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 June 30, 2001

                                       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 incorporation or organization)  (I.R.S. Employer
                                                             Identification No.)

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

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

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


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.          Yes X       No __
                                                       -------    -------



     The  Registrant  had  4,945,605  shares of Common Stock  outstanding  as of
August 14, 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
         June 30, 2001 (unaudited) and September 30, 2000.................    1

         Consolidated Statements of Operations for the Three Months Ended
         June 30, 2001 and 2000 (unaudited)...............................    2

         Consolidated Statement of Comprehensive Income (Loss) for the Three
         Months Ended June 30, 2001 and 2000 (unaudited)..................    3

         Consolidated Statements of Operations for the Nine Months Ended
         June 30, 2001 and 2000 (unaudited)...............................    4

         Consolidated Statement of Comprehensive Income (Loss) for the Nine
         Months Ended June 30, 2001 and 2000 (unaudited)..................    5

         Consolidated Statements of Changes in Equity for the Years Ended
         September 30, 2000, 1999 and 1998 and the Nine Months Ended June 30,
         2001 (unaudited).................................................    6

         Consolidated Statements of Cash Flows for the Nine Months Ended
         June 30, 2001 and 2000 (unaudited)................................   7

         Notes to Consolidated Financial Statements (unaudited)............   9


Item 2   Management's Discussion and Analysis of Financial Condition
         and Results of Operations.........................................  16

Item 3   Quantitative and Qualitative Disclosures about Market Risk........  25

Part II - OTHER INFORMATION

1        Legal Proceedings.................................................  26

2        Changes in Securities and Use of Proceeds.........................  26

3        Defaults Upon Senior Securities...................................  26

4        Submission of Matters to a Vote of Security Holders...............  26

5        Other Information.................................................  26

6        Exhibits and Reports on Form 8 - K................................  26

Signatures


<PAGE>
                     Northeast Pennsylvania Financial Corp.
                 Consolidated Statements of Financial Condition
                June 30, 2001 (unaudited) and September 30, 2000
                                 (in thousands)
<TABLE>
<S>                                                                         <C>               <C>
                                                                               June 30,        September 30,
                                                                                 2001             2000
                                                                                 ----             ----
                               Assets                                         (unaudited)

Cash and cash equivalents                                                        $6,152          $ 6,295
Securities available-for-sale                                                   217,726          157,474
Securities held-to-maturity (estimated fair value of $27,741 at June
    30, 2001 and $28,129 at September 30, 2000)                                  28,124           30,336
Loans (less allowance for loan losses of $3,970 at June 30, 2001 and
    $4,162 at September 30, 2000)                                               493,309          415,105
Accrued interest receivable                                                       6,797            5,401
Assets acquired through foreclosure                                                 379              173
Property and equipment, net                                                      12,000            9,878
Intangible assets                                                                13,364            1,446
Other assets                                                                      8,783           11,234
                                                                                  -----           ------
     Total assets                                                              $786,634        $ 637,342
                                                                               ========        =========

                       Liabilities and Equity

Deposits                                                                       $493,365        $ 419,671
Federal Home Loan Bank advances                                                 206,446          137,461
Other borrowings                                                                  4,986            1,654
Advances from borrowers for taxes, insurance and trust                            1,335              639
Accrued interest payable                                                          1,564            2,472
Other liabilities                                                                 4,237            2,470
                                                                                  -----            -----

          Total liabilities                                                    $711,933        $ 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                                                       62,163           62,164
Common stock acquired by stock benefit plans                                    (5,637)          (6,221)
Retained earnings - substantially restricted                                     35,395           33,207
Accumulated other comprehensive income (loss)                                        68          (3,711)
Treasury stock, at cost (1,476,745 shares at June 30, 2001 and
    1,134,201 shares at September 30, 2000)                                    (17,352)         (12,528)
                                                                               --------         --------

     Total equity                                                               $74,701          $72,975
                                                                                -------          -------

            Total liabilities and equity                                       $786,634        $ 637,342
                                                                               ========        =========
</TABLE>
                                       1

<PAGE>
                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statements of Operations
          For the Three Months Ended June 30, 2001 and 2000 (unaudited)
                      (in thousands, except for share data)
<TABLE>
<S>                                                                          <C>                <C>

                                                                                For the Three months ended
                                                                                         June 30,
Interest Income:                                                               2001                 2000
                                                                               ----                 ----
                                                                                       (unaudited)
  Loans                                                                       $10,144            $ 8,032
  Mortgage-related securities                                                   1,516                923
  Investment securities:
     Taxable                                                                    1,780              1,865
     Non-taxable                                                                  456                781
                                                                                  ---                ---

     Total interest income                                                     13,896             11,601

Interest Expense:
  Deposits                                                                      4,956              3,751
  Federal Home Loan Bank advances and other                                     2,924              3,235
                                                                                -----              -----

     Total interest expense                                                     7,880              6,986

Net interest income                                                             6,016              4,615

Provision for loan losses                                                         494                141
                                                                                  ---                ---


Net interest income after provision for loan losses                             5,522              4,474

Non-interest Income:
  Service charges and other fees                                                  449                338
  Insurance premium income                                                        739                 83
  Trust fee income                                                                136                  5
  Other income (expense)                                                          (5)                121
  Gain (loss) on sale of:
     Real estate owned                                                            (1)               (53)
     Loans                                                                         29                  1
   Available-for-sale securities                                                  350                 18
                                                                                  ---                 --
      Total non-interest income                                                 1,697                513

Non-interest Expense:
  Salaries and net employee benefits                                            2,714              1,940
  Occupancy costs                                                                 683                474
  Data processing                                                                 186                183
  Professional fees                                                               283                164
  Federal Home Loan Bank service charges                                          227                166
  Amortization                                                                    326                 97
  Other                                                                           893                585
                                                                                  ---                ---

     Total non-interest expense                                                 5,312              3,609

Income before income taxes                                                      1,907              1,378

Income taxes                                                                      651                202
                                                                                  ---                ---


Net income                                                                     $1,256            $ 1,176
                                                                               ======            =======

Earnings per share - basic                                                      $0.27             $ 0.25
                                                                                =====             ======
Earnings per share - diluted                                                    $0.26             $ 0.24
                                                                                =====             ======
</TABLE>
                                       2
<PAGE>
                     Northeast Pennsylvania Financial Corp.
              Consolidated Statement of Comprehensive Income (Loss)
          For the Three Months Ended June 30, 2001 and 2000 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                           <C>               <C>
                                                                               For the Three Months Ended
                                                                                       June 30,
                                                                                 2001               2000
                                                                                 ----               ----
                                                                                      (unaudited)
Net Income                                                                     $1,256            $ 1,176
                                                                               ======            =======

