UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q

(Mark One)

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

                For the quarterly period ended December 31, 2000

                                       or

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

For the transition period from __________________ to _________________

                         Commission File Number 1-13793

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

                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.
--------------------------------------------------------------------------------

             (Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------


DELAWARE                                                              06-1504091
--------------------------------------------------------------------------------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation 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 changes 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   __
                                                           ---------      ----

         The Registrant had 1,106,975  shares of Common Stock  outstanding as of
February 9, 2001.


<PAGE>

                                TABLE OF CONTENTS

Item
No.
                                                                            Page
                                                                          Number
PART  I - CONSOLIDATED FINANCIAL INFORMATION

Item 1   CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Statements of Financial Condition at
         December 31, 2000 (unaudited) and September 30, 2000..................1

         Consolidated Statements of Operations for the Three Months Ended
         December 31, 2000 and 1999 (unaudited)................................2

         Consolidated Statement of Comprehensive Income for the Three Months
         Ended December 31, 2000 and 1999 (unaudited)..........................3

         Consolidated  Statements  of  Changes  in Equity  for the  Years  Ended
         September  30, 2000 and 1999 and the Three  Months  Ended  December 31,
         2000
         (unaudited)...........................................................4

         Consolidated Statements of Cash Flows for the Three Months Ended
         December 31, 2000 and 1999(unaudited).................................5

         Notes to Consolidated Financial Statements (unaudited)................7


Item 2   Management's Discussion and Analysis of Financial Condition
         and Results of Operations............................................12

Item 3   Quantitative and Qualitative Disclosures about Market Risk...........16

Part II - OTHER INFORMATION

1        Legal Proceedings....................................................17

2        Changes in Securities and Use of Proceeds............................17

3        Defaults Upon Senior Securities......................................17

4        Submission of Matters to a Vote of Security Holders..................17

5        Other Information....................................................17

6        Exhibits and Reports on Form 8 - K...................................17

Signatures


<PAGE>

                     Northeast Pennsylvania Financial Corp.
                 Consolidated Statements of Financial Condition
              December 31, 2000 (unaudited) and September 30, 2000
                                 (in thousands)
<TABLE>
<S>                                                                          <C>               <C>
                                                                             December 31,      September 30,
                                                                                 2000              2000
                                                                                 ----              ----
                               Assets                                        (unaudited)

Cash and cash equivalents                                                       $ 4,638          $ 6,295
Securities available-for-sale                                                   181,866          157,474
Securities held-to-maturity (estimated fair value of $35,886 at
    December 2000 and $28,129 at September 2000)                                 36,792           30,336
Loans (less allowance for loan losses of $4,899 at December 2000 and
    $4,162 at September 2000)                                                   480,941          415,105
Accrued interest receivable                                                       6,255            5,401
Assets acquired through foreclosure                                                 206              173
Property and equipment, net                                                      10,844            9,878
Other assets                                                                     20,175           12,680
                                                                                 ------           ------
     Total assets                                                             $ 741,717        $ 637,342
                                                                              =========        =========

                       Liabilities and Equity

Deposits                                                                      $ 476,219        $ 419,671
Federal Home Loan Bank advances                                                 182,456          137,461
Other borrowings                                                                  4,079            1,654
Advances from borrowers for taxes and insurance                                     956              639
Accrued interest payable                                                          1,433            2,472
Other liabilities                                                                 2,805            2,470
                                                                                  -----            -----

     Total liabilities                                                        $ 667,948        $ 564,367
                                                                              ---------        ---------

Preferred stock ($.01 par value; 2,000,000 authorized shares;  0
    shares issued)                                                                    -                -
Common stock ($.01 par value; 16,000,000 authorized shares;
    6,427,350 shares issued)                                                         64               64
Additional paid-in capital                                                       62,159           62,164
Common stock acquired by stock benefit plans                                    (6,033)          (6,221)
Retained earnings - substantially restricted                                     34,074           33,207
Accumulated other comprehensive loss                                            (1,962)          (3,711)
Treasury stock, at cost (1,310,366 shares at December 31, 2000 and             (14,533)         (12,528)
                                                                               --------         --------
1,134,201 shares at September 30, 2000)

     Total equity                                                              $ 73,769          $72,975
                                                                               --------          -------

            Total liabilities and equity                                       $741,717        $ 637,342

                                                                               ========        =========
</TABLE>
                                       1

<PAGE>


                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statements of Operations
        For the Three Months Ended December 31, 2000 and 1999 (unaudited)
                                 (in thousands)

<TABLE>
<S>                                                                             <C>                 <C>
                                                                                For the Three months ended
                                                                                         December
                                                                                            31,
Interest Income:                                                                 2000             1999
                                                                                 ----             ----
                                                                                        (unaudited)
  Loans                                                                        $9,556             $7,290
  Mortgage-related securities                                                   1,011                914
  Investment securities:
     Taxable                                                                    1,928              1,648
    Non-taxable                                                                   462                877
                                                                                  ---                ---
     Total interest income                                                     12,957             10,729

Interest Expense:
  Deposits                                                                      5,219              3,765
  Federal Home Loan Bank advances and other                                     2,519              2,239
                                                                                -----              -----

     Total interest expense                                                     7,738              6,004

Net interest income                                                             5,219              4,725

Provision for loan losses                                                           -                205
                                                                                    -                ---


Net interest income after provision for loan losses                             5,219              4,520

Non-interest Income:
  Service charges and other fees                                                  366                315
   Other income                                                                    49                173
   Insurance premium income                                                        77                 58
   Gain (loss) on sale of:
     Real estate owned                                                            (6)               (40)
     Loans                                                                        477                  9
    Available-for-sale securities                                               (182)               (14)
    Fixed assets                                                                 (75)                  -
                                                                                 ----                  -
      Total non-interest income                                                   706                501

Non-interest Expense:
  Salaries and net employee benefits                                            2,111              1,967
  Occupancy costs                                                                 578                469
  Data processing                                                                 170                122
  Professional fees                                                               197                158
  Federal Home Loan Bank service charges                                          181                165
  Other                                                                           875                831
                                                                                  ---                ---

     Total non-interest expense                                                 4,112              3,712

Income before income taxes                                                      1,813              1,309

Income taxes                                                                      522                163
                                                                                  ---                ---


Net income                                                                    $ 1,291            $ 1,146
                                                                              =======            =======

Earnings per share - basic                                                    $ 0.28             $ 0.22
                                                                              ======             ======
Earnings per share - diluted                                                  $ 0.27             $ 0.22
                                                                              ======             ======
</TABLE>
                                       2

<PAGE>


                     Northeast Pennsylvania Financial Corp.
                 Consolidated Statements of Comprehensive Income
        For the Three Months Ended December 31, 2000 and 1999 (unaudited)
                      (in thousands, except per share data)
<TABLE>
<S>                                                                             <C>                 <C>

                                                                               For the Three Months Ended
                                                                                     December 31,
                                                                                 2000               1999
                                                                                 ----               ----
                                                                                      (unaudited)
Net Income                                                                   $ 1,291            $ 1,146

Other  comprehensive  income  (loss),  net of tax
Unrealized  gains (losses) on securities:
    Unrealized holding gains (losses) arising during the period              $ 1,629          $ (2,320)
    Less:  Reclassification adjustment for gains included in net
      income                                                                   (120)                (9)
                                                                               -----                ---
Other comprehensive income (loss)                                            $ 1,749          $ (2,311)
Comprehensive income (loss)                                                  $ 3,040          $ (1,165)
                                                                             =======          =========
</TABLE>
                                       3



<PAGE>


                     Northeast Pennsylvania Financial Corp.
                  Consolidated Statements of Changes in Equity
           For the Three Years Ended September 30, 2000, 1999 and 1998
            and the Three Months Ended December 31, 2000 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                           <C>         <C>          <C>           <C>       <C>           <C>         <C>

                                                                         Common Stock            Accumulated
                                                           Additional    Acquired by                Other
                                               Common       Paid In     stock benefit  Retained Comprehensive  Treasury     Total
                                               Stock        Capital         plans      Earnings  income(loss)   Stock      Equity

Balance September 30, 1997                   $     -       $     -      $      -       $ 27,255   $  1,283     $     -    $ 28,538

Issuance of Common Stock ($.01 par value;
     16,000,000 authorized shares;
     6,427,350 shares issued)                     64                                                                            64
Additional paid-in Capital                                  61,959                                                          61,959
Unearned Employee Stock Ownership
     Plan (ESOP) shares                                                   (5,142)                                           (5,142)
ESOP shares committed to be released                           124           343                                               467
Net changes in gains (losses) on
     securities available for sale, net of tax                                                       1,595                   1,595

Net loss                                                                                    (47)                               (47)
                                            --------      --------      --------       --------   --------    --------    --------
Balance September 30, 1998                    $   64      $ 62,083      $ (4,799)      $ 27,208   $  2,878     $     -    $ 87,434

Unearned stock awards                                                     (3,312)                                           (3,312)
ESOP shares committed to be released                            77           557                                               634
Stock awards                                                   (41)          488                                               447
Net changes in gains (losses) on
securities available for sale, net of tax                                                           (5,752)                 (5,752)
Treasury stock at cost, (626,667 shares)                                                                        (7,585)     (7,585)
Cash dividend paid                                                                         (955)                              (955)
Net income                                                                                4,565                              4,565
                                            --------      --------      --------       --------   --------    --------    --------
Balance September 30, 1999                  $     64      $ 62,119      $ (7,066)      $ 30,818   $ (2,874)   $ (7,585)   $ 75,476

ESOP shares committed to be released                            89           328                                               417
Stock awards                                                   (44)          517                                               473
Net changes in gains (losses) on
securities available-for-sale, net of tax                                                             (837)                   (837)
Treasury stock at cost, (507,534 shares)                                                                        (4,943)     (4,943)
Cash dividend paid                                                                       (1,547)                            (1,547)
Net income                                                                                3,936                              3,936
                                            --------      --------      --------       --------   --------    --------    --------
Balance,  September 30, 2000                $     64      $ 62,164      $ (6,221)      $ 33,207   $ (3,711)   $(12,528)   $ 72,975
                                            ========      ========      ========       ========   ========    ========    ========

ESOP shares committed to be released                             6            57                                                63
Stock awards                                                   (11)          131                                               120
Net changes in gains (losses) on
securities available-for-sale, net of tax                                                            1,749                   1,749
Treasury stock at cost, (176,165 shares)                                                                        (2,005)     (2,005)
Cash dividend paid                                                                         (424)                              (424)
Net income                                                                                1,291                              1,291
                                            --------      --------      --------       --------   --------    --------    --------
Balance, December 31,  2000                 $     64      $ 62,159      $ (6,033)      $ 34,074   $ (1,962)   $(14,533)   $ 73,769
                                            ========      ========      ========       ========   ========    ========    ========

</TABLE>
                                       4






<PAGE>


                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statements of Cash Flows
        For the Three Months Ended December 31, 2000 and 1999 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                                        <C>            <C>
                                                                                          For the Three Months Ended
                                                                                                 December 31,
                                                                                             2000           1999
                                                                                             ----           ----
Operating Activities:                                                                            (unaudited)
Net Income                                                                                 $1,291          $ 1,146
Adjustments to reconcile net income to net cash provided by operating activities:
  Provision for REO loss                                                                       39               10
  Provision for loan losses                                                                     -              205
  Depreciation                                                                                329              275
  Deferred income tax provision                                                                59              584
  ESOP expense                                                                                 64              213
  Stock award expense                                                                         119              145
  Amortization and accretion on:
     Held-to-maturity securities                                                              (2)                -
     Available-for-sale securities                                                          (444)               19
  Amortization of deferred loan fees                                                        (148)             (65)
(Gain) loss on sale of:
     Assets acquired through foreclosure                                                        6               40
     Loans                                                                                  (477)              (9)
     Available-for-sale securities                                                            182               14
  Changes in assets and liabilities:
    Increase in accrued interest receivable                                                 (854)            (450)
    Increase in other assets                                                              (8,651)            (234)
    Increase (decrease) in accrued interest payable                                       (1,039)               82
    Decrease in accrued income taxes payable                                                (311)            (519)
    Increase in other liabilities                                                             646              442
                                                                                              ---              ---

      Net cash provided by (used in) operating activities                                $(9,191)           $1,898

Investing Activities:
Net increase in loans                                                                   $(66,425)        $(19,732)
Proceeds from sale of:
  Available-for-sale securities                                                            33,489            1,048
  Assets acquired through foreclosure                                                         101               22
  Loans                                                                                     1,035              653
Proceeds from repayments of held-to-maturity securities                                         -                2
Proceeds from repayments of available-for-sale securities                                   2,448            2,061
Purchase of:
  Held-to-maturity securities                                                             (6,454)                -
  Available-for-sale securities                                                          (49,146)          (9,557)
  Office properties and equipment                                                         (1,295)             (68)
  Federal Home Loan Bank stock                                                            (8,075)          (1,450)
                                                                                          -------          -------

