<PAGE>

                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                       [X]
For the fiscal year ended December 31, 1995
                                       OR

                                       [ ]

For the transition period from _____________to________________

Commission file Number:  2-85306

                            LAKE ARIEL BANCORP, INC.
             (Exact name of registrant as specified in its charter)

                                   23-2244948
                     (I.R.S. Employer Identification Number)

Post Office Box 67, Route 191, Lake Ariel, Pennsylvania             18436
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code:  (717) 698-5695

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                Name of each exchange on which registered
-------------------                -----------------------------------------
      None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.42 per share
                                (Title of class)

                  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 past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes   X   No
                                                   -----    -----

                   Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

                  The aggregate market value of the voting stock held by
non-affiliates of the registrant based on a closing sale price: $18,818,366 at
March 19, 1996.

                   As of March 19, 1996, the registrant had outstanding
1,662,911 shares of its common stock, par value $.42 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

                   Portions of the Annual Report to stockholders of the
registrant for the year ended December 31, 1995, are incorporated by reference
in Part II of this Annual Report.

                                 Page 1 of ____
                            Exhibit Index on Page 35
<PAGE>

                            LAKE ARIEL BANCORP, INC.
                                   FORM 10-KSB

                                      Index
<TABLE>
<CAPTION>
Part I                                                                            Page
------                                                                            ----
<S>                                                                               <C>
Item 1.       Description of the Business......................................    3

Item 2.       Description of Property..........................................   17

Item 3.       Legal Proceedings................................................   19

Item 4.       Submission of Matters to a Vote of Security Holders..............   Not Applicable

Part II

Item 5.       Market for Common Equity and Related
               Stockholder Matters.............................................   19

Item 6.       Management's Discussion and Analysis.............................   21

Item 7.       Financial Statements.............................................   21

Item 8.       Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure.............................   Not Applicable

Part III

Item 9.       Directors, Executive Officers, Promoters and Control
               Persons; Compliance with Section 16(a) of the
               Exchange Act....................................................   22

Item 10.      Executive Compensation...........................................   26

Item 11.      Security Ownership of Certain Beneficial Owners
               and Management..................................................   27

Item 12.      Certain Relationships and Related Transactions...................   29

Item 13.      Exhibits and Reports on Form 8-K.................................   30


Signatures.....................................................................   32

Exhibit Index..................................................................   35
</TABLE>

                                       2
<PAGE>

                            LAKE ARIEL BANCORP, INC.
                                   FORM 10-KSB

                                     Part I


Item 1.  Description of the Business

                  General
                  -------

                  Lake Ariel Bancorp, Inc. ("Bancorp"), a Pennsylvania business
corporation, is a bank holding company, registered with and supervised by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
Bancorp was organized on May 23, 1983, and commenced operations on November 26,
1983. Bancorp has one wholly-owned subsidiary, LA Bank, National Association
(the "Bank"). Bancorp's business has consisted primarily of managing and
supervising the Bank, and its principal source of income has been dividends paid
by the Bank. At December 31, 1995, Bancorp had total consolidated assets,
deposits and stockholders' equity of approximately $251.9 million, $208.8
million and $19.5 million, respectively.

                  The Bank was organized in 1910. The Bank is a national banking
association that is a member of the Federal Reserve System and the deposits of
which are insured by the Federal Deposit Insurance Corporation (the "FDIC")
under the Bank Insurance Fund ("BIF"). On May 10, 1993, the Bank changed its
legal name to "LA Bank, National Association." As of December 31, 1995, the Bank
has ten branch locations, in addition to its main office in Lake Ariel, Wayne
County (two branches within Wayne County, six branches within Lackawanna County
and two branches within Pike County), an operations center (within Wayne County,
Pennsylvania), and an Administration and Loan Center (within Lackawanna County,
Pennsylvania) and is a full service commercial bank providing a wide range of
services to individuals and small to medium sized businesses in its Northeastern
Pennsylvania market area, including accepting time, demand, and savings deposits
and making secured and unsecured commercial, real estate and consumer loans. The
Bank has one subsidiary, LA Lease, Inc., that engages in the leasing of personal
property.

                  Supervision and Regulation - Bancorp
                  ------------------------------------

                  Bancorp is subject to the jurisdiction of the Securities and
Exchange Commission ("SEC") and of state securities laws administrators for
matters relating to the offering and sale of its securities. Bancorp is
currently subject to the SEC's rules and regulations relating to periodic
reporting, insider trading reports and proxy solicitation materials in
accordance with the Securities Exchange Act of 1934 (the "Exchange Act").
Furthermore, Bancorp qualifies as a "small business issuer" as that term is
defined under Item 10 of Regulation S-B of the SEC, and has elected to make its
SEC filings under the disclosure requirements afforded to small business
issuers.

                  Bancorp is also subject to the provisions of the Bank Holding
Company Act of 1956, as amended ("Bank Holding Company Act"), and to supervision
by the Federal Reserve Board. The Bank Holding Company Act will require Bancorp

                                       3
<PAGE>

to secure the prior approval of the Federal Reserve Board before it owns or
controls, directly or indirectly, more than 5% of the voting shares of
substantially all of the assets of any institution, including another bank. The
Bank Holding Company Act prohibits acquisition by Bancorp of more than 5% of the
voting shares of, or interest in, or substantially all of the assets of, any
bank located outside Pennsylvania unless such an acquisition is specifically
authorized by laws of the state in which such bank is located.