Other comprehensive income (loss), net of tax
   Unrealized gains (losses) on securities:
    Unrealized holding gains (losses) arising during the period                 $349           $ (2,424)
    Less:  Reclassification adjustment for gains included in net
      income                                                                     231                 12
                                                                                 ---                 --
Other comprehensive income (loss)                                                118             (2,412)
                                                                                 ---             -------
Comprehensive income (loss)                                                   $1,374           $ (1,236)
                                                                              ======           =========
</TABLE>
                                        3

<PAGE>
                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statements of Operations
          For the Nine Months Ended June 30, 2001 and 2000 (unaudited)
                      (in thousands, except per share data)
<TABLE>
<S>                                                                             <C>                  <C>
                                                                                 For the Nine Months Ended
                                                                                          June 30,
                                                                                   2001                2000
                                                                                   ----                ----
                                                                                         (unaudited)
Interest Income:
  Loans                                                                          $29,460            $ 22,899
  Mortgage-related securities                                                      4,104               2,760
  Investment securities:
     Taxable                                                                       5,464               5,318
    Non-Taxable                                                                    1,374               2,515
                                                                                   -----               -----
     Total interest income                                                        40,402              33,492

Interest Expense:
  Deposits                                                                        15,319              11,209
  Federal Home Loan Bank advances and other                                        8,344               8,237
                                                                                   -----               -----

     Total interest expense                                                       23,663              19,446

Net interest income                                                               16,739              14,046

Provision for loan losses                                                            757                 585
                                                                                     ---                 ---


Net interest income after provision for loan losses                               15,982              13,461

Non-interest Income:
  Service charges and other fees                                                   1,216                 925
  Insurance premium income                                                         1,304                 189
  Trust fee income                                                                   405                   7
  Other income (expense)                                                            (101)                333
  Gain (loss) on the sale of:
     Real estate owned                                                                 3                (167)
     Loans                                                                           526                  15
     Available-for-sale securities                                                   300                   5
                                                                                     ---                   -
     Total non-interest income                                                     3,653               1,307

Non-interest Expense:
  Salaries and net employee benefits                                               7,401               5,818
  Occupancy costs                                                                  1,955               1,448
  Data processing                                                                    530                 444
  Professional fees                                                                  754                 466
  Federal Home Loan Bank and other service charges                                   698                 491
  Amortization                                                                       861                 288
  Other                                                                            2,397               1,853
                                                                                   -----               -----

     Total non-interest expense                                                   14,596              10,808

Income before income taxes                                                         5,039               3,960

Income taxes                                                                       1,468                 540
                                                                                   -----                 ---


Net income                                                                        $3,571             $ 3,420
                                                                                  ======             =======

Earnings per share - basic                                                         $0.75              $ 0.70
                                                                                   =====              ======
Earnings per share - diluted                                                       $0.73              $ 0.68
                                                                                   =====              ======
</TABLE>
                                       4

<PAGE>

                     Northeast Pennsylvania Financial Corp.
              Consolidated Statement of Comprehensive Income (Loss)
          For the Nine Months Ended June 30, 2001 and 2000 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                           <C>               <C>
                                                                                For the Nine Months Ended
                                                                                       June 30,
                                                                                 2001               2000
                                                                                 ----               ----
                                                                                      (unaudited)
Net Income                                                                     $3,571            $ 3,420
                                                                               ======            =======

Other comprehensive income (loss), net of tax
   Unrealized gains (losses) on securities:
    Unrealized holding gains (losses) arising during the period                $3,977          $ (2,415)
    Less:  Reclassification adjustment for gains included in net
      income                                                                      198                 3
                                                                                  ---                 -
Other comprehensive income (loss)                                               3,779            (2,412)
                                                                                -----            ------
Comprehensive income (loss)                                                    $7,350          $ (1,008)
                                                                               ======          =========

</TABLE>
                                       5


<PAGE>
                     Northeast Pennsylvania Financial Corp.
                  Consolidated Statements of Changes in Equity
              For the Years Ended September 30, 2000, 1999 and 1998
               and the Nine Months Ended June 30, 2001 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                     <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                        100          314                                                    414
Stock awards                                                (23)         270                                                    247
Stock options exercised (32,808 shares)                    (204)                                                      391       187
Net changes in gains (losses) on
securities available-for-sale, net of tax                                                          3,779                      3,779
Treasury stock at cost, (590,404 shares)                                                                           (7,589)   (7,589)
Acquisition of Higgins Insurance
Associates (215,052 shares)                                 126                                                     2,374     2,500
Cash dividend paid                                                                  (1,383)                                  (1,383)
Net income                                                                           3,571                                    3,571
                                         ---------    ---------    ---------      --------      --------         --------  --------
Balance, June 30, 2001                   $      64    $  62,163    $  (5,637)     $ 35,395      $     68         $(17,352) $ 74,701
                                         =========    =========    =========      ========      ========         ========  ========

</TABLE>

                                       6
<PAGE>
                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statement of Cash Flows
          For the Nine Months Ended June 30, 2001 and 2000 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                                        <C>             <C>
                                                                                          For the Nine Months Ended
                                                                                                   June 30,
                                                                                             2001             2000
                                                                                             ----             ----
Operating Activities:                                                                            (unaudited)
Net Income                                                                                 $3,571          $ 3,420
Adjustments to reconcile net income to net cash provided by operating activities:
  Provision for REO loss                                                                      348               64
  Provision for loan losses                                                                   757              585
  Depreciation                                                                              1,052              853
  Amortization                                                                                861              288
  Deferred income tax provision                                                             2,411              461
  ESOP expense                                                                                414              277
  Stock award expense                                                                         246              404
  Amortization and (accretion) on:
     Held-to-maturity securities                                                               (3)              (4)
     Available-for-sale securities                                                           (392)          (1,521)
  Amortization of deferred loan fees                                                         (302)            (122)
(Gain) loss on sale of:
     Assets acquired through foreclosure                                                       (3)             167
     Loans                                                                                   (526)             (15)
     Available-for-sale securities                                                           (300)              (5)
  Changes in assets and liabilities:
    Increase in accrued interest receivable                                                (1,396)            (668)
    Increase in other assets                                                              (15,016)          (2,769)
    Increase (decrease) in accrued interest payable                                          (908)             681
    Decrease in accrued income taxes payable                                                  (29)            (776)
    Increase in other liabilities                                                           1,796            1,453
                                                                                            -----            -----

      Net cash provided by (used in) operating activities                                 $(7,419)           $2,773

Investing Activities:
Net increase in loans                                                                    $(84,578)        $(50,801)
Proceeds from sale of:
  Available-for-sale securities                                                            60,005           32,058
  Held to maturity securities                                                               8,669                -
  Assets acquired through foreclosure                                                         555              208
  Loans                                                                                     5,339            1,051
Proceeds from repayments of held-to-maturity securities                                         -                2
Proceeds from repayments of available-for-sale securities                                  19,053            6,952
Purchase of:
  Held-to-maturity securities                                                              (6,454)               -
  Available-for-sale securities                                                          (121,037)         (24,641)
  Office properties and equipment                                                          (3,174)            (610)
  Federal Home Loan Bank stock                                                            (11,525)          (6,249)
                                                                                         --------          -------