Net cash used in investing activities                                                   $(94,322)        $(27,021)

Financing Activities:
  Net increase (decrease) in deposit accounts                                             $56,548           $(825)
  Net decrease in Federal Home Loan Bank short-term advances                                    -         (13,000)
  Borrowings of Federal Home Loan Bank long-term advances                                  75,000           40,000
  Repayments of Federal Home Loan Bank long-term advances                                (30,005)              (5)
  Net increase (decrease) in advances from borrowers for taxes and insurance                  317            (165)

</TABLE>
                                       5

<PAGE>


                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statements of Cash Flows
        For the Three Months Ended December 31, 2000 and 1999 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                                       <C>            <C>
                                                                                           For the Three Months
                                                                                            Ended December 31,

                                                                                             2000        1999
                                                                                                (unaudited)
    Net increase in other borrowings                                                      $2,425               -
    Purchase of treasury stock                                                            (2,005)         (1,428)
    Cash dividend on common stock                                                           (424)           (348)
                                                                                            -----           -----

     Net cash provided by financing activities                                           $101,856         $24,229

Decrease in cash and cash equivalents                                                     (1,657)           (894)

Cash and cash equivalents, beginning of year                                                6,295           4,177
                                                                                            -----           -----

Cash and cash equivalents, end of year                                                     $4,638          $3,283
                                                                                           ======          ======

Supplemental  disclosures of cash flow information:  Cash paid during the period
  for:
     Interest                                                                              $8,777          $5,922
                                                                                           ======          ======
     Income taxes                                                                              $6             $97
                                                                                               ==             ===
Supplemental disclosure - non-cash and financing information:
  Transfer from loans to real estate owned                                                   $172            $191
                                                                                             ====            ====
  Net change in unrealized losses on securities
   available-for-sale, net of tax                                                          $1,749        $(2,311)
                                                                                           ======        ========

</TABLE>
                                       6


<PAGE>


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

1.        Summary of Significant Accounting Policies

          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 generally accepted accounting principles. However, all
          normal recurring adjustments which, in the opinion of management,  are
          necessary for a fair  presentation of the financial  statements,  have
          been  included.   These  financial   statements   should  be  read  in
          conjunction  with  the  audited  financial  statements  and the  notes
          thereto  included in the Company's  Annual Report for the period ended
          September  30, 2000.  The results for the three months ended  December
          31, 2000 are not  necessarily  indicative  of the results  that may be
          expected for the year ended September 30, 2001.

          Business

               Northeast  Pennsylvania  Financial  Corp.  (the "Company") is the
          holding  company  for First  Federal  Bank.  The  Company's  principal
          subsidiary,  First  Federal  Bank,  serves  Northeastern  and  Central
          Pennsylvania through thirteen full service office locations and a loan
          production  office. The Bank provides a wide range of banking services
          to individual  and corporate  customers.  The Company and the Bank are
          subject to competition  from other  financial  institutions  and other
          companies that provide  financial  services.  The Company and the Bank
          are subject to the regulations of certain federal agencies and undergo
          periodic examinations by those regulatory authorities.

          Principles of Consolidation and Presentation

          The  accompanying  financial  statements  of the  Company  include the
          accounts  of  First  Federal  Bank,   Abstractors,   Inc.,   Northeast
          Pennsylvania Trust Co. and FIDACO, Inc.. First Federal Bank, Northeast
          Pennsylvania  Trust  Co.,  and  Abstractors,  Inc.,  are  wholly-owned
          subsidiaries of Northeast  Pennsylvania  Financial Corp.  Abstractors,
          Inc. is a title insurance  agency.  Northeast  Pennsylvania  Trust Co.
          offers trust, estate and asset management  services and products.  All
          material  inter-company balances and transactions have been eliminated
          in  consolidation.   Prior  period  amounts  are  reclassified,   when
          necessary,  to conform with the current year's  presentation.  FIDACO,
          Inc.  is an inactive  subsidiary  of First  Federal  Bank and its only
          major  asset  is  an  investment  in  Hazleton  Community  Development
          Corporation.

          As  of  the  close  of  business  on  December  31,  2000,   Northeast
          Pennsylvania  Financial Corp.  acquired Higgins Insurance  Associates,
          Inc. The insurance agency is  headquartered in Pottsville,  PA and has
          been servicing  customers  throughout  Schuylkill and Luzerne counties
          since 1946. No financial  information was consolidated in the December
          31,  2000  figures,  due  to  the  timing  and  immateriality  of  the
          transaction.

                                       7

<PAGE>


          Earnings per Share

          Earnings  per share (EPS),  basic and  diluted,  were $0.28 and $0.27,
          respectively, for the three months ended December 31, 2000 compared to
          $0.22 and $0.22, respectively, for the three months ended December 31,
          1999.

          The following table presents the  reconciliation of the numerators and
          denominators of the basic and diluted EPS computations.
<TABLE>
<S>                                                              <C>                 <C>
                                                                        Three months ended
                                                                            December 31,
                                                                         2000           1999
                                                                         ----           ----
                                                                             (unaudited)
                                                              (Dollars in thousands, except per share data)
       Basic:

       Net Income                                                      $1,291           $1,146
                                                                       ======           ======

       Weighted average shares outstanding                          4,527,415        5,003,096
       Plus:  ESOP shares released
          or committed to be released                                 147,829           96,411
                                                                      -------           ------

                                                                    4,675,244        5,099,507

       Earnings per share  - basic                                      $0.28            $0.22
                                                                        =====            =====
</TABLE>
<TABLE>
<S>                                                                   <C>            <C>

                                                                       Three months ended
                                                                           December 31,
                                                                      2000             1999
                                                                      ----             ----
                                                                           (unaudited)
                                                        (Dollars in thousands, except per share data)

        Diluted (1):

        Net Income                                                   $1,291          $1,146
                                                                     ======          ======

        Basic weighted shares outstanding                         4,675,244       5,099,507
        Dilutive Instruments:
          Dilutive effect of outstanding stock options                2,164               -
          Dilutive effect of stock awards                           153,204         193,466
                                                                    -------         -------
                                                                  4,830,612       5,292,973

        Earnings per share - diluted                                  $0.27           $0.22
                                                                      =====           =====
<FN>

          The Company had 424,806 and 513,476 anti-dilutive common stock options
          outstanding  as of  December  31, 2000 and 1999,  respectively.  These
          options are not included in the  calculations of diluted  earnings per
          share for the periods presented.

          (1) Diluted  earnings  per share  include the  dilutive  effect of the
          Company's weighted average stock options/awards  outstanding using the
          Treasury Stock method.
</FN>
</TABLE>

          2. Conversion to Stock Form of Ownership

          The Company is a business  corporation  formed at the direction of the
          Bank under the laws of  Delaware on December  16,  1997.  On March 31,
          1998, the Company issued  6,427,350  shares,  par value $.01 per share
          (the "Common Stock"), including 514,188

                                       8
<PAGE>


          shares to the Bank's  Employee Stock  Ownership Plan and related trust
          ("ESOP") and a  contribution  of 476,100 shares of Common Stock to The
          First Federal Charitable Foundation (the "Foundation"). The Conversion
          resulted in net  proceeds  of $52.1  million,  after  expenses of $2.2
          million.

          The  Bank  established  a  liquidation  account  at  the  time  of the
          Conversion  in an  amount  equal  to  the  equity  of the  Bank  as of
          September 30, 1997. In the unlikely event of a complete liquidation of
          the  Bank,  (and  only in  such an  event),  eligible  depositors  who
          continue to maintain accounts at the Bank shall be entitled to receive
          a  distribution  from  the  liquidation  account.  The  amount  of the
          liquidation  account  decreases to the extent the balances of eligible
          deposits decrease.  The liquidation account  approximated $6.8 million
          at September 30, 2000.

          The Company may not  declare  nor pay  dividends  on its stock if such
          declaration   and  payment  would  violate   statutory  or  regulatory
          requirements.

          In addition to the 16,000,000  authorized  shares of Common Stock, the
          Company  authorized  2,000,000  shares of  preferred  stock with a par
          value of  $0.01  per  share  (the  "Preferred  Stock").  The  Board of
          Directors is authorized, subject to any limitations by law, to provide
          for the  issuance  of the  shares of  Preferred  Stock in  series,  to
          establish  from time to time the  number of shares to be  included  in
          each such series, and to fix the designation,  powers, preferences and
          rights  of the  shares  of each such  series  and any  qualifications,
          limitations or  restriction  thereof.  As of December 31, 2000,  there
          were no shares of Preferred Stock issued.

3.  Securities
     Securities are summarized as follows:
<TABLE>
<S>                                                  <C>              <C>            <C>            <C>
                                                                                      December 31, 2000
                                                                                      -----------------
                                                                                       (in thousands)
                                                                        Gross         Gross
                                                     Amortized        Unrealized    Unrealized          Fair
                                                        Cost            Gains         Losses            Value
Available-for-sale securities:

   Municipal securities                                $34,510          $17            $(986)         $33,541
   Obligations of U.S. Government agencies              18,913           30             (253)          18,690
   Mortgage-related securities                          81,280          227             (525)          80,982
   Trust Preferred securities                           13,724            -           (2,069)          11,655
   Corporate Bonds                                      23,870          178               (1)          24,047
                                                        ------          ---            ------        --------
     Total debt securities                             172,297          452           (3,834)         168,915
                                                       -------          ---            ------        --------

   FHLB stock                                            9,123            -                 -           9,123
   Freddie Mac stock                                       514          313                 -             827
   Fannie Mae stock                                      1,000            8                 -           1,008
   Other equity securities                               2,134           55             (196)           1,993
                                                         -----         ----            ------        --------

     Total equity securities                            12,771          376             (196)          12,951
                                                        ------          ---             -----          ------
           Total                                      $185,068         $828          $(4,030)        $181,866
                                                      ========         ====          ========        ========

Held-to-maturity securities:

   Municipal securities                                 $3,551           $-            $(168)          $3,383
   Obligations of U.S. government agencies              29,781            3             (741)          29,043
   Other equity  securities                              3,460            -                 -           3,460
                                                         -----         ----           -------         -------

           Total                                       $36,792           $3            $(909)        $35,886
                                                       =======           ==            ======        =======

</TABLE>

                                      9
<PAGE>

<TABLE>
<S>                                                    <C>          <C>              <C>               <C>
                                                                                   SEPTEMBER 30, 2000
                                                                                   ------------------
                                                                                     (in thousands)
                                                                       Gross           Gross
                                                       Amortized    Unrealized      Unrealized          Fair
                                                          Cost         Gains          Losses           Value
                                                       ---------    ----------      ----------         -----
Available-for-sale securities:

   Municipal securities                                 $35,503          $-          $(2,471)         $33,032
   Obligations of U.S. Government agencies               39,477           -           (1,404)          38,073
   Mortgage-related securities                           53,810          88             (822)          53,076
   Trust Preferred securities                            13,729           -           (2,296)          11,433
   Corporate Bonds                                       11,407          22              (13)          11,416
                                                         ------         ---           -------        --------
     Total debt securities                              153,926         110           (7,006)         147,030
                                                        -------         ---           -------        --------

   FHLB stock                                             6,873           -                 -           6,873
   Freddie Mac stock                                        910         350                 -           1,260
   Fannie Mae stock                                       1,000           3                 -           1,003
   Other equity securities                                  813         497               (2)           1,308
                                                            ---         ---               ---           -----

     Total equity securities                              9,596         850               (2)          10,444
                                                          -----         ---               ---          ------
           Total                                       $163,522        $960          $(7,008)        $157,474
                                                       ========        ====          ========        ========

Held-to-maturity securities:

   Municipal securities                                  $3,551          $-            $(328)          $3,223
   Obligations of U.S. government agencies               26,785           -           (1,879)          24,906
                                                         ------          --          --------        --------

           Total                                        $30,336          $-          $(2,207)         $28,129
                                                        =======          ==          ========        ========
</TABLE>

4.       Loans

        Loans are summarized as follows:
<TABLE>
<S>                                                               <C>                     <C>
                                                                  December 31,             September 30,
                                                                      2000                     2000
                                                                      ----                     ----
                                                                  (unaudited)
                                                                        (Dollars in thousands)
        Real Estate loans:
          One-to four-family                                          $239,442               $205,790
          Multi-family and commercial                                   63,030                 52,669
          Construction                                                   6,774                  3,152
                                                                         -----                  -----
        Total real estate loans                                        309,246                261,611
                                                                       -------                -------

        Consumer Loans:
          Home equity loans and lines of credit                         80,956                 72,416
          Automobile                                                    55,198                 50,941
          Education                                                      3,726                  3,516
          Unsecured lines of credit                                      1,881                  1,817
          Other                                                         10,685                  8,021
                                                                        ------                  -----
        Total consumer loans                                           152,446                136,711
                                                                       -------                -------
        Commercial loans                                                25,812                 22,481
                                                                        ------                 ------
        Total loans                                                    487,504                420,803
                                                                       -------                -------
          Less:
             Allowance for loan losses                                 (4,899)                 (4,162)
             Deferred loan origination fees                            (1,664)                 (1,536)
                                                                       -------                -------
        Total loans, net                                              $480,941               $415,105
                                                                      ========               ========