                  A bank holding company is prohibited from engaging in or
acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in non-banking activities unless the Federal Reserve Board, by
order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making this determination, the Federal Reserve Board considers whether the
performance of these activities by a bank holding company would offer benefits
to the public that outweigh possible adverse effects.

                  The Bank Holding Company Act also prohibits acquisitions of
control of a bank holding company, such as Bancorp, without prior notice to the
Federal Reserve Board. Control is defined for this purpose as the power,
directly or indirectly, to direct the management or policies of a bank holding
company or to vote twenty-five percent (25%) (or ten percent (10%), if no other
person or persons acting on concert, holds a greater percentage of the Common
Stock) or more of Bancorp's Common Stock.

                  Bancorp is required to file an annual report with the Federal
Reserve Board and any additional information that the Federal Reserve Board may
require pursuant to the Bank Holding Company Act. The Federal Reserve Board may
also make examinations of Bancorp and any or all of its subsidiaries. Further,
under Section 106 of the 1970 amendments to the Bank Holding Company Act and the
Federal Reserve Board's regulations, a bank holding company and its subsidiaries
are prohibited from engaging in certain tie-in arrangements in connection with
any extension of credit or provision of credit or provision of any property or
services. The so-called "Anti-tie-in" provisions state generally that a bank may
not extend credit, lease, sell property or furnish any service to a customer on
the condition that the customer provide additional credit or service to the
bank, to its bank holding company or to any other subsidiary of its bank holding
company or on the condition that the customer not obtain other credit or service
from a competitor of the bank, its bank holding company or any subsidiary of its
bank holding company.

                  Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or any of its subsidiaries, on investments in
the stock or other securities of the bank holding company and on taking of such
stock or securities as collateral for loans to any borrower.

                  Permitted Non-Banking Activities
                  --------------------------------

                  The Federal Reserve Board permits bank holding companies to
engage in non-banking activities so closely related to banking, managing or
controlling banks as to be a proper incident thereto. While the types of
permissible activities are subject to change by the Federal Reserve Board, the
principal non-banking activities that presently may be conducted by a bank
holding company are:

                                       4
<PAGE>

                   1. Making, acquiring or servicing loans and other extensions
of credit for its own account or for the account of others, such as would be
made by the following types of companies: consumer finance, credit card,
mortgage, commercial finance and factoring.

                   2. Operating as an industrial bank, Morris Plan bank or
industrial loan company in the manner authorized by state law so long as the
institution does not accept demand deposits or make commercial loans.

                   3. Operating as a trust company in the manner authorized by
federal or state law so long as the institution does not make certain types of
loans or investments or accept deposits, except as may be permitted by the
Federal Reserve Board.

                   4. Subject to certain limitations, acting as an investment or
financial advisor to investment companies and other persons.

                   5. Leasing personal and real property or acting as agent,
broker, or advisor in leasing property, provided that it is reasonably
anticipated that the transaction will compensate the lessor for not less than
the lessor's full investment in the property and provided further that the
lessor may rely on estimated residual values of up to 100% of the acquisition
cost of the leased property.

                   6. Making equity and debt investments in corporations or
projects designed primarily to promote community welfare, such as the economic
rehabilitation and development of low-income areas by providing housing,
services or jobs for residents.

                   7. Providing to others financially oriented data processing
or bookkeeping services.

                   8. Subject to certain limitations, acting as an insurance
principal, agent or broker in relation to insurance for itself and its
subsidiaries or for insurance directly related to extensions of credit by the
bank holding company system.

                   9. Owning, controlling or operating a savings association, if
the savings association engages only in deposit taking activities and lending,
and other activities permissible for bank holding companies.

                  10. Providing courier services of a limited character.

                  11. Subject to certain limitations, providing management
consulting advice to nonaffiliated banks and nonbank depository institutions.

                  12. Selling money orders having a face value of $1,000 or
less, travelers' checks and United States savings bonds.

                  13. Performing appraisals of real estate and personal
property, including securities.

                                       5
<PAGE>

                  14. Subject to certain conditions, acting as intermediary for
the financing of commercial or industrial income-producing real estate by
arranging for the transfer of the title, control and risk of such a real estate
project to one or more investors.

                  15. Subject to certain limitations, providing full-service
brokerage and financial advisory activities; and selling, solely as an agent or
broker for customers, shares of investment companies advised by an affiliate of
the bank holding company or providing investment advice to customers about the
purchase and sale of shares of investment companies advised by an affiliate of
the bank holding company.

                  16. Underwriting and dealing in obligations of the United
States, general obligations of states and their political subdivisions and other
obligations such as bankers' acceptances and certificates of deposits.

                  17. Subject to certain limitations, providing by any means,
general information and statistical forecasting with respect to foreign exchange
markets; advisory services designed to assist customers in monitoring,
evaluating and managing their foreign exchange exposures; and certain
transactional services with respect to foreign exchange.