Net cash used in investing activities                                                   $(133,147)        $(42,030)

Financing Activities:
  Net increase (decrease) in deposit accounts                                             $73,694         $(21,180)
  Net increase in Federal Home Loan Bank short-term advances                                2,000           39,500
  Borrowings of Federal Home Loan Bank long-term advances                                 108,000           30,000
  Repayments of Federal Home Loan Bank long-term advances                                 (41,014)             (15)
  Net increase in advances from borrowers for taxes and insurance                             696              284

</TABLE>

                                       7
<PAGE>
                     Northeast Pennsylvania Financial Corp.
                      Consolidated Statement of Cash Flows
          For the Nine Months Ended June 30, 2001 and 2000 (unaudited)
                                 (in thousands)
<TABLE>
<S>                                                                              <C>            <C>
                                                                                  For the Nine Months Ended
                                                                                      June 30,

                                                                                      2001           2000
                                                                                        (unaudited)
     Net increase (decrease) in other borrowings                                    $3,332           $ 728
    Purchase of treasury stock                                                      (7,589)         (4,943)
    Stock issued for the purchase of
       Higgins Insurance Associates, Inc.                                            2,500               -
    Stock options exercised                                                            187               -
    Cash dividend on common stock                                                   (1,383)         (1,117)
                                                                                   -------         -------

     Net cash provided by financing activities                                     140,423          43,257

(Increase) decrease in cash and cash equivalents                                      (143)          4,000

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

Cash and cash equivalents, end of period                                            $6,152         $ 8,177
                                                                                    ======         =======

Supplemental disclosures of cash flow information:
  Cash paid during the period for:
     Interest                                                                      $24,572         $18,887
                                                                                   =======         =======
     Income taxes                                                                     $882           $ 696
                                                                                      ====           =====
Supplemental disclosure-non-cash information:
  Transfer from loans to real estate owned                                          $1,106            $657
                                                                                    ======            ====
  Net change in unrealized gains (losses) on securities
     available-for-sale, net of tax                                                 $3,779        $ (2,412)
                                                                                   =======         =======

</TABLE>

                                       8

<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 nine months ended June 30, 2001 are
     not necessarily indicative of the results that may be expected for the year
     ending September 30, 2001.

     Northeast  Pennsylvania  Financial Corp. (the "Company") has a $2.0 million
     investment  in  the  preferred  stock  of   Buildersfirst.com.   Since  the
     investment does not have a readily  determinable  market value, the Company
     is not accounting for the investment under SFAS No. 115. The accounting for
     this security was initially  guided by EITF Topic No. D-68,  EITF Topic No.
     98-13, and EITF Topic No. 99-10,  which, in essence,  provide that investee
     losses  should be  absorbed  by  investments  in other  securities  once an
     investee's common equity has been exceeded by net losses.  However,  during
     the Company's  third fiscal quarter the investee issued  additional  equity
     and entered into certain  other  business  relationships  which reduced the
     Company's   influence  over  the  investee  and  resulted  in  the  Company
     prospectively  utilizing  the cost method of  accounting  for its remaining
     investment in Buildersfirst.com

     Principles of Consolidation and Presentation

     The accompanying  financial  statements of the Company include the accounts
     of  First  Federal  Bank,  Northeast   Pennsylvania  Trust  Co.  ("Trust"),
     Abstractors,  Inc., Higgins Insurance Agency  ("Higgins") and FIDACO,  Inc.
     First Federal Bank, Northeast  Pennsylvania Trust Co.,  Abstractors,  Inc.,
     and Higgins  Insurance  Agency are  wholly-owned  subsidiaries of Northeast
     Pennsylvania Financial Corp. Northeast Pennsylvania Trust Co. offers trust,
     estate and asset management services and products.  Abstractors,  Inc. is a
     title insurance  agency.  Higgins  Insurance Agency provides  insurance and
     investment  products to  individuals  and  businesses.  FIDACO,  Inc. is an
     inactive  subsidiary  of First  Federal Bank and its only major asset is an
     investment  in Hazleton  Community  Development  Corporation.  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.

     Business

     The Company is the holding  company for First  Federal  Bank (the  "Bank"),
     Northeast Pennsylvania Trust Co. (the "Trust Co."), Abstractors,  Inc., and


                                       9
<PAGE>

     Higgins Insurance Agency ("Higgins").  The Company through its subsidiaries
     serves Northeastern and Central  Pennsylvania  through sixteen full service
     community  banking office  locations,  three  financial  centers and a loan
     production  office. The Company provides a wide range of financial services
     to individual,  small business and corporate customers. The Company and all
     subsidiaries are subject to competition  from other financial  institutions
     and companies that provide financial services.  The Company,  the Bank, the
     Trust Co. and Higgins are subject to the  regulations  of federal and state
     agencies and undergo periodic examinations by those regulatory authorities.

     On November  10,  2000,  the  Company  acquired  Security  of  Pennsylvania
     Financial Corp. for $17.50 per share. The total cost of the acquisition was
     $25.9 million.  The  intangibles  acquired are being  amortized  using both
     straight line and accelerated  methods of  amortization  over lives ranging
     from 13 to 31 years.  The  transaction was accounted for using the purchase
     method  of  accounting.  Immediately  upon  consummating  the  transaction,
     Security of Pennsylvania  Financial Corp.  ("Security") and its subsidiary,
     Security Savings Association of Hazleton,  were merged into the Company and
     the Bank,  respectively.  Security Savings Association of Hazleton had four
     offices located in Luzerne and Carbon counties, Pennsylvania.

     The balance sheets contained in the Form 10-Qs for June 30, 2001, March 31,
     2001 and December 31, 2000 reflect  assets and  liabilities  acquired  from
     Security.  Results of former Security  operations have been included in the
     consolidated  Statement  of  Operations  prospectively  from  the  date  of
     acquisition.  Following  are the pro forma results which have been prepared
     as though the Company had acquired  Security at the beginning of the period
     presented.

             PRO FORMA UNAUDITED COMBINED CONDENSED INCOME STATEMENT
                     FOR THE NINE MONTHS ENDED JUNE 30, 2001
                      (In thousands, except per share data)

<TABLE>
<S>                                                     <C>             <C>
                                                           As
                                                        Reported          Pro forma
                                                        ---------------------------


         Net interest income                             $15,982            $16,233
         Other income                                      3,653              2,074
         Net income                                        3,571               (306)

         Earnings per share-basic                          $0.75             $(0.06)
                                                          ======             ======
         Earnings per share-diluted                        $0.73             $(0.06)
                                                          ======             ======
</TABLE>

     Recent Accounting Developments

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


                                       10
<PAGE>
     method. The provisions of the Statement apply to all business  combinations
     initiated  after June 30, 2001.  The Statement also applies to all business
     combinations  accounted  for using the  purchase  method  which the date of
     acquisition  is July 1,  2001,  or later.  There is no  expected  impact on
     earnings,  financial  condition,  or equity upon  adoption of Statement No.
     141.