</TABLE>
                                       10

<PAGE>



         The  activity  in the  allowance  for loan  losses  is as  follows  (in
thousands):
<TABLE>
<S>                                               <C>                      <C>                          <C>
                                                 For the three                                            For the three
                                                 months ended              For the year ended             months ended
                                               December 31, 2000           September 30, 2000           December 31, 1999
                                               -----------------           ------------------           -----------------
                                                 (unaudited)                                               (unaudited)
         Balance, beginning of period                $4,162                      $2,924                       $2,924
         Additional allowance from
          acquisition                                   817                           -                            -
         Charge-offs                                   (82)                       (247)                         (38)
         Recoveries                                       2                          18                            1
         Provision for loan losses                        -                       1,467                          205
                                                          -                       -----                          ---
         Balance, end of period                      $4,899                      $4,162                       $3,092
                                                     ======                      ======                       ======
</TABLE>

5.       Deposits

         Deposits consist of the following major classifications (in thousands):
<TABLE>
<S>                                                                   <C>        <C>              <C>      <C>
                                                                    December 31, 2000           September 30, 2000
                                                                    -----------------           ------------------
                                                                         (unaudited)
                                                                                 Percent                     Percent
                                                                      Amount     of Total          Amount    of Total
                                                                    --------     --------        --------    --------
        Savings accounts (passbook, statement, clubs)                $91,336       19.18%         $70,369      16.77%
        Money market accounts                                         33,946        7.13%          31,635       7.54%
        Certificates of deposit less than $100,000                   222,791       46.78%         180,775      43.08%
        Certificates of deposit greater than $100,000(1)              60,083       12.62%          81,847      19.50%
        NOW Accounts                                                  45,281        9.51%          37,781       9.00%
        Non-interest bearing deposits                                 22,782        4.78%          17,264       4.11%
                                                                      ------        -----          ------       -----
        Total deposits at end of period                             $476,219      100.00%        $419,671     100.00%
                                                                    ========      =======        ========     =======

<FN>

         (1) Deposit balances in excess of $100,000 are not federally insured.
</FN>
</TABLE>
                                       11

<PAGE>



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

In  addition  to  historical   information,   this  10-Q  may  include   certain
forward-looking  statements  based  on  current  management  expectations.   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.  Further  description of the risks and uncertainties to the business are
included in detail in Section B, Management  Strategy;  and Section D, Liquidity
and Capital Resources.

A.       General

The  Company is the holding  company  for First  Federal  Bank (the  "Bank"),  a
federally chartered capital stock savings bank regulated by the Office of Thrift
Supervision  ("OTS").  The Company transacts business primarily through the Bank
and to a lesser extent through Abstractors and Northeast  Pennsylvania Trust Co.
The Bank's results of operations are dependent primarily 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.  Results of operations are also affected by the Bank's provision
for loan losses, loan and security sales,  service charges and other fee income,
and non-interest  expense.  The Bank's non-interest expense principally consists
of compensation and employee  benefits,  office occupancy and equipment expense,
professional  fees,  federal deposit insurance  premiums,  data processing,  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.

B.       Management Strategy

The Bank's operating strategy is that of a community-based bank, offering a wide
variety of products to its retail customers,  while concentrating on residential
and  construction  lending and, to a lesser extent,  consumer  lending and small
business  and  municipal  commercial  lending.  In  order to  promote  long-term
financial strength and profitability,  the Bank's operating strategy has focused
on: (i) maintaining strong asset quality by originating one-to four-family loans
in its market area; (ii) increasing profitability by emphasizing higher-yielding
consumer  and  commercial  loans;  (iii)  managing  its  interest  rate  risk by
emphasizing   consumer  and  commercial  loans,  in  addition  to  shorter-term,
fixed-rate, one-to four-family 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 ("FHLB"); and investing in investment and mortgage-related securities
having  shorter  estimated  durations;  (iv)  meeting the  banking  needs of its
customers  through  expanded  products and improved  delivery  systems by taking
advantage of  technological  advances;  and (v) maintaining a strong  regulatory
capital position.

                                       12
<PAGE>

During the quarter the Bank  continued to diversify and expand its loan products
to better  serve its  customer  base by placing a greater  emphasis  on consumer
lending   and   commercial   lending,   primarily   to  small   businesses   and
municipalities.

C.       Non-Performing Assets and Impaired Loans

The following  table presents  information  regarding the Bank's  non-performing
loans,  real estate owned and other  repossessed  assets at the dates  indicated
(dollars in thousands):
<TABLE>
<S>                                                                        <C>                      <C>
                                                                          December 31,             September 30,
                                                                             2000                       2000
                                                                             ----                       ----
                                                                          (unaudited)
Non-performing loans:
 Non-accrual loans plus other impaired loans                                  $4,876                  $3,499
Real estate owned and other repossessed assets                                   206                     173
                                                                                 ---                     ---
     Total non-performing assets                                              $5,082                  $3,672
                                                                              ======                  ======

         Total non-performing loans as a percentage of total loans             1.00%                   0.83%
         Total non-performing assets as a percentage of total assets            .69%                   0.58%

<FN>

The increase in  non-performing  assets was  primarily  the result of additional
delinquencies associated with the Security Savings acquisition.
</FN>
</TABLE>

D.       Liquidity and Capital Resources

The Bank's  primary  sources of funds on a long-term  and  short-term  basis are
deposits,   principal  and  interest  payments  on  loans,  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 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 has continued to maintain
the  required  levels  of liquid  assets as  defined  by OTS  regulations.  This
requirement  of the  OTS,  which  may be  varied  at the  direction  of the  OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term  borrowings.  The Bank's current  required  liquidity
ratio is 4.0%. At December 31, 2000 and 1999, the Bank's  liquidity  ratios were
8.5% and 5.1%, respectively.

At  December  31,  2000,  the  Bank  exceeded  all  of  its  regulatory  capital
requirements  with a tangible  capital level of $48.4 million,  or 6.7% of total
adjusted assets,  which is above the required level of $10.8 million, or 1.5%; a
core capital level of $48.4 million, or 6.7% of total adjusted assets,  which is
above the required level of $21.7 million,  or 3.0%; and a risk-based capital of
$53.5 million,  or 12.4% of  risk-weighted  assets,  which is above the required
level of $33.6 million, or 8.0%.

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  December  31,  2000,  cash and cash
equivalents and investment and  mortgage-related  securities  available-for-sale
totaled $186.6 million, or 25.2% of total assets.

                                       13
<PAGE>

The Bank has other sources of liquidity if a need for  additional  funds arises,
including  FHLB  advances.  At December 31, 2000, the Bank had $182.5 million in
advances  outstanding from the FHLB, and had an overall borrowing  capacity from
the FHLB of $285.2  million.  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.

At December 31, 2000,  the Bank had  commitments to originate and purchase loans
and unused outstanding lines of credit and undisbursed  proceeds of construction
mortgages  totaling  $49.8  million.  The  Bank  anticipates  that it will  have
sufficient  funds  available to meet these  commitments.  Certificate  accounts,
including  Individual  Retirement Account ("IRA") and KEOGH accounts,  which are
scheduled to mature in less than one year from December 31, 2000, totaled $169.9
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 December  31, 2000,  the
Bank had $48.8 million in jumbo certificates, the majority of which are deposits
from local school districts and municipalities.

At December 31, 2000, the Bank had total equity,  determined in accordance  with
generally accepted  accounting  principles,  of $55.7 million, or 7.7%, of total
assets,  which approximated the Bank's regulatory  tangible capital at that date
of 6.7% of assets.  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.

E. Comparison of Financial Condition at December 31, 2000 and September 30, 2000

On November  10, 2000  Northeast  Pennsylvania  Financial  Corp.  completed  its
acquisition of Security of Pennsylvania Financial Corp. ("Security Savings") for
$17.50 per share in a  transaction  accounted  for using the purchase  method of
accounting.

As a result of the  acquisition  of Security  Savings in  November of 2000,  the
asset base increased $104.4 million from $637.3 million at September 30, 2000 to
$741.7  million at  December  31,  2000.  The  growth  was in loans  receivable,
investment securities and other assets.

Securities classified as available-for-sale  securities increased $24.4 million,
from $157.5  million at  September  30, 2000 to $181.9  million at December  31,
2000. The increase was primarily attributable to the purchase of mortgage backed
securities utilizing proceeds from the sale of mortgage loans.

Loans  increased  $65.8 million to $480.9 million at December 31, 2000. This was
primarily due to the loans obtained from the Security Savings  acquisition.  The
largest  increase was in one-to  four-family  real estate loans which  increased
$33.7  million,  as a result of $61.6  million of loans  acquired  from Security
Savings,  offset by the sale of $30.0  million of Security  Savings'  fixed rate
mortgage  loans.  In  addition,  consumer  loans  increased  $15.7  million  and
multi-family and commercial real estate loans increased $10.4 million

Other assets  increased  $7.5 million to $20.2 million at December 31, 2000 as a
result of a core  deposit  intangible  of $7.7  million  created by the Security
Savings  acquisition.  The core deposit intangible is being amortized to expense
on an accelerated basis over a 13 to 31 year life.

                                       14
<PAGE>

FHLB advances  increased $45.0 million from $137.5 million at September 30, 2000
to $182.5  million  at  December  31,  2000.  This was a result of  management's
utilization of FHLB borrowings to fund the purchase of Security Savings.

Total equity  increased  $794,000 to $73.8  million at December  31, 2000.  This
increase in equity resulted primarily from a $1.7 million net of tax decrease in
unrealized  losses on securities  reflected in accumulated  other  comprehensive
income,  along with  retention  of earnings  for the period.  This  increase was
partially  offset by the purchase of an  additional  176,000  shares  during the
quarter at a cost of $2.0 million.

F.  Comparison of Operating Results for the Three Months ended December 31, 2000
    and December 31, 1999

General.  The Company had net income of $1.3  million for the three months ended
December 31,  2000,  compared to net income of $1.1 million for the three months
ended  December 31, 1999, an increase of $145,000,  or 12.7%.  This increase was
primarily  attributable  to a $2.2  million rise in interest  income,  offset by
increases  in interest  expense  and  non-interest  expense of $1.7  million and
$400,000, respectively.

Interest Income.  Total interest income increased $2.2 million,  or 20.8%,  from
$10.7 million for the three months ended  December 31, 1999 to $12.9 million for
the three months ended  December 31,  2000.  This was  primarily  due to a $72.0
million,  or 12.0%,  increase in the average balance of interest earning assets.
Specifically,  interest income on loans increased $2.3 million from $7.3 million
for the period ended  December 31, 1999 to $9.6 million.  This was due to a $1.3
million increase in interest income on real estate loans, due to a $57.8 million
increase  in the average  balance of these  loans.  Interest  income on consumer
loans increased  $834,000 due to a $29.5 million increase on the average balance
of these loans.

Interest Expense.  Interest expense increased $1.7 million,  or 28.9%, from $6.0
million for the three  months  ended  December  31, 1999 to $7.7 million for the
three months ended December 31, 2000. The  contributing  factor for the increase
in  interest  expense  was a  $1.1  million  increase  in  interest  expense  on
certificates of deposit, which was the result of a $44.5 million increase in the
average balance of these accounts.  Interest  expense on FHLB advances and other
borrowings  increased  $280,000 due to a 88 basis point  increase in the average
rate.

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
December  31,  2000  decreased  $205,000.  Based  on an  analysis  of  the  loan
portfolio,  including  loans acquired from Security  Savings,  the allowance for
loan losses was deemed to be at a sufficient  level at December  31,  2000.  The
allowance is maintained at a level that management considers adequate to provide
for estimated losses based upon an evaluation of known and inherent risks in the
loan portfolio.  Loan losses,  other than those incurred on loans held for sale,
are  charged  directly  against  the  allowance  and  recoveries  on  previously
charged-off loans are added to the allowance.  Management's  evaluation is based
upon,  among other  things,  delinquency  trends,  the volume of  non-performing
loans, prior loss experience of the portfolio,  current economic conditions, and
other  relevant  factors.  Although  management  believes  it has  used the best
information  available  to  it in  making  such  determinations,  and  that  the
allowance for loan losses is adequate,  future  adjustments to the allowance may
be necessary,  and net income may be adversely affected if circumstances  differ
substantially  from  the  assumptions  used  in  determining  the  level  of the
allowance.  In addition,  various  regulatory  agencies,  as an integral part of
their examination

                                       15
<PAGE>

process,  periodically  review the Bank's  allowance  for losses on loans.  Such
agencies may require the Bank to recognize  additions to the allowance  based on
their  judgements  about  information  available  to them at the  time of  their
examination.