                  18. Subject to certain limitations, acting as a futures
commission merchant in the execution and clearance on major commodity exchanges
of futures contracts and options on futures contracts for bullion, foreign
exchange, government securities, certificates of deposit and other money market
instruments.

                  19. Subject to certain limitations, providing commodity
trading and futures commission merchant advice, including counsel, publications,
written analysis and reports.

                  20. Providing consumer financial counseling that involves
counseling, educational courses and distribution of instructional materials to
individuals on consumer-oriented financial management matters, including debt
consolidation, mortgage applications, bankruptcy, budget management, real estate
tax shelters, tax planning, retirement and estate planning, insurance and
general investment management, so long as this activity does not include the
sale of specific products or investments.

                  21. Providing tax planning and preparation advice such as
strategies designed to minimize tax liabilities and includes, for individuals,
analysis of the tax implications of retirement plans, estate planning and family
trusts. For a corporation, tax planning includes the analysis of the tax
implications of mergers and acquisitions, portfolio mix, specific investments,
previous tax payments and year-end tax planning. Tax preparation involves the
preparation of tax forms and advice concerning liability based on records and
receipts supplied by the client.

                  22. Providing check guaranty services to subscribing
merchants.

                  23. Subject to certain limitations, operating a collection
agency.

                                       6
<PAGE>

                  24. Operating a credit bureau that maintains files on the past
credit history of consumers and providing such information to a lender that is
considering a borrower's application for credit, provided that the credit bureau
does not grant preferential treatment to an affiliated bank in the bank holding
company system.

                  Except for its indirect subsidiary, LA Lease, Inc. with
respect to the leasing of personal property, Bancorp has not and does not intend
to commence or conduct any of the above-delineated activities during the
calendar years 1995 and 1996, respectively.

                  Pennsylvania Banking Law
                  ------------------------

                  Under the Pennsylvania Banking Code of 1965, as amended (the
"Code"), Bancorp is permitted to control an unlimited number of banks. However,
Bancorp would be required, under the Bank Holding Company Act, to obtain the
prior approval of the Federal Reserve Board before it could acquire all or
substantially all of the assets of any bank, or acquire ownership or control of
any voting shares of any bank other than the Bank, if, after such acquisition,
it would own or control more than five percent (5%) of the voting shares of such
bank.

                  Interstate Banking and Branching
                  --------------------------------

                  On September 29, 1994, the President signed into law the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"). The following discussion describes those provisions
of the Interstate Banking Act that would pertain to Bancorp. It is not an
exhaustive description of all provisions of the Interstate Banking Act.

                  In general, the Federal Reserve Board may approve an
application by Bancorp to acquire control of, or acquire all or substantially
all of the assets of, a bank located outside of the Commonwealth of Pennsylvania
without regard to whether such acquisition is prohibited under the law of any
state. The Federal Reserve Board may approve such application if it finds, among
other things, that Bancorp is "adequately capitalized" and "adequately managed."
Moreover, the Federal Reserve Board may not approve such acquisition if the
target bank has not been in existence for the minimum period of time, if any,
required by such target bank's "host" state. The Federal Reserve Board may,
however, approve the acquisition of the target bank that has been in existence
for at least five years without regard to any longer minimum period of time
required under the law of the "host" state of the target bank. These above
provisions took effect on September 30, 1995.

                  Furthermore, the Interstate Banking Law provides that,
beginning June 1, 1997, appropriate federal supervisory agencies may approve a
merger of the Bank with another bank located in a different state or the
establishment by the Bank of a new branch office either by acquisition or de
novo, unless the Commonwealth of Pennsylvania enacts a law prior to June 1,
1997, allowing an interstate merger or expressly prohibiting merger with an
out-of-state bank. The Commonwealth of Pennsylvania has enacted a law to
"opt-in" early to these interstate mergers.

                                       7
<PAGE>

                  Moreover, the Interstate Banking Law provides that the Bank
may establish and operate a de novo branch in any state that "opts-in" to de
novo branching. A "de novo branch" is a branch office that is originally
established as a branch and does not become a branch as a result of an
acquisition or merger. The Commonwealth of Pennsylvania has enacted a law to
"opt-in" early to de novo interstate branching.

                  On December 13, 1995, the Banking Commissioners of the states
of Delaware, Maryland, Pennsylvania and Virginia executed a Cooperative
Agreement which governs the manner in which state-chartered banks with branches
in multiple states will be supervised. This Cooperative Agreement was
necessitated by the Interstate Banking Law and was drafted to create a level
playing field for state-chartered banks with respect to supervision and
regulation of branch offices in a multiple state setting. Specifically, this
agreement outlines general principles for determining whether home or host state
law applies, including the following: (1) host state law applies to operational
issues relating to a branch located in a host state, including antitrust,
community reinvestment, consumer protection, usury and fair lending laws; (2)
the state law of the home state will apply to corporate structure issues, such
as, charter, by-laws, incorporation, liquidation, stockholders and directors,
capital and investments; and (3) bank powers issues will be resolved with
reference to both home and host state laws. The Bank is a national association
and is governed by, among other laws and regulations, the National Bank Act and
regulations promulgated by the Comptroller of the Currency. Therefore, the
Cooperative Agreement does not apply to the Bank.