     In June 2001,  the FASB  issued  Statement  No.  142,  "Goodwill  and Other
     Intangible  Assets."  The  Statement  addresses  financial  accounting  and
     reporting for acquired  goodwill and other intangible assets and supersedes
     APB Opinion No. 17,  Intangible  Assets. It addresses how intangible assets
     that are  acquired  individually  or with a group of other  assets (but not
     those  acquired  in a  business  combination)  should be  accounted  for in
     financial  statements upon their acquisition.  The Statement also addresses
     how goodwill and other intangible assets should be accounted for after they
     have been initially recognized in the financial statements.  The provisions
     of the  Statement  are  required to be applied  starting  with fiscal years
     beginning  after  December 15, 2001,  except that  goodwill and  intangible
     assets  acquired  after June 30, 2001,  will be subject  immediately to the
     nonamortization  and  amortization  provisions  of  the  Statement.   Early
     application  is permitted  for entities with fiscal years  beginning  after
     March 15, 2001,  provided that the first interim financial  statements have
     not previously been issued.  The Statement is required to be applied at the
     beginning of an entity's  fiscal year and to be applied to all goodwill and
     other  intangible  assets  recognized in its  financial  statements at that
     date. There is no anticipated impact on earnings,  financial condition,  or
     equity  upon  adoption  of  Statement  No.  142;  however,  due  to  recent
     acquisitions,  the  Company,  on a  quarterly  basis,  has been  amortizing
     $107,000 of goodwill which will no longer be required upon  commencement of
     the Company's fiscal year beginning October 1, 2001.


                                       11

<PAGE>
         Earnings per Share

     The  following  table  presents  the  reconciliation  basic and diluted EPS
computations.
<TABLE>
<S>                                               <C>                <C>             <C>             <C>

                                                      Three months ended                  Nine months ended
                                                           June 30,                           June 30,
                                                      2001            2000             2001             2000
                                                      ----            ----             ----             ----
                                                                          (unaudited)
                                                         (Dollars in thousands, except per share data)

       Basic:
       Net Income                                   $1,256            $1,176            $3,571          $3,420
                                                    ======            ======            ======          ======

       Weighted average shares outstanding
                                                 4,561,576         4,543,060         4,578,771       4,760,307
       Plus:  ESOP shares released or
         committed to be released                  173,539           122,121           160,684         109,266
                                                   -------           -------           -------         -------
                                                 4,735,115         4,665,181         4,739,455       4,869,573
                                                 =========         =========         =========       =========

       Earnings per share  - basic                   $0.27             $0.25             $0.75           $0.70
                                                     =====             =====             =====           =====



                                                      Three months ended                  Nine months ended
                                                           June 30,                           June 30,
                                                      2001            2000             2001             2000
                                                      ----            ----             ----             ----
                                                                          (unaudited)
                                                         (Dollars in thousands, except per share data)

       Diluted:

       Net Income                                   $1,256             $1,176           $3,571          $3,420
                                                    ======             ======           ======          ======

       Basic weighted shares outstanding         4,735,115          4,665,181        4,739,455       4,869,573
       Dilutive Instruments:
         Dilutive effect of outstanding
          stock options                             34,327                  -           14,648               -
         Dilutive effect of stock awards           131,405            193,984          139,032         193,925
                                                   -------            -------          -------         -------
                                                 4,900,847          4,859,165        4,893,135       5,063,498
                                                 =========          =========        =========       =========

       Earnings per share  - diluted                 $0.26              $0.24            $0.73           $0.68
                                                     =====              =====            =====           =====
</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 in  connection  with the
     Bank's  conversion from the mutual to stock form of organization.  On March
     31, 1998, the Company  issued  6,427,350  shares,  par value $.01 per share
     (the "Common Stock"), including 514,188 shares to the Bank's Employee Stock
     Ownership Plan and related trust (the "ESOP") and a contribution of 476,100
     shares of Common  Stock to The First  Federal  Charitable  Foundation  (the
     "Foundation").  The Company  received net proceeds of $52.1 million,  after
     expenses of $2.2 million from the offering.

     As required by regulation,  the Bank  established a liquidation  account at
     the time of its  conversion  to stock form 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

                                       12
<PAGE>
     a distribution from the liquidation  account. The amount of the liquidation
     account decreases to the extent the balances of eligible deposits decrease.
     However,  the  liquidation  account does not  increase if deposit  accounts
     increase.  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 has 2,000,000 authorized 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
     June 30, 2001, there were no shares of preferred stock issued.

3.   Securities

     Securities are summarized as follows:
<TABLE>
<S>                                                   <C>         <C>             <C>              <C>
                                                                          June 30, 2001
                                                                           (unaudited)
                                                                          (in thousands)
                                                                     Gross             Gross
                                                     Amortized    Unrealized         Unrealized          Fair
                                                       Cost          Gains            Losses           Value
                                                     ---------    ----------         ----------       -------

Available-for-sale securities:

   Municipal securities                                $34,511          $23            $(938)         $33,596
   Obligations of U.S. Government agencies              11,928          116               (7)          12,037
   Mortgage-related securities                          99,410        1,688              (67)         101,031
   Trust Preferred securities                           13,710            -           (1,674)          12,036
   Corporate Bonds                                      39,227          873              (23)          40,077
                                                        ------          ---              ----          ------

     Total debt securities                             198,786        2,700           (2,709)         198,777

   FHLB stock                                           10,322            -                 -          10,322
   Freddie Mac stock                                     1,000            -                 -           1,000
   Fannie Mae stock                                      2,000            2                 -           2,002
  Other equity securities                                5,507          124               (6)           5,625
                                                         -----          ---               ---           -----

     Total equity securities                            18,829          126               (6)          18,949
                                                        ------          ---               ---          ------

           Total                                      $217,615       $2,826          $(2,715)        $217,726
                                                       =======        =====           =======         =======

Held-to-maturity securities:

   Municipal securities                                 $3,552            -             (171)           3,381
   Obligations of U.S. government agencies              23,287            1             (213)          23,075
   Certificates of deposit                               1,285            -                 -           1,285
                                                         -----            -                 -           -----

           Total                                       $28,124           $1            $(384)         $27,741
                                                       =======           ==            ======         =======

</TABLE>
                                       13
<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

<TABLE>
<S>                                                                    <C>                    <C>
        Loans are summarized as follows:                              June 30,              September 30,
                                                                        2001                    2000
                                                                        ----                    ----
                                                                  (unaudited)
                                                                                (in thousands)
        Real Estate loans:
          One-to four-family                                          $229,830               $205,790
          Multi-family and commercial                                   69,988                 52,669
          Construction                                                   8,222                  3,152
                                                                         -----                  -----
        Total real estate loans                                        308,040                261,611
                                                                       -------                -------