Non-interest  Income.  Non-interest  income increased  $205,000 from $501,000 to
$706,000,  for the three  months  ended  December  31,  2000.  The  increase  in
non-interest income was primarily due to a gain on the sale of Security Savings'
fixed rate mortgage loans,  offset in part by a loss on the sale of investments,
and a $75,000 loss on fixed assets.  Other income decreased $124,000 largely due
to losses derived from our investment in Buildersfirst.com.  Service charges and
other fees increased  $51,000 due to additional  branches and a larger  customer
base.

Non-interest Expense. Total non-interest expense increased from $3.7 million for
the three  months  ended  December 31, 1999 to $4.1 million for the three months
ended  December 31,  2000.  This  increase  was due  primarily to an increase in
compensation  and  employee  benefits  of  $144,000,  for  additional  Northeast
Pennsylvania  Trust Co. employees and new staff from the acquisition of Security
Savings,  combined  with  regular  increases  in  salaries.  Occupancy  expenses
increased  $109,000  due to  general  utility  expense  increases,  as well  as,
additional  expenses  associated with properties acquired from Security Savings.
Data processing  increased  $48,000 due to an increase in an annual  maintenance
contract. Other non-interest expense increased $44,000 due to an increase in the
provision for repossessed  assets  combined with general  increases in operating
expenses such as supplies and telephone.  Professional fees increased $39,000 as
a result of a technology study.

Income Taxes.  The Company had an income tax provision of $522,000 for the three
months  ended  December  31,  2000,  compared to a provision of $163,000 for the
three months ended  December 31, 1999 resulting in effective tax rates of 28.8%,
and 12.5%, respectively. The change in income tax expense was attributable to an
increase in income  before  taxes,  as well as, an increase in the effective tax
rate as a direct result of the sale of tax-exempt municipal securities.


                                       16
<PAGE>


Item 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  As of December 31, 2000,  there have been no material  changes
                  in the quantative  and  qualitative  disclosures  about market
                  risks  presented in the  Company's  Annual Report on Form 10-K
                  for the fiscal year ended September 30, 2000.

                                       17
<PAGE>


Part II - OTHER INFORMATION

Item 1.           Legal Proceedings

                  The Company is not involved in any pending  legal  proceedings
                  other than routine legal proceedings occurring in the ordinary
                  course of business.  Such routine  legal  proceedings,  in the
                  aggregate,  are believed by management to be immaterial to the
                  Company's financial condition or results of operation.

Item 2.           Changes in Securities and Use of Proceeds

                  Not applicable.

Item 3.           Defaults Upon Senior  Securities

                  Not applicable.

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

                  None.

Item 5.           Other information

                  Not applicable.

Item 6.           Exhibits and Reports on Form 8-K

(A)      Exhibits

3.1      Certificate of Incorporation of Northeast Pennsylvania Financial Corp.*

3.2      Bylaws (as amended, effective December 29, 2000) of Northeast
         Pennsylvania Financial Corp.*

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

10.7     Form of Proposed Employment Agreement between Northeast Pennsylvania
         Financial Corp. and certain executive officers*

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

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

(B)      Reports on Form 8-K


On November 1, 2000,  the Company  filed an 8-K to announce its earnings for the
quarter  and  year  ended  September  30,  2000,  the  resumption  of its  stock
repurchase program and that it had

                                      18
<PAGE>
entered  into a letter of intent  to  acquire  an  insurance  agency.  The press
release announcing these items was filed by exhibit.

On November 21, 2000,  the Company filed an 8-K to announce the  acquisition  of
Security  of  Pennsylvania  Financial  Corp.  and its  wholly-owned  subsidiary,
Security  Savings  Association  of Hazelton.  The press release  announcing  the
completion of the acquisition was filed by exhibit.

                                       19
<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:    February 14, 2001                         By: /s/ E. Lee Beard
                                                   E. Lee Beard
                                                   President and Chief Executive
                                                   Officer

Date:    February 14, 2001                         By: /s/ Patrick J. Owens, Jr.
                                                   Patrick J. Owens, Jr.
                                                   Treasurer

<PAGE>

                     NORTHEAST PENNSYLVANIA FINANCIAL CORP.

                                     BYLAWS

                            ARTICLE I - STOCKHOLDERS

         Section 1.        Annual Meeting.
         ---------         --------------

         An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the  transaction of such other business
as may properly  come before the meeting,  shall be held at such place,  on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within  thirteen  (13)  months  subsequent  to the later of the date of
incorporation or the last annual meeting of stockholders.

         Section 2.        Special Meetings.
         ---------         ----------------

         Subject  to the  rights  of the  holders  of any  class  or  series  of
preferred  stock of the  Corporation,  special  meetings of  stockholders of the
Corporation  may be  called  only  by  the  Board  of  Directors  pursuant  to a
resolution  adopted by a majority  of the total  number of  Directors  which the
Corporation  would have if there  were no  vacancies  on the Board of  Directors
(hereinafter the "Whole Board").

         Section 3.        Notice of Meetings.
         ---------         ------------------

         Written  notice of the place,  date,  and time of all  meetings  of the
stockholders  shall be given,  not less than ten (10) nor more than  sixty  (60)
days  before the date on which the  meeting is to be held,  to each  stockholder
entitled  to vote at such  meeting,  except  as  otherwise  provided  herein  or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General  Corporation Law or the Certificate of Incorporation of the
Corporation).

         When a meeting is adjourned  to another  place,  date or time,  written
notice need not be given of the  adjourned  meeting if the place,  date and time
thereof  are  announced  at the  meeting  at which  the  adjournment  is  taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally  noticed,  or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned  meeting shall be given in conformity  herewith.
At any adjourned  meeting,  any business may be transacted which might have been
transacted at the original meeting.

         Section 4.        Quorum.
         ---------         ------

         At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy  (after  giving  effect  to  the  provisions  of  Article  FOURTH  of  the
Corporation's  Certificate of Incorporation),  shall constitute a quorum for all
purposes,  unless or except to the extent that the  presence of a larger  number
may be required by law. Where a separate vote by a class or classes is required,

<PAGE>
a  majority  of the  shares  of such  class or  classes  present  in  person  or
represented by proxy (after giving effect to the provisions of Article FOURTH of
the  Corporation's  Certificate  of  Incorporation)  shall  constitute  a quorum
entitled to take action with respect to that vote on that matter.

         If a quorum  shall  fail to attend any  meeting,  the  chairman  of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present,  in person or by proxy,  may adjourn the meeting to another  place,
date, or time.

         If a notice of any adjourned special meeting of stockholders is sent to
all  stockholders  entitled to vote  thereat,  stating that it will be held with
those  present  in person or by proxy  constituting  a  quorum,  then  except as
otherwise required by law, those present in person or by proxy at such adjourned
meeting  shall  constitute a quorum,  and all matters  shall be  determined by a
majority of the votes cast at such meeting.

         Section 5.        Organization.
         ---------         ------------

         Such person as the Board of Directors  may have  designated  or, in the
absence of such a person,  the Chairman of the Board of the  Corporation  or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present,  in person or by proxy,  shall call
to order any meeting of the stockholders and act as chairman of the meeting.  In
the absence of the  Secretary of the  Corporation,  the secretary of the meeting
shall be such person as the chairman appoints.

         Section 6.        Conduct of Business.
         ---------         -------------------

                  (a)  The  chairman  of  any  meeting  of  stockholders   shall
determine  the order of business and the  procedures  at the meeting,  including
such regulation of the manner of voting and the conduct of discussion as seem to
him or her in order.  The date and time of the  opening and closing of the polls
for each matter upon which the  stockholders  will vote at the meeting  shall be
announced at the meeting.

                  (b) At any  annual  meeting  of the  stockholders,  only  such
business shall be conducted as shall have been brought  before the meeting:  (i)
by or at the direction of the Board of Directors or (ii) by any  stockholder  of
the  Corporation  who is entitled to vote with respect  thereto and who complies
with the notice  procedures  set forth in this Section 6(b).  For business to be
properly  brought before an annual  meeting by a stockholder,  the business must
relate to a proper subject  matter for  stockholder  action and the  stockholder
must have  given  timely  notice  thereof in  writing  to the  Secretary  of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety  (90) days prior to the date of the annual  meeting;  provided,  however,
that in the event that less than one hundred  (100) days' notice or prior public
disclosure of the date of the meeting is given or made to  stockholders,  notice
by the  stockholder  to be timely must be  received  not later than the close of
business on the 10th day  following  the day on which such notice of the date of
the  annual   meeting  was  mailed  or  such  public   disclosure  was  made.  A
stockholder's  notice to the  Secretary  shall set forth as to each  matter such

<PAGE>

stockholder proposes to bring before the annual meeting: (i) a brief description
of the business  desired to be brought before the annual meeting and the reasons
for conducting such business at the annual  meeting;  (ii) the name and address,
as they appear on the  Corporation's  books, of the  stockholder  proposing such
business;  (iii)  the class and  number of shares of the  Corporation's  capital
stock that are  beneficially  owned by such  stockholder;  and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary,  no business  shall be brought before or conducted at an
annual  meeting  except in accordance  with the provisions of this Section 6(b).
The Officer of the Corporation or other person presiding over the annual meeting
shall,  if the facts so  warrant,  determine  and  declare to the  meeting  that
business  was not properly  brought  before the meeting in  accordance  with the
provisions  of this  Section  6(b) and, if he should so  determine,  he shall so
declare to the meeting and any such  business so  determined  to be not properly
brought before the meeting shall not be transacted.

         At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought  before the meeting by or at the  direction
of the Board of Directors.

                  (c) Only persons who are qualified under Article II, Section 1
of these Bylaws and nominated in  accordance  with the  procedures  set forth in
these Bylaws shall be eligible for election as Directors. Nominations of persons
for  election  to the Board of  Directors  of the  Corporation  may be made at a
meeting of  stockholders at which directors are to be elected only: (i) by or at
the  direction  of the Board of  Directors;  or (ii) by any  stockholder  of the
Corporation  entitled to vote for the  election of  Directors at the meeting who
complies  with the  notice  procedures  set  forth in this  Section  6(c).  Such
nominations,  other  than  those  made by or at the  direction  of the  Board of
Directors,  shall be made by timely  notice in writing to the  Secretary  of the
Corporation.  To be timely, a stockholder's  notice shall be delivered or mailed
to and received at the principal  executive  offices of the Corporation not less
than ninety (90) days prior to the date of the meeting; provided,  however, that
in the event that less than one hundred  (100) days' notice or prior  disclosure
of the  date of the  meeting  is given or made to  stockholders,  notice  by the
stockholder  to be  timely  must be so  received  not  later  than the  close of
business on the 10th day  following  the day on which such notice of the date of
the meeting was mailed or such public  disclosure was made.  Such  stockholder's
notice shall set forth: (i) as to each person whom such stockholder  proposes to
nominate for election or re-election as a Director,  all information relating to
such person that would  indicate such person's  qualification  under Article II,
Section 1,  including  an affidavit  that such person would not be  disqualified
under the provisions of Section 1(d), and such  information  that is required to
be  disclosed  in  solicitations  of proxies for  election of  directors,  or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended  (including  such person's  written  consent to
being named in the proxy  statement as a nominee and to serving as a director if
elected);  and (ii) as to the  stockholder  giving  the  notice (x) the name and
address, as they appear on the Corporation's  books, of such stockholder and (y)
the class and  number of shares  of the  Corporation's  capital  stock  that are
beneficially  owned  by  such  stockholder.  At  the  request  of the  Board  of
Directors,  any person  nominated  by the Board of  Directors  for election as a
Director  shall furnish to the  Secretary of the  Corporation  that  information
required  to  establish  his or her  qualifications  and  to be set  forth  in a
stockholder's  notice of  nomination  which  pertains to the nominee.  No person
shall be eligible for election as a Director of the Corporation unless nominated

<PAGE>

in accordance  with the provisions of this Section 6(c) and Section 1 of Article
II. The Officer of the  Corporation  or other  person  presiding  at the meeting
shall,  if the facts so warrant,  determine  that a  nomination  was not made in
accordance with such provisions and, if he or she shall so determine,  he or she
shall  so  declare  to  the  meeting  and  the  defective  nomination  shall  be
disregarded.

         Section 7.        Proxies and Voting.
         ---------         ------------------

         At any meeting of the stockholders,  every stockholder entitled to vote
may vote in person or by proxy  authorized  by an instrument in writing filed in
accordance  with  the  procedure  established  for the  meeting.  Any  facsimile
telecommunication or other reliable  reproduction of the writing or transmission
created  pursuant to this  paragraph may be  substituted  or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing  or  transmission  could be used,  provided  that such  copy,  facsimile
telecommunication or other reproduction shall be a complete  reproduction of the
entire original writing or transmission.

         All voting,  including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation,  may
be made by a voice  vote;  provided,  however,  that upon  demand  therefor by a
stockholder  entitled to vote or his or her proxy,  a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the  stockholder  or proxy voting and such other  information as may be required
under the procedures  established  for the meeting.  The  Corporation  shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate  inspectors  to replace any  inspector who fails to
act. If no inspector  or alternate is able to act at a meeting of  stockholders,
the person  presiding at the meeting shall appoint one or more inspectors to act
at the  meeting.  Each  inspector,  before  entering  upon the  discharge of his
duties,  shall  take  and sign an oath  faithfully  to  execute  the  duties  of
inspector with strict impartiality and according to the best of his ability.