                  As of the filing date of this report, Bancorp and the Bank
have no plans to engage in interstate banking or branching.

                  Legislation and Regulatory Changes
                  ----------------------------------
 
                  From time to time, legislation is enacted which has the effect
of increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions are frequently made in Congress, and before various bank regulatory
agencies. No prediction can be made as to the likelihood of any major changes or
the impact such changes might have on Bancorp and its subsidiary bank. Certain
changes of potential significance to Bancorp which have been enacted or
promulgated, as the case may be, by Congress or various regulatory agencies,
respectively, are discussed below.

                   Financial Institutions Reform, Recovery and Enforcement Act
                   of 1989 ("FIRREA")
                   -----------------------------------------------------------

                  On August 9, 1989, major reform and financing legislation,
i.e., FIRREA, was enacted into law in order to restructure the regulation of the
thrift industry, to address the financial condition of the Federal Savings and
Loan Insurance Corporation and to enhance the supervisory and enforcement powers
of the Federal bank and thrift regulatory agencies. The Office of the
Comptroller of the Currency ("OCC"), as the primary Federal regulator of the
Bank, is primarily responsible for supervision of the Bank. The OCC and FDIC
have far greater flexibility to impose supervisory agreements on an institution
that fails to comply with its regulatory requirements, particularly with respect

                                       8
<PAGE>

to the capital requirements. Possible enforcement actions include the imposition
of a capital plan, termination of deposit insurance and removal or temporary
suspension of an officer, director or other institution-affiliated party.

                  Under FIRREA, civil penalties are classified into three
levels, with amounts increasing with the severity of the violation. The first
tier provides for civil penalties of up to $5,000 per day for any violation of
law or regulation. A civil penalty of up to $25,000 per day may be assessed if
more than a minimal loss or a pattern of misconduct is involved. Finally, a
civil penalty of up to $1.0 million per day may be assessed for knowingly or
recklessly causing a substantial loss to an institution or taking action that
results in a substantial pecuniary gain or other benefit. Criminal penalties are
increased to $1.0 million per violation, up to $5.0 million for continuing
violations or for the actual amount of gain or loss. These monetary penalties
may be combined with prison sentences for up to five years.

                  Federal Deposit Insurance Corporation Improvement Act of 1991
                  ("FDICIA")
                  -------------------------------------------------------------

                  General. The FDICIA was enacted in December, 1991, and
reformed a variety of bank regulatory laws. Some of these reforms have a direct
impact on the Bank. Certain of these provisions are discussed below.

                  Examinations and Audits. Annual full-scope, on-site
examinations are required for all FDIC-insured institutions with assets of $500
million or more. For bank holding companies with $500 million or more in assets,
the independent accountants of such companies shall attest to the accuracy of
management's report. Such accountants shall also monitor management's compliance
with governing laws and regulations. Such companies are also required to select
an independent audit committee composed of outside directors who are independent
of management, to review with management and the independent accountants the
reports that must be submitted to the appropriate bank regulatory agencies. If
the independent accountants resign or are dismissed, written notification must
be given to the FDIC and to the appropriate federal and state bank regulatory
agency.

                  Prompt Corrective Action. In order to reduce losses to the
deposit insurance funds, the FDICIA established a format to more closely monitor
FDIC-insured institutions and to enable prompt corrective action by the
appropriate federal supervisory agency if an institution begins to experience
any difficulty. The FDICIA established five "Capital" categories. They are: (1)
well-capitalized; (2) adequately capitalized; (3) undercapitalized; (4)
significantly undercapitalized; and (5) critically undercapitalized. The overall
goal of these new capital measures is to impose more scrutiny and operational
restrictions on depository institutions as they descend the capital categories
from well capitalized to critically undercapitalized.

                  The FDIC, the OCC, the Federal Reserve Board and the Office of
Thrift Supervision have issued jointly final regulations relating to these
capital categories and prompt corrective action. These capital measures for
prompt corrective action are defined as follows:

                  A "well-capitalized" institution would be one that has at
least a 10% total risk-based capital ratio, a 6% or greater Tier I risk-based
capital ratio, a 5% or greater Tier I leverage capital ratio, and is not subject
to any written order or final directive by the FDIC to meet and maintain a
specific capital level.

                                       9
<PAGE>

                  An "adequately capitalized" institution would be one that
meets the required minimum capital levels, but does not meet the definition of a
"well-capitalized" institution. The existing capital rules generally require
banks to maintain a Tier I leverage capital ratio of at least 4% and an 8% or
greater total risk-based capital ratio. Since the risk-based standards also
require at least half of the total risk-based capital requirement to be in the
form of Tier I capital, this also will mean that an institution would need to
maintain at least a 4% Tier I risk-based capital ratio. Thus, an institution
would need to meet each of the required minimum capital levels in order to be
deemed "adequately capitalized."

