen the review and authorization process so
        that such errors do not occur in the future. These changes and the
        continuing review of prior periods have resulted in the identification
        of the errors reflected in the restatement included in this amendment to
        the Form 10-Q for June 30, 2003. The Chief Executive Officer and Chief
        Financial Officer believe that the corrective actions taken should be
        adequate to remedy the aforementioned control inadequacies.

        (b) Changes in internal controls. The Company made no significant
        changes in its internal controls or in other factors that could
        significantly affect these controls subsequent to the date of the
        evaluation of those controls by the chief executive officer, except for
        the corrective actions referred to in item (a) above.

                                       31


<PAGE>

Part II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

    (A) Exhibits

         3.1      Certificate of Incorporation of Northeast Pennsylvania
                  Financial Corp.*

         3.2      Bylaws of Northeast Pennsylvania Financial Corp.**

         4.0      Form of Stock Certificate of Northeast Pennsylvania Financial
                  Corp.*

        11.0      Statement regarding Computation of Per Share Earnings (See
                  Notes to Consolidated Financial Statements)

        31.1      Rule 13a-14(a)/15d-14(a) Certification

        32.0      Section 1350 Certification

    *  Incorporated herein by reference into this document from the Exhibits to
       Form S-1, Registration Statement, and any amendments thereto,
       Registration No. 333-43281.

    ** Incorporated herein by reference into this document from the Exhibits to
       the Form 10-K/A as filed with the Securities and Exchange Commission on
       January 8, 2003.


    (B) Reports on Form 8-K

       On April 25, 2003, the Company filed a Form 8-K in which it announced its
       financial results for the quarter ended March 31, 2003. A press release
       announcing the financial results was filed by exhibit.

                                       32

<PAGE>



                                   SIGNATURES

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




                                          NORTHEAST PENNSYLVANIA
                                          FINANCIAL CORP.


Date: December 15, 2003                   By: /s/ Thomas M. Petro
                                          -----------------------
                                          Thomas M. Petro
                                          President and  Chief Executive Officer



Date: December 15, 2003                   By: /s/ Jerry D. Holbrook
                                          -------------------------
                                          Jerry D. Holbrook
                                          Chief Financial Officer