         All elections shall be determined by a plurality of the votes cast, and
except as otherwise  required by law or the  Certificate of  Incorporation,  all
other matters shall be determined by a majority of the votes cast.

         Section 8.        Stock List.
         ---------         ----------

         A complete  list of  stockholders  entitled  to vote at any  meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares  registered in his
or her name, shall be open to the examination of any such  stockholder,  for any
purpose germane to the meeting,  during ordinary  business hours for a period of
at least ten (10) days prior to the  meeting,  either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the  meeting,  or if not so  specified,  at the place where the meeting is to be
held.


<PAGE>

         The stock list shall  also be kept at the place of the  meeting  during
the  whole  time  thereof  and  shall  be open to the  examination  of any  such
stockholder who is present. This list shall presumptively determine the identity
of the  stockholders  entitled  to vote at the  meeting and the number of shares
held by each of them.

         Section 9.        Consent of Stockholders in Lieu of Meeting.
         ---------         ------------------------------------------

         Subject  to the  rights  of the  holders  of any  class  or  series  of
preferred stock of the Corporation, any action required or permitted to be taken
by the  stockholders of the Corporation must be effected at an annual or special
meeting  of  stockholders  of the  Corporation  and may not be  effected  by any
consent in writing by such stockholders.

                         ARTICLE II - BOARD OF DIRECTORS

         Section 1.   General Powers, Number, Term of Office and Qualifications.
         ---------    ---------------------------------------------------------

         (a) General Powers.The business and affairs of the Corporation shall be
under the  direction of its Board of  Directors.  The Board of  Directors  shall
annually  elect a Chairman of the Board from among its  members who shall,  when
present, preside at its meetings.

         (b) Number.  The number of  Directors  who shall  constitute  the Whole
Board  shall be such  number as the Board of  Directors  shall from time to time
have  designated,  except that in the absence of such  designation  shall be ten
(10).

         Except  for the  initial  members of the Board of  Directors  as of the
effective date of these Bylaws, no person shall be eligible for initial election
as a  Director  who is 68  years  of age or  more.  No  person  may be  elected,
appointed,  nominated or otherwise serve as a Director of the Corporation  after
December 31 of the year in which such person attains the age of 70. Vacancies on
the Board of Directors  created by operation of this  provision may be filled in
accordance with these Bylaws.

         (c) Term of Office. The Directors,  other than those who may be elected
by the holders of any class or series of Preferred Stock, shall be divided, with
respect to the time for which they  severally  hold office,  into three classes,
with the term of office of the first class to expire at the first annual meeting
of stockholders,  the term of office of the second class to expire at the annual
meeting of stockholders  one year thereafter and the term of office of the third
class to expire at the annual meeting of stockholders two years thereafter, with
each  Director to hold office  until his or her  successor  shall have been duly
elected and qualified. At each annual meeting of stockholders, Directors elected
to succeed those  Directors  whose terms then expire shall be elected for a term
of office to expire at the third succeeding annual meeting of stockholders after
their  election,  with each  Director to hold office until his or her  successor
shall have been duly elected and qualified.
         (d) No person  shall be eligible  for  election or  appointment  to the
Board of Directors:  (i) if such person has, within the previous 10 years,  been
the subject of supervisory action by a financial regulatory agency that resulted
in a cease and desist order or an agreement or other written  statement  subject

<PAGE>

to public disclosure under 12 U.S.C.  1818(u), or any successor provision;  (ii)
if such person has been convicted of a crime  involving  dishonesty or breach of
trust which is punishable by  imprisonment  for a term  exceeding one year under
state  or  federal  law;  (iii)  if such  person  is  currently  charged  in any
information,   indictment,   or  other  complaint  with  the  commission  of  or
participation  in such a crime;  and (iv)  unless  such  person has been,  for a
period  of at  least  one  year  prior  to his or her  election,  nomination  or
appointment, a resident of a county in which the Corporation or its subsidiaries
maintains a banking  office or of a county  contiguous to any such county or had
significant business ties to such counties.  No person may serve on the Board of
Directors and at the same time be a director or officer of another  co-operative
bank, credit union,  savings bank, savings and loan association,  trust company,
bank holding company or banking association (in each case whether chartered by a
state,  the  federal  government  or any other  jurisdiction)  that  engages  in
business  activities  in the same market area as the  Corporation  or any of its
subsidiaries. No person shall be eligible for election to the Board of Directors
if such person is the  representative  or agent of a person or acting in concert
(as that term is used to describe  relationships  involved in either presumptive
or actual concerted action under 12 C.F.R. Section 574.4(d)) with respect to the
Corporation or its subsidiaries, with a person who is ineligible for election to
the  Board of  Directors  under  this  Subsection  1(d).  No  nomination  of any
individual  who would not be qualified to be elected or appointed to or serve as
a member of the Board of Directors  under this Article II, Section 1(d) shall be
valid,  accepted or voted upon.  The Board of Directors  shall have the power to
construe  and  apply  the  provisions  of this  Section  1(d)  and to  make  all
determinations necessary to implement such provisions, including but not limited
to  determinations  as to whether any persons are a group acting in concert,  as
defined by this Section 1(d).  The Board may request from a nominee  information
it deems relevant to assessing a nominee's  satisfaction of the  requirements of
this Section 1(d).

         Section 2.        Vacancies and Newly Created Directorships.
         ---------         -----------------------------------------

         Subject  to the  rights  of the  holders  of any  class  or  series  of
Preferred Stock, and unless the Board of Directors otherwise  determines,  newly
created  directorships  resulting from any increase in the authorized  number of
directors  or any  vacancies  in the Board of  Directors  resulting  from death,
resignation,  retirement,  disqualification,  removal from office or other cause
may be filled only by a majority  vote of the Directors  then in office,  though
less  than a quorum,  and  Directors  so chosen  shall  hold  office  for a term
expiring at the annual  meeting of  stockholders  at which the term of office of
the class to which they have been  elected  expires  and until  such  Director's
successor shall have been duly elected and qualified.  No decrease in the number
of  authorized  directors  constituting  the Board shall shorten the term of any
incumbent Director.



<PAGE>


         Section 3.        Regular Meetings.
         ---------         ----------------

         Regular  meetings of the Board of Directors shall be held at such place
or places,  on such date or dates,  and at such time or times as shall have been
established  by the Board of Directors and  publicized  among all  Directors.  A
notice of each regular meeting shall not be required.

         Section 4.        Special Meetings.
         ---------         ----------------

         Special  meetings of the Board of Directors  may be called by one-third
(1/3) of the Directors then in office  (rounded up to the nearest whole number),
by the Chairman of the Board or the President or, in the event that the Chairman
of the Board or President  are  incapacitated  or otherwise  unable to call such
meeting, by the Secretary, and shall be held at such place, on such date, and at
such time as they, or he or she, shall fix. Notice of the place,  date, and time
of each such  special  meeting  shall be given each  Director  by whom it is not
waived by mailing  written notice not less than five (5) days before the meeting
or by telegraphing or telexing or by facsimile transmission of the same not less
than  twenty-four (24) hours before the meeting.  Unless otherwise  indicated in
the notice thereof, any and all business may be transacted at a special meeting.

         Section 5.        Quorum.
         ---------         ------

         At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting,  a majority of those present may adjourn the meeting to another  place,
date, or time, without further notice or waiver thereof.

         Section 6.        Participation in Meetings By Conference Telephone.
         ---------         -------------------------------------------------

         Members of the Board of  Directors,  or of any committee  thereof,  may
participate  in a meeting  of such  Board or  committee  by means of  conference
telephone  or similar  communications  equipment  by means of which all  persons
participating  in the meeting can hear each other and such  participation  shall
constitute presence in person at such meeting.

         Section 7.        Conduct of Business.
                           -------------------

         At any meeting of the Board of Directors,  business shall be transacted
in such order and manner as the Board may from time to time  determine,  and all
matters shall be determined by the vote of a majority of the Directors  present,
except as otherwise  provided  herein or required by law. Action may be taken by
the Board of Directors  without a meeting if all members thereof consent thereto
in  writing,  and the  writing  or  writings  are  filed  with  the  minutes  of
proceedings of the Board of Directors.


<PAGE>

         Section 8.        Powers.
         ---------         ------

         The Board of  Directors  may,  except  as  otherwise  required  by law,
exercise  all such powers and do all such acts and things as may be exercised or
done by the  Corporation,  including,  without  limiting the  generality  of the
foregoing, the unqualified power:

                  (1) To declare dividends from time to time in accordance with
         law;

                  (2) To purchase or otherwise  acquire any  property,  rights
         or  privileges on such terms as it shall determine;

                  (3) To authorize  the creation,  making and issuance,  in such
         form  as it may  determine,  of  written  obligations  of  every  kind,
         negotiable  or  non-negotiable,  secured  or  unsecured,  and to do all
         things necessary in connection therewith;

                  (4) To remove any Officer of the  Corporation  with or without
         cause,  and from time to time to  devolve  the powers and duties of any
         Officer upon any other person for the time being;

                  (5) To confer upon any Officer of the Corporation the power to
         appoint, remove and suspend subordinate Officers, employees and agents;

                  (6) To adopt from time to time such stock, option, stock
         purchase, bonus or other compensation plans for Directors, Officers,
         employees and agents of the Corporation and its subsidiaries as it may
         determine;

                  (7) To adopt from time to time such insurance, retirement, and
         other benefit plans for  Directors,  Officers,  employees and agents of
         the Corporation and its subsidiaries as it may determine;

                  (8) To adopt from time to time  regulations,  not inconsistent
         with these Bylaws, for the management of the Corporation's business and
         affairs; and

                  (9) To fix the Compensation of officers and employees of the
         Corporation and its subsidiaries as it may determine.

<PAGE>

         Section 9.        Compensation of Directors.
         ---------         -------------------------

         Directors, as such, may receive, pursuant to resolution of the Board of
Directors,  fixed fees and other  compensation  for their services as Directors,
including,  without  limitation,  their services as members of committees of the
Board of Directors.


                            ARTICLE III - COMMITTEES

         Section 1.        Committees of the Board of Directors.
         ---------         ------------------------------------

         The  Board  of  Directors,  by a vote of a  majority  of the  Board  of
Directors,  may from time to time designate  committees of the Board,  with such
lawfully  delegable  powers and duties as it  thereby  confers,  to serve at the
pleasure of the Board and shall,  for these  committees and any others  provided
for  herein,  elect a Director or  Directors  to serve as the member or members,
designating, if it desires, other Directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated  may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of  ownership  and  merger  pursuant  to  Section  253 of the  Delaware  General
Corporation  Law  if  the  resolution   which  designates  the  committee  or  a
supplemental  resolution  of the Board of  Directors  shall so  provide.  In the
absence or  disqualification  of any member of any  committee  and any alternate
member in his or her place,  the member or members of the  committee  present at
the meeting and not disqualified  from voting,  whether or not he or she or they
constitute a quorum,  may by unanimous vote appoint  another member of the Board
of  Directors  to act at the meeting in the place of the absent or  disqualified
member.

         Section 2.        Conduct of Business.
         ---------         -------------------

         Each  committee  may  determine  the  procedural  rules for meeting and
conducting  its  business  and  shall  act in  accordance  therewith,  except as
otherwise  provided herein or required by law. Adequate  provision shall be made
for notice to members of all  meetings.  The quorum  requirements  for each such
committee shall be a majority of the members of such committee  unless otherwise
determined  by the  Board  of  Directors  by a  majority  vote of the  Board  of
Directors  which  such  quorum  determined  by a  majority  of the  Board may be
one-third of such members and all matters considered by such committees shall be
determined by a majority vote of the members present. Action may be taken by any
committee  without a meeting if all members  thereof consent thereto in writing,
and the writing or writings  are filed with the  minutes of the  proceedings  of
such committee.

<PAGE>

         Section 3.        Nominating Committee.
         ----------        ---------------------

         The Board of  Directors  shall  appoint a  Nominating  Committee of the
Board,  consisting of not less than three (3) members.  The Nominating Committee
shall have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation  pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine  compliance  with such Bylaw;
and (b) to  recommend  to the Whole Board  nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.


                              ARTICLE IV - OFFICERS

         Section 1.        Generally.
         ---------         ---------

                  (a) The Board of Directors as soon as may be practicable after
the annual meeting of stockholders  shall choose a Chairman of the Board,  Chief
Executive Officer, a President,  one or more Vice Presidents,  a Secretary and a
Treasurer  and from time to time may choose  such other  officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.  Any
number of offices may be held by the same person.

                  (b) The term of office of all Officers shall be until the next
annual election of Officers and until their respective successors are chosen but
any Officer may be removed from office at any time by the affirmative  vote of a
majority of the authorized  number of Directors then  constituting  the Board of
Directors.