                  An "undercapitalized" institution would fail to meet one or
more of the required minimum capital levels for an "adequately capitalized"
institution. An "undercapitalized" institution must file a capital restoration
plan and is automatically subject to restrictions on dividends, management fees
and asset growth. In addition, the institution is prohibited from making
acquisitions, opening new branches or engaging in new lines of business without
the prior approval of its primary federal regulator. A number of other
discretionary restrictions also may be imposed on a case-by-case basis, and
harsher restrictions that otherwise would apply to "significantly
undercapitalized" institutions may be imposed on an "undercapitalized"
institution that fails to file or implement an acceptable capital restoration
plan.

                  A "significantly undercapitalized" institution would have a
total risk-based capital ratio of less than 6%, a Tier I risk-based capital
ratio of less than 3%, or a Tier I leverage capital ratio of less than 3%, as
the case may be. Institutions in this category would be subject to all the
restrictions that apply to "undercapitalized" institutions. Certain other
mandatory prohibitions also would apply, such as restrictions against the
payment of bonuses or raises to senior executive officers without the prior
approval of the institution's primary federal regulator. A number of other
restrictions may be imposed.

                  A "critically undercapitalized" institution would be one with
a tangible equity (Tier I capital) ratio of 2% or less. In addition to the same
restrictions and prohibitions that apply to "undercapitalized" and
"significantly undercapitalized" institutions, the FDIC's rule implementing this
provision of FDICIA also addresses certain other provisions for which the FDIC
has been accorded responsibility as the insurer of depository institutions.


At a minimum, any institution that becomes "critically undercapitalized" is
prohibited from taking the following actions without the prior written approval
of its primary federal supervisory agency: engaging in any material transactions
other than in the usual course of business; extending credit for highly
leveraged transactions ("HLTs"); amending its charter or bylaws; making any
material changes in accounting methods; engaging in certain transactions with
affiliates; paying excessive compensation or bonuses; and paying interest on
liabilities exceeding the prevailing rates in the institution's market area. In
addition, a "critically undercapitalized" institution is prohibited from paying
interest or principal on its subordinated debt and is subject to being placed in
conservatorship or receivership if its tangible equity capital level is not
increased within certain mandated time frames.

                  At any time, an institution's primary federal supervisory
agency may reclassify it into a lower capital category. All institutions are
prohibited from declaring any dividends, making any other capital distribution,
or paying a management fee if it would result in downward movement into any of

                                       10
<PAGE>

the three undercapitalized categories. The FDICIA provides an exception to this
requirement for stock redemptions that do not lower an institution's capital and
would improve its financial condition, if the appropriate federal supervisory
agency has consulted with the FDIC and approved the redemption.

                  The regulation requires institutions to notify the FDIC
following any material event that would cause such institution to be placed in a
lower category. Additionally, the FDIC monitors capital levels through call
reports and examination reports.

                  Deposit Insurance. On January 1, 1994, the FDIC implemented
the permanent Risk Related Premium System (the "RRPS") with respect to the
assessments and payment of deposit insurance premiums.

                  Under the RRPS, the FDIC, on a semiannual basis, will assign
each institution to one of three capital groups (well-capitalized, adequately
capitalized or undercapitalized, in each case as these terms are defined for
purposes of prompt corrective action rules described above) and further assign
such institution to one of three subgroups within a capital group corresponding
to the FDIC's judgment of its strength based on supervisory evaluations,
including examination reports, statistical analysis and other information
relevant to gauging the risk posed by the institution. Only institutions with a
total capital to risk-adjusted assets ratio of 10.00% or greater, a Tier I
capital to risk-adjusted assets ratio of 5% or a greater and a Tier I leverage
ratio of 5% or greater, are assigned to the well-capitalized group.

                  Effective January 1, 1996, the FDIC board of directors has
further reduced BIF premiums. Highly-rated institutions will pay only the
statutory minimum of $2,000 annually for FDIC insurance. The remaining
institutions will pay on a scale ranging from 3 to 30 cents per every $100 of
insured deposits, which is down from the scale in the latter half of 1995 of 4
to 31 cents. If such lower FDIC insurance premium rates were to have been in
effect for all of 1995, then Bancorp would have paid $220,000 less in such
premiums based upon current deposit levels.

                  Real Estate Lending Standards. Pursuant to the FDICIA, the OCC
and other federal banking agencies adopted real estate lending guidelines which
would set loan-to-value ("LTV") ratios for different types of real estate loans.
A LTV ratio is generally defined as the total loan amount divided by the
appraised value of the property at the time the loan is originated. If the
institution does not hold a first lien position, the total loan amount would be
combined with the amount of all senior liens when calculating the ratio. In
addition to establishing the LTV ratios, the guidelines require all real estate
loans to be based upon proper loan documentation and a recent appraisal of the
property.

                  Bank Enterprise Act of 1991. Within the overall FDICIA is a
separate subtitle called the "Bank Enterprise Act of 1991." The purpose of this
Act is to encourage banking institutions to establish "basic transaction
services for consumers" or so-called "lifeline accounts." The FDIC assessment
rate is reduced for all lifeline depository accounts. This Act establishes ten
(10) factors which are the minimum requirements to qualify as a lifeline
depository account. Some of these factors relate to minimum opening and balance
amounts, minimum number of monthly withdrawals, the absence of discriminatory
practices against low-income individuals and minimum service charges and fees.