        Consumer Loans:
          Home equity loans and lines of credit                         80,037                 72,416
          Automobile                                                    65,919                 50,941
          Education                                                      3,471                  3,516
          Unsecured lines of credit                                      1,865                  1,817
          Other                                                         11,333                  8,021
                                                                        ------                  -----
        Total consumer loans                                           162,625                136,711
                                                                       -------                -------
        Commercial loans                                                28,309                 22,481
                                                                        ------                 ------
        Total loans                                                    498,974                420,803
                                                                       -------                -------
          Less:
             Allowance for loan losses                                  (3,970)                (4,162)
             Deferred loan origination fees                             (1,695)                (1,536)
                                                                       -------                -------
        Total loans, net                                              $493,309               $415,105
                                                                      ========               ========

</TABLE>
                                       14

<PAGE>

     The activity in the allowance for loan losses is as follows (in thousands):

<TABLE>
<S>                                                   <C>                       <C>                            <C>

                                                      For the nine                                            For the nine
                                                      months ended             For the year ended             months ended
                                                     June 30, 2001             September 30, 2000             June 30, 2000
                                                     -------------             ------------------             -------------
                                                      (unaudited)                                              (unaudited)
         Balance, beginning of period                     $4,162                     $2,924                       $2,924
         Additional allowance from
          acquisition of Security                            817                          -                            -
         Charge-offs                                       (1782)                      (247)                         (88)
         Recoveries                                           16                         18                           16
         Provision for loan losses                           757                      1,467                          585
                                                             ---                      -----                          ---
         Balance, end of period                           $3,970                     $4,162                       $3,437
                                                          ======                     ======                       ======
</TABLE>

5.       Deposits

         Deposits consist of the following major classifications (in thousands):
<TABLE>
<S>                                                                <C>            <C>            <C>          <C>

                                                                      June 30, 2001             September 30, 2000
                                                                      -------------             ------------------
                                                                       (unaudited)
                                                                                 Percent                     Percent
                                                                      Amount     of Total          Amount    of Total
                                                                     --------    --------        --------    --------
                                                                     --------    --------        --------    --------
        Savings accounts (passbook, statement, clubs)                $90,494        18.34%        $70,369       16.77%
        Money market accounts                                         37,718         7.65          31,635        7.54
        Certificates of deposit less than $100,000                   225,419        45.69         180,775       43.08
        Certificates of deposit greater than $100,000(1)              67,072        13.59          81,847       19.50
        NOW Accounts                                                  49,141         9.96          37,781        9.00
        Non-interest bearing deposits                                 23,521         4.77          17,264        4.11
                                                                      ------         ----          ------        ----
        Total deposits at end of period                             $493,365       100.00%       $419,671      100.00%
                                                                    ========       ======        ========      ======

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

                                       15
<PAGE>


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

In   addition   to   historical   information,   this  10-Q   includes   certain
forward-looking  statements based on current management expectations.  Northeast
Pennsylvania  Financial  Corp.  (the  "Company")  intends  such  forward-looking
statements to be covered by the safe harbor provisions of the Private Securities
Reform Act of 1995 and is  including  this  statement  for purposes of such safe
harbor  provisions.  The Company's  actual results could differ  materially from
those management  expectations.  Factors that could cause future results to vary
from current management  expectations  include,  but are not limited to, general
economic  conditions,  legislative and regulatory  changes,  monetary and fiscal
policies  of  the  federal  government,  changes  in  tax  policies,  rates  and
regulations  of federal,  state and local tax  authorities,  changes in interest
rates,  deposit flows, the cost of funds,  demand for loan products,  demand for
financial  services,  competition,  changes in the quality or composition of the
Bank's  loan  and  investment  portfolios,  changes  in  accounting  principles,
policies  or  guidelines,  and other  economic,  competitive,  governmental  and
technological  factors affecting the Company's  operations,  markets,  products,
services  and  prices.   These  factors   should  be  considered  in  evaluating
forward-looking  statements  and  undue  reliance  should  not be placed on such
statements.  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, a federally-chartered
capital  stock  savings  bank  regulated  by the  Office of  Thrift  Supervision
("OTS"),  Abstractors,  Inc., Trust, and Higgins. The Company transacts business
primarily  through the Bank and to a lesser extent its other  subsidiaries.  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.

In June 1998, the Company  purchased  Abstractors,  Inc. a local title insurance
agency.  In June 1999,  the  Company  received  approval  from the  Pennsylvania
Department of Banking to form Northeast  Pennsylvania  Trust Co. The Trust began
operations in the first fiscal quarter of 2000 and offers current customers and,
potentially,  other financial  institutions'  customers trust,  estate and asset
management services and products.

On November 10, 2000, the Company  acquired  Security of Pennsylvania  Financial
Corp., the holding company for Security Savings Association of Hazleton, a local
financial institution.  In December 2000, the Company acquired Higgins Insurance
Agency, a Pottsville based insurance  agency,  which has been serving  customers
throughout  Schuylkill and Luzerne Counties since 1946. Higgins offers personal,
health and commercial insurance.

                                       16
<PAGE>

B.        Management Strategy

The  Company's  operating  strategy  is  that  of  a  community-based  financial
institution,  offering a wide  variety of  financial  products to its retail and
business customers. The Bank, while maintaining its focus on residential lending
has been concentrating on increasing its consumer, small business and commercial
lending. In order to promote long-term financial strength and profitability, the
Company's  operating strategy has focused on: (i) meeting the financial needs of
its customers through expanded product offerings,  improved delivery systems and
by taking  advantage of  technological  advances,  including the internet;  (ii)
increasing profitability by emphasizing  higher-yielding consumer and commercial
loans; (iii) maintaining a strong regulatory capital position; (iv) managing its
interest rate risk by emphasizing  consumer and commercial loans, in addition to
shorter term, adjustable rate, one-to four-family loans,  soliciting longer-term
deposits and utilizing  longer-term  advances from the Federal Home Loan Bank of
Pittsburgh (the "FHLB");  and (v) maintaining  strong asset quality by utilizing
strong underwriting guidelines.

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:
<TABLE>
<S>                                                                       <C>                        <C>
                                                                              June 30,               September 30,
                                                                               2001                       2000
                                                                               ----                       ----
                                                                            (unaudited)
                                                                                      (in thousands)
Non-performing loans:
 Non-accrual loans plus other impaired loans                                  $4,698                    $3,499
Real estate owned and other repossessed assets                                   379                       173
                                                                                 ---                       ---
     Total non-performing assets                                              $5,077                    $3,672
                                                                              ======                    ======

         Total non-performing loans as a percentage of total loans             0.94%                     0.83%
         Total non-performing assets as a percentage of total assets           0.65%                     0.58%
</TABLE>

The  increase in  non-performing  loans and assets was  primarily  the result of
additional  delinquencies  associated  with the  Security  Savings  acquisition.
Included in  non-accrual  plus other  impaired  loans at September 30, 2000 is a
$2.0 million  impaired loan to a commercial  borrower.  This  commercial loan is
secured by a portfolio of NASDAQ traded  securities  whose value has  fluctuated
greatly in recent periods. At June 30, 2001, $1.7 million of the commercial loan
was charged off, leaving approximately $300,000 remaining.  The Bank anticipates
full collection of the remaining balance.