                  (c) All Officers  chosen by the Board of Directors  shall have
such powers and duties as generally pertain to their respective Offices, subject
to the specific  provisions  of this ARTICLE IV. Such  officers  shall also have
such  powers  and duties as from time to time may be  conferred  by the Board of
Directors or by any committee thereof.

         Section 2.        Chairman of the Board of Directors.
         ---------         ----------------------------------

         The Chairman of the Board,  subject to the  provisions  of these Bylaws
and to the  direction of the Board of  Directors,  when present shall preside at
all meetings of the stockholders of the  Corporation.  The Chairman of the Board
shall perform such duties  designated to him by the Board of Directors and which
are delegated to him or her by the Board of Directors by resolution of the Board
of Directors.

         Section 3.        President and Chief Executive Officer.
         ---------         -------------------------------------

         The   President  and  Chief   Executive   Officer  shall  have  general
responsibility for the management and control of the business and affairs of the
Corporation  and shall perform all duties and have all powers which are commonly
incident to the office of  President  and Chief  Executive  Officer or which are
delegated to him or her by the Board of  Directors.  Subject to the direction of

<PAGE>

the Board of Directors,  the President  and Chief  Executive  Officer shall have
power to sign all stock  certificates,  contracts and other  instruments  of the
Corporation  which are authorized  and shall have general  supervision of all of
the other Officers (other than the Chairman of the Board),  employees and agents
of the Corporation.

         Section 4.        Vice President.
         ----------        ---------------

         The Vice President or Vice  Presidents  shall perform the duties of the
President in his absence or during his  inability to act. In addition,  the Vice
Presidents  shall perform the duties and exercise the powers usually incident to
their respective  offices and/or such other duties and powers as may be properly
assigned  to them by the Board of  Directors,  the  Chairman of the Board or the
President.  A Vice  President or Vice  Presidents may be designated as Executive
Vice President or Senior Vice President.

         Section 5.        Secretary.
         ---------         ---------

         The Secretary or Assistant  Secretary  shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall  perform such other  duties and exercise  such other powers as are usually
incident to such  office  and/or  such other  duties and powers as are  properly
assigned  thereto by the Board of  Directors,  the  Chairman of the Board or the
President.  Subject to the  direction of the Board of  Directors,  the Secretary
shall have the power to sign all stock certificates.

         Section 6.        Treasurer.
         ---------         ---------

         The Treasurer  shall be the  Comptroller of the  Corporation  and shall
have  the   responsibility   for  maintaining  the  financial   records  of  the
Corporation.  He or she  shall  make  such  disbursements  of the  funds  of the
Corporation  as are  authorized and shall render from time to time an account of
all such  transactions and of the financial  condition of the  Corporation.  The
Treasurer  shall also perform  such other  duties as the Board of Directors  may
from time to time prescribe. Subject to the direction of the Board of Directors,
the Treasurer shall have the power to sign all stock certificates.

         Section 7.        Assistant Secretaries and Other Officers.
         ---------         -----------------------------------------

         The Board of Directors  may appoint one or more  Assistant  Secretaries
and such other Officers who shall have such powers and shall perform such duties
as are  provided  in these  Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.

<PAGE>

         Section 8.     Action with Respect to Securities of Other Corporations.
         ----------     --------------------------------------------------------

         Unless otherwise  directed by the Board of Directors,  the President or
any Officer of the  Corporation  authorized by the President shall have power to
vote and otherwise act on behalf of the  Corporation,  in person or by proxy, at
any meeting of  stockholders of or with respect to any action of stockholders of
any  other  corporation  in  which  this  Corporation  may hold  securities  and
otherwise to exercise any and all rights and powers which this  Corporation  may
possess by reason of its ownership of securities in such other corporation.




<PAGE>


                                ARTICLE V - STOCK

         Section 1.        Certificates of Stock.
         ---------         ---------------------

         Each  stockholder  shall be entitled to a certificate  signed by, or in
the name of the Corporation by, the Chairman of the Board or the President,  and
by the  Secretary  or an  Assistant  Secretary,  or any  Treasurer  or Assistant
Treasurer,  certifying  the number of shares  owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.

         Section 2.        Transfers of Stock.
         ---------         ------------------

         Transfers  of stock shall be made only upon the  transfer  books of the
Corporation  kept  at  an  office  of  the  Corporation  or by  transfer  agents
designated to transfer  shares of the stock of the  Corporation.  Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an  outstanding   certificate  for  the  number  of  shares  involved  shall  be
surrendered for cancellation before a new certificate is issued therefor.

         Section 3.        Record Date.
         ---------         -----------

         In order that the Corporation may determine the  stockholders  entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any  change,  conversion  or  exchange  of stock or for the
purpose of any other  lawful  action,  the Board of  Directors  may fix a record
date,  which  record  date shall not  precede  the date on which the  resolution
fixing the record date is adopted  and which  record date shall not be more than
sixty  (60)  nor less  than ten (10)  days  before  the date of any  meeting  of
stockholders,  nor more than  sixty  (60) days  prior to the time for such other
action as hereinbefore described;  provided,  however, that if no record date is
fixed by the Board of Directors,  the record date for  determining  stockholders
entitled  to notice of or to vote at a meeting of  stockholders  shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived,  at the close of business on the next day preceding the day
on which the meeting is held,  and,  for  determining  stockholders  entitled to
receive payment of any dividend or other  distribution or allotment or rights or
to  exercise  any rights of change,  conversion  or exchange of stock or for any
other  purpose,  the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.

         A  determination  of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.



<PAGE>


         Section 4.        Lost, Stolen or Destroyed Certificates.
         ---------         --------------------------------------

         In the event of the loss,  theft or destruction  of any  certificate of
stock,  another may be issued in its place  pursuant to such  regulations as the
Board  of  Directors  may  establish  concerning  proof of such  loss,  theft or
destruction  and  concerning  the  giving  of a  satisfactory  bond or  bonds of
indemnity.

         Section 5.        Regulations.
         ---------         -----------

         The issue,  transfer,  conversion and  registration  of certificates of
stock shall be governed by such other  regulations as the Board of Directors may
establish.

                              ARTICLE VI - NOTICES

         Section 1.        Notices.
         ---------         -------

         Except as otherwise  specifically  provided  herein or required by law,
all notices required to be given to any stockholder, Director, Officer, employee
or agent shall be in writing and may in every instance be  effectively  given by
hand delivery to the recipient thereof,  by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier.  Any such notice  shall be  addressed  to such  stockholder,  Director,
Officer,  employee or agent at his or her last known address as the same appears
on the books of the Corporation.  The time when such notice is received, if hand
delivered,  or  dispatched,  if  delivered  through  the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.

         Section 2.        Waivers.
         ---------         -------

         A written  waiver of any  notice,  signed by a  stockholder,  Director,
Officer,  employee or agent,  whether  before or after the time of the event for
which notice is to be given,  shall be deemed  equivalent to the notice required
to be given to such stockholder,  Director,  Officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.

                           ARTICLE VII - MISCELLANEOUS

         Section 1.        Facsimile Signatures.
         ---------         --------------------

         In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws,  facsimile signatures of any officer or
officers of the  Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.


<PAGE>


         Section 2.        Corporate Seal.
         ---------         --------------

         The Board of Directors may provide a suitable seal, containing the name
of the Corporation,  which seal shall be in the charge of the Secretary.  If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the  Treasurer or by an Assistant  Secretary or
an assistant to the Treasurer.

         Section 3.        Reliance Upon Books, Reports and Records.
         ---------         ----------------------------------------

         Each Director,  each member of any committee designated by the Board of
Directors,  and each Officer of the Corporation shall, in the performance of his
or her  duties,  be fully  protected  in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or  statements  presented to the  Corporation  by any of its Officers or
employees,  or  committees  of the Board of Directors so  designated,  or by any
other person as to matters  which such Director or committee  member  reasonably
believes are within such other person's  professional  or expert  competence and
who has been selected with reasonable care by or on behalf of the Corporation.

         Section 4.        Fiscal Year.
         ---------         -----------

         The fiscal  year of the  Corporation  shall be as fixed by the Board of
Directors.

         Section 5.        Time Periods.
         ---------         ------------

         In applying any provision of these Bylaws which requires that an act be
done or not be done a specified  number of days prior to an event or that an act
be done  during  a period  of a  specified  number  of days  prior to an  event,
calendar days shall be used,  the day of the doing of the act shall be excluded,
and the day of the event shall be included.

                            ARTICLE VIII - AMENDMENTS

         The Board of Directors  may amend,  alter or repeal these Bylaws at any
meeting of the Board,  provided notice of the proposed change was given not less
than two (2) days prior to the meeting.  The stockholders  shall also have power
to amend,  alter or repeal these Bylaws at any meeting of stockholders  provided
notice of the proposed change was given in the notice of the meeting;  provided,
however,  that,  notwithstanding  any  other  provisions  of the  Bylaws  or any
provision of law which might  otherwise  permit a lesser vote or no vote, but in
addition  to any  affirmative  vote of the  holders of any  particular  class or
series of the voting stock required by law, the  Certificate  of  Incorporation,
any Preferred Stock  Designation or these Bylaws,  the affirmative  votes of the
holders of at least 80% of the voting power of all the  then-outstanding  shares
of the Voting Stock,  voting  together as a single  class,  shall be required to
alter, amend or repeal any provisions of these Bylaws.

The above Bylaws are effective as of May 16, 2000.

<PAGE>
                               FIRST FEDERAL BANK
                              EMPLOYMENT AGREEMENT


         This AGREEMENT is made effective as of September 20, 2000, by and among
First Federal Bank (the "Bank"), a federally  chartered  financial  institution,
with its principal administrative office at 12 Broad Street, Hazleton, PA 18201,
Northeast  Pennsylvania  Financial Corp., a corporation organized under the laws
of the  State of  Delaware,  the  holding  company  for the Bank  (the  "Holding
Company"), and Allan A. Farias ("Executive").

         WHEREAS, the Bank wishes to assure  itself of the services of Executive
for the period  provided in this Agreement; and

         WHEREAS,  Executive  is  willing to serve in the employ of the Bank for
said period.

         NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  herein
contained,  and upon the other terms and conditions  hereinafter  provided,  the
parties hereby agree as follows:

1.       POSITION AND RESPONSIBILITIES.

         During  the period of his  employment  hereunder,  Executive  agrees to
serve as Manager  Corporate/Retail  Administration of the Bank.  Executive shall
render   administrative  and  management  services  to  the  Bank  such  as  are
customarily performed by persons situated in a similar executive capacity.

2.       TERMS AND DUTIES.

         (a) The period of Executive's  employment under this Agreement shall be
deemed to have  commenced as of the date first above written and shall  continue
for a period of twelve full calendar  months  thereafter.  The Board will review
the Agreement and Executive's  performance  annually for purposes of determining
whether to extend the Agreement  and the rationale and results  thereof shall be
included in the minutes of the Board's  meeting.  The Board shall give notice to
the Executive as soon as possible  after such review as to whether the Agreement
is to be extended.

         (b) During the period of Executive's  employment hereunder,  except for
periods of absence  occasioned  by illness,  reasonable  vacation  periods,  and
reasonable  leaves of absence,  Executive  shall  devote  substantially  all his
business time, attention,  skill, and efforts to the faithful performance of his
duties hereunder including  activities and services related to the organization,
operation and  management of the Bank and  participation  in community and civic
organizations;  provided,  however,  that,  with the  approval of the Board,  as
evidenced by a resolution of such Board, from time to time, Executive may serve,
or continue to serve,  on the boards of directors of, and hold any other offices
or positions in, companies or  organizations,  which, in such Board's  judgment,
will not present any conflict of interest with the Bank,  or  materially  affect
the performance of Executive's duties pursuant to this Agreement.

<PAGE>

         (c)  Notwithstanding  anything  herein  to  the  contrary,  Executive's
employment  with the Bank may be terminated by the Bank or the Executive  during
the  term of  this  Agreement,  subject  to the  terms  and  conditions  of this
Agreement.

3.       COMPENSATION AND REIMBURSEMENT.

         (a) The Bank shall pay Executive as  compensation  a salary of $117,000
per year ("Base Salary").  Base Salary shall include any amounts of compensation
deferred by Executive  under any qualified or  non-qualified  plan maintained by
the Bank. Such Base Salary shall be payable bi-weekly. During the period of this
Agreement,  Executive's  Base Salary  shall be reviewed at least  annually;  the
first  such  review  will be made no later  than one year  from the date of this
Agreement.  Such review shall be conducted by the  President.  The President may
increase  Executive's Base Salary.  Any increase in Base Salary shall become the
"Base  Salary" for  purposes of this  Agreement.  In addition to the Base Salary
provided in this  Section  3(a),  the Bank shall also provide  Executive,  at no
premium  cost to  Executive,  with  all  such  other  benefits  as are  provided
uniformly to permanent full-time employees of the Bank.