                                       11
<PAGE>

Moreover, the Housing and Community Development Act of 1972 requires that the
FDIC's risk-based assessment system include provisions regarding life-line
accounts. Assessment rates applicable to life-line accounts are to be
established by FDIC rule.

                  Truth in Savings Act. The FDICIA also contains the Truth in
Savings Act ("TSA"). The Federal Reserve Board has adopted regulations
("Regulation DD") under the TSA. The purpose of TSA is to require the clear and
uniform disclosure of the rates of interest which are payable on deposit
accounts by depository institutions and the fees that are assessable against
deposit accounts, so that consumers can make a meaningful comparison between the
competing claims of banks with regard to deposit accounts and products. In
addition to disclosures to be provided when a customer establishes a deposit
account, TSA requires the depository institution to include, in a clear and
conspicuous manner, the following information with each periodic statement of a
deposit account: (1) the annual percentage yield earned; (2) the amount of
interest earned; (3) the amount of any fees and charges imposed; and (4) the
number of days in the reporting period. TSA allows for civil lawsuits to be
initiated by customers if the depository institution violates any provision or
regulation under TSA.

                  Regulatory Capital Requirements
                  -------------------------------

                  The following table presents Bancorp's consolidated capital
ratios at December 31, 1995.

                                                                 (In Thousands)
Tier I Capital..............................................        $19,026
Tier II Capital.............................................          1,605
                                                                    -------
Total Capital...............................................        $20,631
                                                                    =======

Adjusted Total Average Assets...............................       $251,102
Total Adjusted Risk-Weighted Assets(1)......................       $149,274

Tier I Risk-Based Capital Ratio(2)..........................        12.75%
Required Tier I Risk-Based Capital Ratio....................         4.00%
Excess Tier I Risk-Based Capital Ratio......................         8.75%

Total Risk-Based Capital Ratio(3)...........................        13.82%
Required Total Risk-Based Capital Ratio.....................         8.00%
Excess Total Risk-Based Capital Ratio.......................         5.82%

Tier I Leverage Ratio(4)....................................         7.59%
Required Tier I Leverage Ratio..............................         4.00%
Excess Tier I Leverage Ratio................................         3.59%
------------------------------
(1)   Includes off-balance sheet items at credit-equivalent values less
      intangible assets.
(2)   Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I
      Capital to Total Adjusted Risk-Weighted Assets.
(3)   Total Risk-Based Capital Ratio is defined as the ratio of Tier I and
      Tier II Capital to Total Adjusted Risk-Weighted Assets.
(4)   Tier I Leverage Ratio is defined as the ratio of Tier I Capital to
      Adjusted Total Average Assets.

                                       12
<PAGE>

                  Bancorp was required to implement, on January 1, 1994,
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("FASB 115"). For financial reporting
purposes, FASB 115 changed the composition of stockholders' equity in financial
statements prepared in accordance with generally accepted accounting principles
by including as a separate component of equity the amount of net unrealized
holding gains or losses on debt and equity securities that are deemed to be
available-for-sale. The implementation of FASB 115 had no effect on the
computation of the regulatory capital ratios of Bancorp.

                  Effective January 27, 1995, the FDIC has issued a final rule
with respect to the implementation of FASB 115 for regulatory capital reporting
purposes. Under this final rule, net unrealized holding losses on
available-for-sale equity securities (but not debt securities) with readily
determinable fair values will be included (i.e., deducted) when calculating
Bancorp's consolidated Tier 1 capital. All other unrealized holding gains and
losses on available-for-sale securities will be excluded (i.e., not deducted)
from Bancorp's consolidated Tier 1 capital. Such final rule had no material
effect on Bancorp's consolidated Tier 1 capital.

                  Bancorp's ability to maintain the required levels of capital
is substantially dependent upon the success of Bancorp's capital and business
plans; the impact of future economic events on Bancorp's loan customers; and
Bancorp's ability to manage its interest rate risk and investment portfolio and
control its growth and other operating expenses.

                  Effect of Government Monetary Policies
                  --------------------------------------

                  The earnings of Bancorp are and will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States
government and its agencies.

                  The monetary policies of the Federal Reserve Board have had,
and will likely continue to have, an important impact on the operating results
of commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The Federal
Reserve Board has a major effect upon the levels of bank loans, investments and
deposits through its open market operations in United States government
securities and through its regulations of, among other things, the discount rate
on borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes
in monetary and fiscal policies.

                  History and Business - Bank
                  ---------------------------

                  The Bank's legal headquarters are located on Route 191, Lake
Ariel, Pennsylvania. On May 10, 1993, the Bank changed its legal name to "LA
Bank, National Association" and is currently trading as LA Bank, N.A., a
subsidiary of Lake Ariel Bancorp, Inc.

                  As of December 31, 1995, the Bank had total assets of $251.9
million, total shareholders' equity of $19.5 million and total deposits and
other liabilities of $232.3 million.

                                       13
<PAGE>

                  The Bank engages in a full-service commercial banking
business, including accepting time and demand deposits, and making secured and
unsecured commercial and consumer loans. The Bank's business is not seasonal in
nature. Its deposits are insured by the FDIC to the extent provided by law.