D.        Allowance for Loan Losses

An allowance is maintained to absorb losses inherent in the loan portfolio.  The
adequacy of the  allowance is  periodically  evaluated by management to maintain
the allowance at a level that is sufficient to absorb expected loan losses.  The
allowance  for loan  losses  is also  increased  by  balances  acquired  through
acquisitions,  recoveries and is decreased by  charge-offs.  The Company charges
current  earnings with a provision for loan losses to maintain the allowance for
loan losses at a level deemed  appropriate  by management.  In  determining  the
provision,  management  considers both specifically  identified problem loans as
well as credit risks not specifically identified in the loan portfolio.

                                       17
<PAGE>

The  Company's  determination  as to the  adequacy of the  allowance is based on
management's  evaluation of past loan loss experience,  known and inherent risks
in the loan portfolio,  possible adverse  situations that have occurred that may
affect a  borrower's  ability  to  repay,  the  estimated  value  of  underlying
collateral, economic conditions, and other relevant factors. Management assesses
the adequacy of the allowance through a formula allowance,  specific  allowances
for identified problem loans and an unallocated allowance.

The formula allowance  element gives  consideration to historical losses and the
current   composition  of  the  portfolios.   Losses  are  recognized  when  (a)
information  indicates that it is probable that a loss has been incurred and (b)
the amount of the loss can be  reasonably  estimated.  Borrowers are impacted by
events that result in loan default such as job loss, divorce,  medical crisis or
the loss of a major tenant. The time-frame between the occurrence of such events
and the  resulting  default and loss  realization  is between 1.0 and 2.5 years,
depending  upon the loan type.  Therefore,  for example,  if the general  credit
characteristics of a portion of a loan portfolio have not changed  significantly
over time,  losses can be estimated by calculating  historical  loss  experience
over a period of two years.

The formula  allowance  is  determined  by  applying  loss  factors  against all
non-impaired  loans. Loss factors may be adjusted for significant  factors that,
in management's  judgment,  affect the collectibility of the portfolio as of the
evaluation  date. Loss factors are calculated  based on models that estimate the
probability  that  loans  will  become   delinquent  and  ultimately  result  in
foreclosure  over a period of between 1.0 and 2.5 years,  depending  on the loan
type,  and the  rates of loss  that have been  experienced  on such  loans.  The
foreclosure  and loss  rates are then  reviewed  in order to  attempt to predict
losses going forward. A contingency factor is then added to provide for the risk
associated with imprecision in estimating inherent loan losses.

Specific allowances are established against individual residential 1-4 mortgage,
consumer,  commercial,  and  commercial and  multi-family  real estate loans for
which  management has performed  analyses and concluded  that,  based on current
information  and events,  it is probable that the Bank will be unable to collect
all  amounts  due  according  to the  contractual  terms of the loan  agreement.
Generally,  management believes that full collectibility in the normal manner is
improbable if a loan is severely  delinquent or if it has been determined that a
borrower's  cash flow is inadequate for debt  repayment.  The amount of specific
allowance  is  determined  by an  estimation  of any  underlying  fair  value of
collateral, net of the cost of disposition of the collateral, and the fair value
is compared to the net book value of the loan. If the net book value exceeds the
fair  value,  a specific  allowance  is  established  in an amount  equal to the
excess.  Loans  evaluated  for specific  allowance are excluded from the formula
allowance analysis so as not to double-count loss exposure.

An  unallocated  allowance  is  established  for losses  which may not have been
identified  through the  formula and  specific  portions of the  allowance.  The
unallocated  portion is more subjective and requires a high degree of management
judgment and experience.  Management has identified  several factors that impact
credit  losses that are not  considered  in either the  formula or the  specific
allowance  segments.  These  factors  consist of industry  and  geographic  loan
concentrations,   changes  in  the  composition  of  loan   portfolios   through
acquisitions and new business strategies, changes in underwriting processes, and
trends in problem  loan and loss  recovery  rates.  Each factor is analyzed  and
assigned a range of values.  At this time,  management has chosen an unallocated
allowance amount at the mid-point of the range for each factor.


                                       18
<PAGE>

E.        Liquidity and Capital Resources

The Bank's primary sources of funds on a long 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's most liquid assets are cash and cash  equivalents  and its investment
and mortgage-related securities  available-for-sale.  The levels of these assets
are  dependent  on  the  Bank's  operating,  financing,  lending  and  investing
activities  during any given period. At June 30, 2001, cash and cash equivalents
and investment and mortgage-related securities available-for-sale totaled $223.9
million, or 28.5% of total assets.

The Bank has other sources of liquidity if a need for  additional  funds arises,
including  FHLB  advances.  At June 30,  2001,  the Bank had  $206.4  million in
advances  outstanding  from the FHLB, and had an overall  borrowing  capacity of
$373.0  million.  Depending  on market  conditions  and the  pricing  of deposit
products versus FHLB advances,  the Bank may continue to rely on FHLB borrowings
to fund asset growth.

At June 30, 2001,  the Bank had  commitments  to originate  and purchase  loans,
unused  outstanding  lines of credit and  undisbursed  proceeds of  construction
mortgages  totaling  $56.5  million.  The  Bank  anticipates  that it will  have
sufficient  funds  available to meet these  commitments.  Certificate  accounts,
including Individual Retirement Account and KEOGH accounts,  which are scheduled
to mature in less than one year from  June 30,  2001,  totaled  $227.9  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 June 30, 2001,  the Bank
had $55.7 million in jumbo certificates, the majority of which are deposits from
local school districts and municipalities.

At June 30, 2001, the Bank exceeded all of its regulatory  capital  requirements
with a  tangible  capital  level of  $48.9  million,  or 6.4% of total  adjusted
assets,  which is above the  required  level of $11.7  million,  or 1.5%; a core
capital level of $48.9 million, or 6.4% of total adjusted assets, which is above
the required level of $30.7 million,  or 4.0%; and a risk-based capital of $52.8
million, or 11.6% of risk-weighted  assets, which is above the required level of
$36.4 million, or 8.0%.

At June 30, 2001,  the Bank had total  equity,  determined  in  accordance  with
generally accepted  accounting  principles,  of $60.1 million, or 7.8%, of total
assets,  which approximated the Bank's regulatory  tangible capital at that date
of 6.4% of assets.  An  institution  with a ratio of  tangible  capital to total
assets of greater than or equal to 5.0% is considered  to be  "well-capitalized"
pursuant to OTS regulations.


                                       19
<PAGE>


F.        Comparison of Financial Condition at June 30, 2001 and
          September 30, 2000

On November  10, 2000  Northeast  Pennsylvania  Financial  Corp.  completed  its
acquisition  of  Security  Savings  in a  transaction  accounted  for  using the
purchase  method of  accounting.  This  acquisition  contributed  to the  $149.3
million  increase in the asset base from $637.3 million at September 30, 2000 to
$786.6 million at June 30, 2001. The growth was in loans receivable,  investment
securities and intangible assets.