         (b) The  Executive  shall be entitled to  participate  in any  employee
benefit plans, arrangements and perquisites substantially equivalent to those in
which Executive was participating or otherwise deriving benefit from immediately
prior to the  beginning  of the term of this  Agreement,  and the Bank will not,
without  Executive's  prior  written  consent,  make any  changes in such plans,
arrangements or perquisites which would materially  adversely affect Executive's
rights or  benefits  thereunder;  except to the  extent  such  changes  are made
applicable to all Bank employees on a non-discriminatory basis. Without limiting
the generality of the foregoing  provisions of this  Subsection  (b),  Executive
shall be entitled  to  participate  in or receive  benefits  under any  employee
benefit  plans  including  but not limited to,  retirement  plans,  supplemental
retirement  plans,  pension  plans,  profit-sharing  plans,  health-and-accident
plans,  medical  coverage or any other employee benefit plan or arrangement made
available by the Bank in the future to its senior  executives and key management
employees,  subject to and on a basis consistent with the terms,  conditions and
overall  administration  of such  plans  and  arrangements.  Executive  shall be
entitled to  incentive  compensation  and bonuses as provided in any plan of the
Bank  in  which  Executive  is  eligible  to  participate.  Nothing  paid to the
Executive  under  any such plan or  arrangement  will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.

         (c) In addition to the Base Salary  provided  for by  paragraph  (a) of
this Section 3 and other  compensation  provided  for by  paragraph  (b) of this
Section 3, the Bank shall pay or reimburse  Executive for all reasonable  travel
and  other  reasonable  expenses  incurred  in the  performance  of  Executive's
obligations under this Agreement and may provide such additional compensation in
such form and such amounts as the Board may from time to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

         (a) Upon the occurrence of an Event of Termination  (as herein defined)
during the Executive's term of employment  under this Agreement,  the provisions
of  this  Section  shall  apply.  As  used  in  this  Agreement,  an  "Event  of
Termination"  shall mean and include any one or more of the  following:  (i) the
termination by the Bank of Executive's  full-time  employment  hereunder for any
reason other than a termination  governed by Section 5(a) hereof, or Termination

<PAGE>

for Cause, as defined in Section 7 hereof; (ii) Executive's resignation from the
Bank's employ upon any (A) a material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser  responsibility,  importance,  or scope from the position and  attributes
thereof described in Section 1, above,  unless consented to by Executive,  (B) a
relocation of  Executive's  principal  place of employment by more than 25 miles
from its location at the effective date of this Agreement,  unless  consented to
by the Executive,  (C) a material  reduction in the benefits and  perquisites to
the  Executive  from  those  being  provided  as of the  effective  date of this
Agreement,  unless  consented  to by  the  Executive,  or (D) a  liquidation  or
dissolution of the Bank, or (E) breach of this  Agreement by the Bank.  Upon the
occurrence of any event  described in clauses (A), (B), (C), (D), or (E), above,
Executive  shall have the right to elect to terminate his employment  under this
Agreement by resignation upon not less than sixty (60) days prior written notice
given  within  three full  months  after the event  giving rise to said right to
elect.

         (b) Upon the  occurrence  of an  Event of  Termination,  on the Date of
Termination,  as  defined  in  Section  8, the Bank  shall be  obligated  to pay
Executive,  or,  in the  event  of his  subsequent  death,  his  beneficiary  or
beneficiaries,  or his estate, as the case may be an amount equal to the sum of:
(i) the amount of the remaining payments that the Executive would have earned if
he had continued his employment  with the Bank during the remaining term of this
Agreement at the Executive's  Base Salary at the Date of  Termination;  and (ii)
the  amount  equal to the  annual  contributions  that  would  have been made on
Executive's  behalf to any  employee  benefit  plans of the Bank or the  Holding
Company during the remaining term of this Agreement based on contributions  made
(on an annualized basis) at the Date of Termination; provided, however, that any
payments  pursuant to this subsection and subsection  4(c) below,  shall not, in
the aggregate, exceed one times Executive's average annual compensation.  In the
event the Bank is not in compliance with its minimum capital  requirements or if
such payments  pursuant to this subsection (b) would cause the Bank's capital to
be reduced  below its minimum  regulatory  capital  requirements,  such payments
shall be deferred until such time as the Bank or successor thereto is in capital
compliance. At the election of the Executive, which election is to be made prior
to an Event of Termination,  such payments shall be made in a lump sum as of the
Executive's Date of Termination.  In the event that no election is made, payment
to Executive will be made on a monthly basis in approximately equal installments
during the remaining term of the  Agreement.  Such payments shall not be reduced
in the event the Executive  obtains other  employment  following  termination of
employment.

         (c) Upon the occurrence of an Event of Termination, the Bank will cause
to be continued  life,  medical,  dental and disability  coverage  substantially
identical  to the  coverage  maintained  by the Bank or the Holding  Company for
Executive prior to his  termination at no premium cost to the Executive,  except
to the extent such  coverage  may be changed in its  application  to all Bank or
Holding Company employees.  Such coverage shall cease upon the expiration of the
remaining term of this Agreement.

5.       CHANGE IN CONTROL.

         (a) For purposes of this  Agreement,  a "Change in Control" of the Bank
shall mean an event of a nature  that:  (i) would be  required to be reported in
response to Item 1 of the  current  report on Form 8-K, as in effect on the date
hereof,  pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange  Act");  or (ii) results in a Change in Control of th

<PAGE>

Bank within the meaning of the Home  Owners' Loan Act of 1933,  as amended,  the
Federal Deposit  Insurance Act or the Rules and  Regulations  promulgated by the
Office of Thrift Supervision  ("OTS") (or its predecessor  agency), as in effect
on the date hereof  (provided,  that in  applying  the  definition  of change in
control as set forth under the rules and regulations of the OTS, the Board shall
substitute its judgment for that of the OTS); or (iii) without limitation such a
Change  in  Control  shall be deemed  to have  occurred  at such time as (A) any
"person" (as the term is used in Sections  13(d) and 14(d) of the Exchange  Act)
is or  becomes  the  "beneficial  owner" (as  defined  in Rule  13d-3  under the
Exchange Act),  directly or indirectly,  of voting securities of the Bank or the
Holding Company  representing 25% or more of the Bank's or the Holding Company's
outstanding voting securities or right to acquire such securities except for any
voting  securities of the Bank  purchased by the Holding  Company and any voting
securities  purchased  by any  employee  benefit plan of the Bank or the Holding
Company,  or (B)  individuals  who  constitute the Board on the date hereof (the
"Incumbent  Board")  cease for any  reason  to  constitute  at least a  majority
thereof,  provided  that any person  becoming a director  subsequent to the date
hereof whose election was approved by a vote of at least  three-quarters  of the
directors  comprising the Incumbent  Board, or whose  nomination for election by
the Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board,  shall be, for purposes of this clause, or (C)
a plan of reorganization,  merger,  consolidation,  sale of all or substantially
all the assets of the Bank or the Holding Company or similar  transaction occurs
in which the Bank or Holding  Company  is not the  resulting  entity;  provided,
however,  that such an event listed above will be deemed to have  occurred or to
have been effectuated upon the receipt of all required regulatory  approvals not
including the lapse of any statutory waiting periods.

         (b) If a Change in Control has occurred pursuant to Section 5(a) or the
Board has determined  that a Change in Control has occurred,  Executive shall be
entitled to the benefits  provided in paragraphs  (c), and (d) of this Section 5
upon his  subsequent  termination  of  employment at any time during the term of
this Agreement due to: (1) Executive's  dismissal or (2)  Executive's  voluntary
resignation  following  any  demotion,  loss of  title,  office  or  significant
authority  or  responsibility,  material  reduction  in annual  compensation  or
benefits or  relocation  of his  principal  place of  employment by more than 25
miles from its location immediately prior to the Change in Control,  unless such
termination is because of his death or termination for Cause.

         (c) Upon Executive's  entitlement to benefits pursuant to Section 5(b),
the Bank  shall pay  Executive,  or in the event of his  subsequent  death,  his
beneficiary or beneficiaries,  or his estate, as the case may be, a sum equal to
the greater of: (1) the payments due for the remaining term of the Agreement; or
2) one (1) times Executive's  average annual  compensation for the five (5) most
recent taxable years that Executive has been employed by the Bank or such lesser
number of years in the event that Executive shall have been employed by the Bank
for less than five (5) years.  Such average  annual  compensation  shall include
Base Salary,  commissions,  bonuses,  contributions on Executive's behalf to any
pension and/or profit sharing plan,  severance  payments,  retirement  payments,
directors or committee fees, fringe benefits paid or to be paid to the Executive
in any such year,  and  payment  of  expense  items  without  accountability  or
business purpose or that do not meet the IRS  requirements for  deductibility by
the  Institution;  provided  however,  that any payment under this provision and
subsection 5(d) below shall not exceed three (3) times the  Executive's  average
annual compensation. In the event the Bank is not in compliance with its minimum
capital  requirements  or if such payments  would cause the Bank's capital to be
reduced below its minimum regulatory capital  requirements,  such payments shall

<PAGE>

be  deferred  until  such time as the Bank or  successor  thereto  is in capital
compliance. At the election of the Executive, which election is to be made prior
to a  Change  in  Control,  such  payment  shall be made in a lump sum as of the
Executive's Date of Termination.  In the event that no election is made, payment
to the Executive will be made in approximately  equal  installments on a monthly
basis  over a  period  of  thirty-six  (36)  months  following  the  Executive's
termination.  Such payments shall not be reduced in the event Executive  obtains
other employment following termination of employment.

         (d) Upon the  Executive's  entitlement to benefits  pursuant to Section
5(b), the Bank will cause to be continued life,  medical,  dental and disability
coverage  substantially  identical  to the coverage  maintained  by the Bank for
Executive prior to his severance at no premium cost to the Executive,  except to
the extent that such  coverage  may be changed in its  application  for all Bank
employees on a non-discriminatory  basis. Such coverage and payments shall cease
upon the expiration of thirty-six (36) months following the Date of Termination.

6.       CHANGE OF CONTROL RELATED PROVISIONS

         Notwithstanding  the  provisions  of Section  5, in no event  shall the
aggregate  payments or benefits to be made or afforded to  Executive  under said
paragraphs (the "Termination Benefits") constitute an "excess parachute payment"
under Section 280G of the Code or any successor  thereto,  and in order to avoid
such a result,  Termination Benefits will be reduced, if necessary, to an amount
(the  "Non-Triggering  Amount"),  the value of which is one dollar  ($1.00) less
than an amount equal to three (3) times Executive's "base amount", as determined
in accordance  with said Section 280G. The allocation of the reduction  required
hereby among the Termination  Benefits provided by Section 5 shall be determined
by Executive.

7.       TERMINATION FOR CAUSE.

         The term  "Termination  for Cause"  shall mean  termination  because of
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit,  intentional failure to perform stated
duties,  willful  violation of any law, rule or  regulation  (other than traffic
violations  or similar  offenses)  or final  cease-and-desist  order or material
breach  of any  provision  of this  Agreement.  Notwithstanding  the  foregoing,
Executive shall not be deemed to have been Terminated for Cause unless and until
there  shall have been  delivered  to him a Notice of  Termination  which  shall
include a copy of a resolution duly adopted by the affirmative  vote of not less
than a majority of the members of the Board at a meeting of the Board called and
held for that purpose (after  reasonable  notice to Executive and an opportunity
for him, together with counsel,  to be heard before the Board),  finding that in
the good faith opinion of the Board,  Executive's conduct justified a finding of
Termination  for  Cause  and  specifying  the  particulars  thereof  in  detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.  During the period beginning on the date
of the Notice of Termination  for Cause pursuant to Section 8 hereof through the
Date of Termination for Cause,  stock options and related limited rights granted
to Executive under any stock option plan shall not be exercisable, nor shall any
unvested  awards granted to Executive  under any stock benefit plan of the Bank,
the Holding Company or any subsidiary or affiliate thereof, vest. At the Date of
Termination  for Cause,  such stock options and related  limited rights and such
unvested  awards shall become null and void and shall not be  exercisable  by or
delivered to Executive at any time subsequent to such Termination for Cause.

<PAGE>

8.       NOTICE.

         (a) Any  purported  termination  by the Bank or by  Executive  shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this  Agreement,  a "Notice of  Termination"  shall mean a written  notice which
shall indicate the specific termination  provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances  claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

         (b) "Date of  Termination"  shall mean the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty days from the date such Notice of Termination is given.).