                  At December 31, 1995, the Bank had 97 full-time employees and
27 part-time employees. The Bank is not a party to any collective bargaining
agreement.

                  Market Area
                  -----------

                  The Bank competes actively with other area commercial banks
and savings and loan associations, many of which are larger than the Bank, as
well as with major regional banking and financial institutions headquartered in
Wilkes-Barre and Scranton, Pennsylvania. The Bank's major competitors in its
market area are, in alphabetical order: First Fidelity Bank, N.A., Pennsylvania
(to be acquired by First Union Corporation, Charlotte, North Carolina); Meridian
Bank (to be acquired by Corestates Financial Corporation, Philadelphia,
Pennsylvania); Pioneer American Bank, N.A.; PNC Bank, N.A.; Wayne Bank; First
National Community Bank; Fidelity Deposit & Discount Bank; First National Bank
of Jermyn; Penn Security Bank and Trust Company; NBO National Bank; and
Community Bank & Trust Co. The Bank is generally competitive with all competing
financial institutions in its service area with respect to interest rates paid
on time and savings deposits, service charges on deposit accounts and interest
rates charged on loans.

                  Supervision and Regulation - Bank
                  ---------------------------------

                  The operations of the Bank are subject to federal and state
statutes applicable to banks chartered under the banking laws of the United
States, to members of the Federal Reserve System and to banks whose deposits are
insured by the FDIC. Bank operations are also subject to regulations of the OCC,
the Federal Reserve Board and the FDIC.

                  The primary supervisory authority of the Bank is the OCC, that
regularly examines the Bank. The OCC has the authority under the Financial
Institutions Supervisory Act to prevent a national bank from engaging in an
unsafe or unsound practice in conducting its business.

                  Federal and state banking laws and regulations govern, among
other things, the scope of a bank's business, the investments a bank may make,
the reserves against deposits a bank must maintain, loans a bank makes and
collateral it takes, the activities of a bank with respect to mergers and
consolidations and the establishment of branches. All banks in Pennsylvania are
permitted to maintain branch offices in any county of the state. Branches of
national banks may be established only after approval by the OCC. The OCC is
required to grant approval only if it finds that there is a need for banking
services or facilities such as are contemplated by the proposed branch. The OCC
may disapprove the application if the bank does not have the capital and surplus
deemed necessary by the OCC, or if the application relates to the establishment
of a branch in a county contiguous to the county in which the applicant's
principal place of business is located, and another banking institution that has
its principal place of business in the county in which the proposed branch would

                                       14
<PAGE>

be located, has in good faith, notified the OCC of its intention to establish a
branch in the same municipal location in which the proposed branch would be
located.

                   Multi-bank holding companies are permitted in Pennsylvania
within certain limitations. See sections entitled "Pennsylvania Banking Law" and
"Interstate Banking and Branching."

                  A subsidiary bank of a bank holding company is subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or its subsidiaries, on investments in the
stock or other securities of the bank holding company or its subsidiaries and on
taking such stock or securities as collateral for loans. The Federal Reserve Act
and Federal Reserve Board regulations also place certain limitations and
reporting requirements on extensions of credit by a bank to principal
shareholders of its parent holding company, among others, and to related
interests of such principal shareholders. In addition, such legislation and
regulations may affect the terms upon which any person becoming a principal
shareholder of a holding company may obtain credit from banks with which the
subsidiary bank maintains a correspondent relationship.

                  Federal law also prohibits acquisitions of control of a bank
holding company without prior notice to certain federal bank regulators. Control
is defined for this purpose as the power, directly or indirectly, to influence
the management or policies of the bank or bank holding company or to vote
twenty-five percent (25%) or more of any class of voting securities of the bank
holding company.

                  From time to time, various types of federal and state
legislation have been proposed that could result in additional regulations of,
and restrictions on, the business of the Bank. It cannot be predicted whether
any such legislation will be adopted or how such legislation would affect the
business of the Bank. As a consequence of the extensive regulation of commercial
banking activities in the United States, the Bank's business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the costs of doing business.

                  Under the Federal Deposit Insurance Act, the OCC possesses the
power to prohibit institutions regulated by it (such as the Bank) from engaging
in any activity that would be an unsafe and unsound banking practice and in
violation of the law. Moreover, the Financial Institutions and Interest Rate
Control Act of 1987 ("FIRA") generally expands the circumstances under which
officers or directors of a bank may be removed by the institution's federal
supervisory agency; restricts lending by a bank to its executive officers,
directors, principal shareholders or related interests thereof; restricts
management personnel of a bank from serving as directors in other management
positions with certain depository institutions whose assets exceed a specified
amount or which have an office within a specified geographic area; and restricts
management personnel from borrowing from another institution that has a
correspondent relationship with their bank. Additionally, FIRA requires that no
person may acquire control of a bank unless the appropriate federal supervisory
agency has been given 60-days prior written notice and within that time has not
disapproved the acquisition or extended the period for disapproval.