Available-for-sale  securities  increased $60.2 million,  from $157.5 million at
September  30,  2000 to  $217.7  million  at June 30,  2001.  The  increase  was
primarily  attributable to the purchase of mortgage backed securities  utilizing
proceeds from the sale of mortgage loans and advances from the FHLB.

Loans increased $78.2 million to $493.3 million at June 30, 2001,  primarily due
to the loans obtained from the Security acquisition. The largest increase was in
consumer loans which increased $25.9 million, as a result of loans acquired from
Security,  as well as increased indirect auto  originations.  One-to four-family
real  estate  loans  increased  $24.0  million,  primarily  as a result of loans
acquired from Security,  offset by the sale of $30.0 million of Security's fixed
rate mortgage  loans.  Multi family and commercial  real estate loans  increased
$17.3 million while commercial and construction loans increased $5.8 million and
$5.1 million, respectively.

Intangible assets increased $11.9 million to $13.4 million at June 30, 2001 as a
result of a core  deposit  intangible  of $9.1  million  created by the Security
acquisition.  The core deposit  intangible is being  amortized on an accelerated
basis over a 13 to 31 year life.  Goodwill from the purchase of Security is $1.2
million which is being amortized over a 20 year life. Also  contributing to this
increase is $2.6 million of goodwill  created as a result of the  acquisition of
Higgins, which is being amortized over a 20 year life.

Deposits  increased  $73.7 million from $419.7  million at September 30, 2000 to
$493.4 million at June 30, 2001.  The largest  increase was in  certificates  of
deposit and savings  accounts,  which increased $29.9 million and $20.1 million,
respectively, from the acquisition of Security combined with increased marketing
efforts and competitive  pricing of such products.  NOW accounts increased $11.3
million  from  $37.8  million  to $49.1  million  as a result  of a more  active
solicitation of such accounts and the Security acquisition.

FHLB advances increased $68.9 million, from $137.5 million at September 30, 2000
to  $206.4  million  at  June  30,  2001.  This  was a  result  of  management's
utilization of FHLB borrowings to fund the purchase of Security and the purchase
of investment securities.

Total  equity  increased  $1.7 million to $74.7  million at June 30, 2001.  This
increase in equity resulted primarily from a $3.8 million,  net of tax, increase
in unrealized gains on securities  reflected in accumulated other  comprehensive
income, along with retention of earnings for the period, offset by the effect of
the purchase by the Company of an additional  590,404 shares of its common stock
during the period at a cost of $7.6 million and a cash dividend  payment of $1.4
million.  Equity  also  increased  through  the  issuance  of 215,052  shares of
treasury stock in the amount of $2.5 million for the purchase of Higgins.


                                       20
<PAGE>


G.        Comparison of Operating Results for the Three Months ended
          June 30, 2001 and June 30, 2000

General.  The Company had net income of $1.3  million for the three months ended
June 30, 2001, compared to net income of $1.2 million for the three months ended
June 30, 2000.

Interest Income.  Total interest income increased $2.3 million,  or 19.8%,  from
$11.6  million for the three months ended June 30, 2000 to $13.9 million for the
three months ended June 30, 2001. This was primarily due to a $102.9 million, or
16.0%, increase in the average balance of interest earning assets. Specifically,
interest income on loans increased $2.1 million,  or 26.3% from $8.0 million for
the period ended June 30, 2000 to $10.1 million at June 30, 2001,  primarily due
to a $46.4  million  increase in the average  balance of real estate loans and a
$30.4 million increase in the average balance of consumer loans.

Interest  Expense.  Interest expense  increased  $894,000,  or 12.8%,  from $7.0
million for the three  months  ended June 30, 2000 to $7.9 million for the three
months ended June 30, 2001.  The increase in interest  expense was primarily the
result of a $977,000  increase in interest  expense on  certificates of deposit,
which was the result of a $68.7 million increase in the average balance of these
accounts.  Interest  expense on checking and savings rose  $140,000 and $94,000,
respectively,  as a result  of higher  outstanding  balances.  Offsetting  these
increases was a $311,000 decrease in interest expense on FHLB advances and other
borrowings due to a $12.3 million decline in the average balance as well as a 26
basis point decrease in the weighted average rate paid on such borrowings.

Provision for Loan Losses. The Company's provision for loan losses for the three
months  ended June 30, 2001 was  $494,000  compared  to  $141,000  for the three
months ended June 30, 2000. The increase in the provision was primarily due to a
write  down of a  large  commercial  loan,  which  was  previously  reported  as
non-performing and was substantially  reserved.  Management's judgment as to the
appropriate  amount  for the  provision  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 process,  periodically review
the  Company's  allowance  for losses on loans.  Such  agencies  may require the
Company to recognize  additions to the allowance  based on their judgments about
information available to them at the time of their examination.

Non-interest Income.  Non-interest income increased $1.2 million,  from $513,000
to $1.7  million,  for the three  months  ended June 30,  2001.  The increase in
non-interest  income was  primarily  due to a  $656,000  increase  in  insurance
premium  income due to the  acquisition  of Higgins in  December  2000.  Gain on
available-for-sale  securities  increased  $332,000  due to sales of  securities
during the quarter.  Trust fee income increased $131,000 as a result of a larger
asset base under  management.  Service  charges  and other fee income  increased
$111,000  as a result  of  higher  outstanding  balances  on  deposits  and more
transactions. Offsetting these increases was a $126,000 decrease in other income
due to losses derived from the Company's investment in Buildersfirst.com.


                                       21
<PAGE>

Non-interest Expense. Total non-interest expense increased from $3.6 million for
the three  months ended June 30, 2000 to $5.3 million for the three months ended
June 30, 2001,  respectively.  Salaries and employee benefits increased $774,000
primarily  as a result  of new  staff  from the  acquisitions  of  Security  and
Higgins.  Other non-interest expense increased $308,000, or 52.6%, primarily due
to a $122,000  increase in expense for assets acquired  through  foreclosure and
repossession,  as  well as  general  increases  in  operating  expenses  such as
supplies and postage.  Amortization  expense  increased  $229,000 due to expense
associated  with the  acquisition  of Security  and Higgins.  Occupancy  expense
increased  $209,000 as a result of additional  expense  incurred with properties
acquired from Security.

Income Taxes.  The Company had an income tax provision of $651,000 for the three
months  ended June 30,  2001,  compared to a provision of $202,000 for the three
months ended June 30, 2000 reflecting an effective tax rate of 34.1%, and 14.7%,
respectively,  for those  periods.  The increase in the effective tax rate was a
direct result of the sale of tax-exempt municipal securities.

H.        Comparison of Operating Results for the Nine Months ended
          June 30, 2001 and June 30, 2000.

General.  The Company had net income of $3.6  million for the nine months  ended
June 30, 2001 and $3.4 million for the nine months ended June 30, 2000.