         (c) If,  within  thirty  (30) days after any Notice of  Termination  is
given,  the party receiving such Notice of Termination  notifies the other party
that a dispute exists concerning the termination,  the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement  of  the  parties,  by a  binding  arbitration  award,  or by a  final
judgment,  order or decree of a court of  competent  jurisdiction  (the time for
appeal  therefrom  having  expired  and no appeal  having  been  perfected)  and
provided  further that the Date of Termination  shall be extended by a notice of
dispute  only if such  notice is given in good faith and the party  giving  such
notice  pursues  the  resolution  of such  dispute  with  reasonable  diligence.
Notwithstanding  the pendency of any such dispute, in the event the Executive is
terminated for reasons other than  Termination  for Cause the Bank will continue
to pay  Executive  his Base Salary in effect when the notice  giving rise to the
dispute  was given until the  earlier  of: 1) the  resolution  of the dispute in
accordance  with this  Agreement or 2) the  expiration of the remaining  term of
this Agreement as determined as of the Date of  Termination.  Amounts paid under
this Section are in addition to all other  amounts due under this  Agreement and
shall not be  offset  against  or  reduce  any  other  amounts  due  under  this
Agreement.

9.       POST-TERMINATION OBLIGATIONS.

         All payments and benefits to Executive  under this  Agreement  shall be
subject  to  Executive's  compliance  with this  Section 9 for one (1) full year
after  the  earlier  of the  expiration  of this  Agreement  or  termination  of
Executive's  employment with the Bank.  Executive shall, upon reasonable notice,
furnish  such  information  and  assistance  to the  Bank as may  reasonably  be
required by the Bank in connection with any litigation in which it or any of its
subsidiaries or affiliates is, or may become, a party.

10.      NON-COMPETITION AND NON-DISCLOSURE.

         (a) Upon any termination of Executive's  employment  hereunder pursuant
to Section 4 hereof,  Executive agrees not to compete with the Bank for a period
of one (1) year following such  termination in any city, town or county in which
the Executive's  normal business office is located and the Bank has an office or
has filed an application for regulatory  approval to establish an office and any
county  adjacent to such city,  town or county,  determined  as of the effective
date of such  termination,  except as agreed to  pursuant to a  resolution  duly
adopted by the Board.  Executive  agrees that during such period and within said
cities, towns and counties,  Executive

<PAGE>

shall not work for or advise,  consult or  otherwise  serve  with,  directly  or
indirectly,  any entity whose business  materially competes with the depository,
lending  or  other  business   activities  of  the  Bank.  The  parties  hereto,
recognizing  that  irreparable  injury will result to the Bank, its business and
property in the event of Executive's  breach of this Subsection 10(a) agree that
in the event of any such  breach by  Executive,  the Bank will be  entitled,  in
addition  to any other  remedies  and damages  available,  to an  injunction  to
restrain  the  violation  hereof by  Executive,  Executive's  partners,  agents,
servants,  employees  and all  persons  acting  for or under  the  direction  of
Executive.  Nothing  herein  will be  construed  as  prohibiting  the Bank  from
pursuing any other remedies  available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.

         (b) Executive  recognizes  and  acknowledges  that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof,  as it may exist from time to time,  is a valuable,  special and unique
asset of the business of the Bank.  Executive will not, during or after the term
of his  employment,  disclose  any  knowledge of the past,  present,  planned or
considered  business activities of the Bank or affiliates thereof to any person,
firm,  corporation,  or other  entity  for any  reason  or  purpose  whatsoever.
Notwithstanding the foregoing,  Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank. Further,
Executive may disclose information regarding the business activities of the Bank
to the OTS and the Federal Deposit Insurance  Corporation ("FDIC") pursuant to a
formal  regulatory  request.  In the event of a breach or  threatened  breach by
Executive of the  provisions  of this  Section,  the Bank will be entitled to an
injunction  restraining  Executive  from  disclosing,  in whole or in part,  the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person,  firm,
corporation,  other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed.  Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies  available to the Bank for
such  breach or  threatened  breach,  including  the  recovery  of damages  from
Executive.

11.      SOURCE OF PAYMENTS.

         (a) All  payments  provided in this  Agreement  shall be timely paid in
cash or check from the general funds of the Bank. The Holding Company,  however,
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to  Executive  and, if such amounts and benefits due from the Bank are
not timely paid or provided by the Bank, such amounts and benefits shall be paid
or provided by the Holding Company.

         (b) Notwithstanding any provision herein to the contrary, to the extent
that  payments  and  benefits,  as  provided by this  Agreement,  are paid to or
received by  Executive  under the  Employment  Agreement  dated March 31,  1998,
between  Executive  and the Holding  Company,  such  compensation  payments  and
benefits  paid by the Holding  Company will be  subtracted  from any amounts due
simultaneously to Executive under similar provisions of this Agreement. Payments
pursuant to this Agreement and the Holding Company  Agreement shall be allocated
in proportion to the services  rendered and time expended on such  activities by
Executive  as  determined  by the  Holding  Company  and the Bank on a quarterly
basis.

<PAGE>

12.  EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

         This Agreement  contains the entire  understanding  between the parties
hereto and supersedes  any prior  employment  agreement  between the Bank or any
predecessor  of the Bank and  Executive,  except that this  Agreement  shall not
affect or operate to reduce any benefit or compensation  inuring to Executive of
a kind elsewhere  provided.  No provision of this Agreement shall be interpreted
to mean that  Executive  is  subject  to  receiving  fewer  benefits  than those
available to him without reference to this Agreement.

13.      NO ATTACHMENT.

         (a) Except as required by law, no right to receive  payments under this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to affect any such action  shall be null,
void, and of no effect.

         (b) This Agreement  shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors, heirs, and assigns.

14.      MODIFICATION AND WAIVER.

         (a) This  Agreement may not be modified or amended  except by an
instrument in writing signed by the parties hereto.

         (b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement,  except by written  instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing  waiver
unless specifically  stated therein,  and each such waiver shall operate only as
to the specific  term or condition  waived and shall not  constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

15.      REQUIRED PROVISIONS.

         (a) The Bank may terminate Executive's  employment at any time, but any
termination by the Bank, other than  Termination for Cause,  shall not prejudice
Executive's  right to  compensation  or other  benefits  under  this  Agreement.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 7 hereinabove.

         (b) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section  8(e)(3) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.
ss.1818(e)(3)  or (g)(1);  the Bank 's obligations  under this contract shall be
suspended as of the date of service,  unless stayed by appropriate  proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion:  (i)
pay  Executive all or part of the  compensation  withheld  while their  contract
obligations were suspended;  and (ii) reinstate (in whole or in part) any of the
obligations which were suspended.

<PAGE>

         (c)  If  Executive  is  removed  and/or  permanently   prohibited  from
participating  in the  conduct of the Bank's  affairs by an order  issued  under
Section  8(e)(4) or 8(g)(1) of the  Federal  Deposit  Insurance  Act,  12 U.S.C.
ss.1818(e)(4)  or (g)(1),  all obligations of the Bank under this contract shall
terminate  as of the  effective  date of the  order,  but  vested  rights of the
contracting parties shall not be affected.

         (d) If the Bank is in default  as  defined  in  Section  3(x)(1) of the
Federal Deposit  Insurance Act, 12 U.S.C.  ss.1813(x)(1)  all obligations of the
Bank under this  contract  shall  terminate as of the date of default,  but this
paragraph shall not affect any vested rights of the contracting parties.

         (e)  All   obligations  of  the  Bank  under  this  contract  shall  be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of the institution: (i) by the Director of
the OTS (or his designee), the FDIC or the Resolution Trust Corporation,  at the
time the FDIC enters into an agreement to provide  assistance to or on behalf of
the Bank under the authority  contained in Section 13(c) of the Federal  Deposit
Insurance Act, 12 U.S.C. ss.1823(c);  or (ii) by the Director of the OTS (or his
designee)  at the time the  Director (or his  designee)  approves a  supervisory
merger to resolve  problems  related to the  operations  of the Bank or when the
Bank is determined by the Director to be in an unsafe or unsound condition.  Any
rights of the parties that have already vested,  however,  shall not be affected
by such action.

         (f)      Any payments  made to Executive  pursuant to this  Agreement,
or  otherwise,  are subject to and conditioned  upon  compliance  with 12 U.S.C.
ss.1828(k)  and 12 C.F.R.ss.545.121 and any  rules  and  regulations promulgated
thereunder.

16.      REINSTATEMENT OF BENEFITS UNDER SECTION 15(b).

         In the event Executive is suspended and/or temporarily  prohibited from
participating  in the  conduct of the Bank's  affairs by a notice  described  in
Section  15(b) hereof (the  "Notice")  during the term of this  Agreement  and a
Change  in  Control,  as  defined  herein,  occurs,  the Bank  will  assume  its
obligation  to  pay  and  Executive  will  be  entitled  to  receive  all of the
termination  benefits  provided for under Section 5 of this  Agreement  upon the
Bank's receipt of a dismissal of charges in the Notice.

17.      SEVERABILITY.

         If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this  Agreement or any part of such  provision not held so invalid,  and each
such other  provision and part thereof shall to the full extent  consistent with
law continue in full force and effect.

18.      HEADINGS FOR REFERENCE ONLY.

         The headings of sections and paragraphs  herein are included solely for
convenience of reference and shall not control the meaning or  interpretation of
any of the provisions of this Agreement.

<PAGE>

         Wherever any words are used herein in the masculine, feminine or neutor
gender,  they shall be construed as though they were also used in another gender
in all cases where they would so apply.

19.      GOVERNING LAW.

         The  validity,  interpretation,  performance  and  enforcement  of this
Agreement shall be governed by the laws of the State of  Pennsylvania,  but only
to the extent not superseded by federal law.

20.      ARBITRATION.

         Notwithstanding  any right to  enforcement  under  Section  10(a),  any
dispute or controversy  arising under or in connection with this Agreement shall
be  settled  exclusively  by  arbitration,  conducted  before  a panel  of three
arbitrators  sitting in a location selected by Executive within fifty (50) miles
from the  location of the Bank,  in  accordance  with the rules of the  American
Arbitration  Association  then  in  effect.  Judgment  may  be  entered  on  the
arbitrator's award in any court having  jurisdiction;  provided,  however,  that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement,  other than in the case of a
Termination for Cause.

         In the event any dispute or controversy  arising under or in connection
with  Executive's  termination  is  resolved in favor of  Executive,  whether by
judgment, arbitration or settlement,  Executive shall be entitled to the payment
of all  back-pay,  including  salary,  bonuses and any other cash  compensation,
fringe  benefits and any  compensation  and benefits  due  Executive  under this
Agreement.

21.      PAYMENT OF COSTS AND LEGAL FEES.

         All  reasonable  costs and legal  fees paid or  incurred  by  Executive
pursuant to any dispute or question of interpretation relating to this Agreement
shall be paid or reimbursed by the Bank if Executive is successful on the merits
pursuant to a legal judgment, arbitration or settlement.

22.      INDEMNIFICATION.

         (a)  Subject to the  provisions  of  Section 15 hereof,  the Bank shall
provide  Executive  (including  his heirs,  executors and  administrators)  with
coverage under a standard directors' and officers' liability insurance policy at
its  expense,  and shall  indemnify  Executive  (and his  heirs,  executors  and
administrators)  to the fullest extent permitted under  Pennsylvania law against
all expenses and  liabilities  reasonably  incurred by him in connection with or
arising out of any  action,  suit or  proceeding  in which he may be involved by
reason of him having been a director  or officer of the Bank  (whether or not he
continues to be a director or officer at the time of incurring  such expenses or
liabilities),  such expenses and liabilities to include,  but not be limited to,
judgments,   court  costs  and  attorneys'  fees  and  the  cost  of  reasonable
settlements.

<PAGE>

23.      SUCCESSOR TO THE BANK.

         The Bank shall  require any  successor or assignee,  whether  direct or
indirect,  by  purchase,   merger,   consolidation  or  otherwise,   to  all  or
substantially  all the  business or assets of the Bank or the  Holding  Company,
expressly  and  unconditionally  to  assume  and  agree to  perform  the  Bank's
obligations under this Agreement, in the same manner and to the same extent that
the Bank would be required to perform if no such  succession or  assignment  had
taken place.


<PAGE>


                                   SIGNATURES

         IN WITNESS  WHEREOF,  First  Federal  Bank and  Northeast  Pennsylvania
Financial  Corp. have caused this Agreement to be executed and their seals to be
affixed hereunto by their duly authorized officers and directors,  and Executive
has signed this Agreement, on the ___ day of April, 1998.


ATTEST:                                       FIRST FEDERAL BANK




/s/ Megan Kennedy                             By:/s/ Thomas L. Kennedy
--------------------------------------------     -------------------------------
Megan Kennedy                                 Thomas L. Kennedy
Secretary                                     Chairman of the Board of Directors
                                              For the Entire Board of Directors



         [SEAL]


ATTEST:                                   NORTHEAST PENNSYLVANIA FINANCIAL CORP.

                                                              (Guarantor)


/s/ Megan Kennedy                             By:/s/ Thomas L. Kennedy
--------------------------------------------     -------------------------------
Megan Kennedy                                 Thomas L. Kennedy
Secretary                                     Chairman of the Board of Directors
                                              For the Entire Board of Directors

         [SEAL]

                                                 /s/ E. Lee Beard
WITNESS:                                         -------------------------------
/s/ Dee Dee Lazur                             E. Lee Beard
---------------------------                   Executive
Dee Dee Lazur