Interest Income.  Total interest income increased $6.9 million,  or 20.6%,  from
$33.5  million for the nine months ended June 30, 2000 to $40.4  million for the
nine months ended June 30, 2001,  primarily  due to a $93.9  million,  or 15.1%,
increase  in the  average  balance of  interest  earning  assets.  Specifically,
interest  income on loans increased $6.6 million from $22.9 million for the nine
month  period  ending June 20,  2000 to $29.5  million,  due to a $54.7  million
increase in the average  balance of real estate loans, a $30.6 million  increase
in the average  balance of consumer  loans,  and a $2.9 million  increase in the
average  balance  of  commercial  loans.  Interest  income  on total  securities
increased  $349,000 to $10.9  million  for the nine  months  ended June 30, 2001
primarily  due  to a $5.8  million  increase  in the  average  balance  of  such
securities.

Interest Expense.  Interest expense increased $4.3 million, or 21.7%, from $19.4
million  for the nine months  ended June 30, 2000 to $23.7  million for the nine
months  ended  June  30,  2001,  primarily  due to a $3.2  million  increase  in
certificates  of deposit  interest  expense.  Interest  expense on checking  and
savings rose $552,000 and $397,000, respectively. The higher interest expense on
deposits  was a direct  reflection  of  higher  outstanding  balances.  Interest
expense on FHLB  advances and other  borrowings  increased  $107,000 due to a 21
basis point increase in the average rate and higher outstanding balances.

Provision for Loan Losses. The Company's  provision for loan losses for the nine
months ended June 30, 2001 was $757,000 compared to $585,000 for the nine months
ended June 30, 2000.  The increase was  primarily due to a write down of a large
commercial loan, which was previously  reported as  non-performing.  Information
relating to the  Company's  allowance  for loan  losses  appears in Section D of
Management's Discussion and Analysis of this Form 10-Q.

Non-interest  Income.  The  Company  experienced  a  $2.4  million  increase  in
non-interest income from $1.3 million for the nine months ended June 30, 2000 to
$3.7  million for the nine months ended June 30,  2001.  The primary  reason for
this increase was a $1.1 million increase in insurance premium income due to the
acquisition of Higgins in December 2000 and  Abstractors.  Gain on sale of loans
increased $511,000 as a result of the sale of Security's fixed rate mortgage

                                       22
<PAGE>

loans.  Trust fee income  increased  $398,000 from an increased asset base under
management. Gain on the sale of available for sale securities increased $295,000
as a result of sale of  securities.  Service  charges  and other fees  increased
$291,000 due to additional branches and a larger customer base. Offsetting these
increases was a $434,000  decrease in other income largely due to losses derived
from the Company's investment in Buildersfirst.com.

Non-interest  Expense.  Total  non-interest  expense increased $3.8 million,  or
35.0%,  from $10.8  million to $14.6  million for the nine months ended June 30,
2001.  The  largest  increase,  $1.6  million,  was in salary  and net  employee
benefits  expense  as a result  of new  staff  from  the  Security  and  Higgins
acquisitions.  Amortization  expense  increased  $573,000 due to the purchase of
Security and Higgins.  Other non-interest  expense increased $544,000 mainly due
to the expenses  associated  with the  repossession  and  foreclosure of assets.
General  operating  expenses such as supplies and postage also  increased due to
additional branch and company  expansion.  Occupancy expense increased  $507,000
due to renovations and increased rent costs on properties acquired from Security
Savings.

Income  Taxes.  The Company had income tax expense of $1.5  million for the nine
months ended June 30, 2001,  compared to expense of $540,000 for the nine months
ended  June 30,  2000,  reflecting  effective  tax  rates of 29.1%,  and  13.6%,
respectively.  The increase in the effective tax rate was the result of the sale
of tax-exempt municipal securities.

I.        Recent Accounting Developments

In June 2001, the FASB issued Statement No. 141,  "Business  Combinations."  The
Statement addresses financial accounting and reporting for business combinations
and supersedes APB Opinion No. 16, Business Combinations, and FASB Statement No.
38, Accounting for Preacquisition  Contingencies of Purchased  Enterprises.  All
business  combinations  in the scope of the  Statement  are to be accounted  for
using the purchase method. The provisions of the Statement apply to all business
combinations  initiated  after June 30, 2001.  The Statement also applies to all
business combinations  accounted for using the purchase method which the date of
acquisition is July 1, 2001, or later.  There is no expected impact on earnings,
financial condition, or equity upon adoption of Statement No. 141.

In June 2001, the FASB issued Statement No. 142,  "Goodwill and Other Intangible
Assets." The Statement addresses financial accounting and reporting for acquired
goodwill  and other  intangible  assets  and  supersedes  APB  Opinion  No.  17,
Intangible  Assets.  It  addresses  how  intangible  assets  that  are  acquired
individually  or with a group  of other  assets  (but not  those  acquired  in a
business combination) should be accounted for in financial statements upon their
acquisition.  The Statement  also  addresses  how goodwill and other  intangible
assets should be accounted for after they have been initially  recognized in the
financial statements. The provisions of the Statement are required to be applied
starting  with fiscal years  beginning  after  December  15,  2001,  except that
goodwill and intangible  assets  acquired  after June 30, 2001,  will be subject
immediately to the nonamortization and amortization provisions of the Statement.
Early  application is permitted for entities with fiscal years  beginning  after
March 15, 2001,  provided that the first interim  financial  statements have not
previously been issued. The Statement is required to be applied at the beginning
of an  entity's  fiscal  year  and to be  applied  to  all  goodwill  and  other
intangible assets recognized in its financial  statements at that date. There is
no anticipated impact on earnings,  financial condition, or equity upon adoption
of Statement No. 142; however,  due to recent  acquisitions,  the Company,  on a
quarterly basis, has been


                                       23
<PAGE>

amortizing   $107,000  of  goodwill  which  will  no  longer  be  required  upon
commencement of the Company's fiscal year beginning October 1, 2001.

                                       24
<PAGE>


Item 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

               As of June 30, 2001,  there have been no material  changes in the
               quantitative  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.


                                       25
<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

               Not applicable.

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.**

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

          *    Incorporated  herein by reference  into this  document  from Form
               10-Q filed on February 14, 2001.

          **   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 January 24, 2001, the Company filed an amendment to the 8-K it
               had filed on November 21, 2000.  The  amendment  incorporated  by
               reference  the  audited  financial   statements  of  Security  of
               Pennsylvania  Financial  Corp.  and provided pro forma  financial
               information  regarding the Company's  acquisition  of Security of
               Pennsylvania Financial Corp.

                                       26
<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:    August 14, 2001
                                                   E. Lee Beard
                                                   President and Chief Executive
                                                   Officer

Date:    August 14, 2001
                                                   Patrick J. Owens, Jr.
                                                   Treasurer and Chief Financial
                                                   Officer