                                       15
<PAGE>

                  Under the Bank Secrecy Act ("BSA"), the Bank is required to
report to the Internal Revenue Service currency transactions of more than
$10,000 or multiple transactions of which the Bank is aware in any one day that
aggregate in excess of $10,000. Civil and criminal penalties are provided under
the BSA for failure to file a required report, for failure to supply information
required by the BSA or for filing a false or fraudulent report.

                  The Garn-St Germain Depository Institutions Act of 1982 ("1982
Act"), removes certain restrictions on the lending powers and liberalizes the
depository abilities of the Bank. The 1982 Act also amends FIRA (see above) by
eliminating certain statutory limits on lending of a bank to its executive
officers, directors, principal shareholders or related interests thereof and by
relaxing certain reporting requirements. However, the 1982 Act strengthened FIRA
provisions respecting management interlocks and correspondent bank relationships
by management personnel.

                  Community Reinvestment Act
                  --------------------------

                  The Community Reinvestment Act of 1977, as amended (the
"CRA"), and the regulations promulgated to implement the CRA are designed to
create a system for bank regulatory agencies to evaluate a depository
institution's record in meeting the credit needs of its community. Until May
1995, a depository institution was evaluated for CRA compliance based upon 12
assessment factors.

                  The CRA regulations were completely revised as of May 4, 1995,
to establish new performance-based standards for use in examining a depository
institution's compliance with the CRA (the "revised CRA regulations"). The
revised CRA regulations establish new tests for evaluating both small and large
depository institutions' investment in the community. A "small bank" is defined
as a bank which has total assets of less than $250 million and is independent or
is an affiliate of a holding company with less than $1 billion in assets.
Pursuant to the revised CRA regulations, a depository institution which
qualifies as a "small bank" will be examined under a streamlined procedure which
emphasizes lending activities. The streamlined examination procedures for a
small bank became effective on January 1, 1996.

                  A large retail institution is one which does not meet the
"small bank" definition, above. A large retail institution can be evaluated
under one of two tests: (1) a three-part test evaluating the institution's
lending, service and investment performance; or (2) a "strategic plan" designed
by the institution with community involvement and approved by the appropriate
federal bank regulator. A large institution must choose one of these options
prior to July 1997, but may opt to be examined under one of these two options
prior to that time. Effective January 1, 1996, a large retail institution that
opts to be examined pursuant to a strategic plan may submit its strategic plan
to the bank regulators for approval.

                  In addition, the revised CRA regulations include separate
rules regarding the manner in which "wholesale banks" and "limited purpose
banks" will be evaluated for compliance.

                  The new CRA regulations will be phased in over a two-year
period, beginning July 1, 1995, with a final effective date of July 1, 1997.
Until the applicable test is phased in, institutions may be examined under the
prior CRA regulations.

                                       16
<PAGE>

                  On December 27, 1995, the federal banking regulators issued a
joint final rule containing technical amendments to the revised CRA regulations.
Specifically, the recent technical amendments clarify the various effective
dates in the revised CRA regulations, correct certain cross references and state
that once an institution becomes subject to the requirements of the revised CRA
regulations, it must comply with all aspects of the revised CRA regulations,
regardless of the effective date of certain provisions. Similarly, once an
institution is subject to the revised CRA regulations, the prior CRA regulations
do not apply to that institution.

                  For the purposes of the revised CRA regulations, the Bank is
deemed to be a large depository institution, based upon financial information as
of December 31, 1995. In the future, the Bank will be evaluated for CRA
compliance using the three-part, performance-based test. Under the 12 assessment
factors contained in the prior CRA regulations, the Bank received a
"satisfactory" rating for 1994. No examination was scheduled or was conducted
for 1995. The Bank expects to receive a rating under the revised CRA regulations
which is consistent with its prior examination rating.

                  Concentration
                  -------------

                  Bancorp and the Bank are not dependent for deposits nor
exposed by loan concentrations to a single customer or to a small group of
customers the loss of any one or more of which would have a materially adverse
effect on the financial condition of Bancorp or the Bank.

                  Business - LA Lease, Inc.
                  -------------------------

                  The principal office of LA Lease, Inc. is located at Routes
247 and 348, Lake Ariel, Pennsylvania 18436 (the Mt. Cobb branch of the Bank).

                   As of December 31, 1995, LA Lease, Inc. had total assets of
$1.485 million, total shareholders' equity of $(28) thousand and other
liabilities of $1.513 million.

                   LA Lease, Inc. provides financing to consumers and businesses
in the form of vehicle and equipment leases. The business of LA Lease, Inc. is
not seasonal in nature.


Item 2.  Description of Property

                  Bancorp owns or leases no properties, except through the Bank.
The following is selective information about the Bank's properties:
<TABLE>
<CAPTION>
                                             Type of              Square
Property       Location                     Ownership             Footage       Use
--------       --------                     ---------             -------       ---       
<S>            <C>                            <C>                  <C>          <C>                              
   1           Route 191                      Own                  3000         Banking services and
               Lake Ariel, PA                                                   Main Office.

   2           Route 191                      Own                  1800         Greene-Dreher branch
               Newfoundland, PA
</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                             Type of              Square
Property       Location                     Ownership             Footage       Use
--------       --------                     ---------             -------       ---       
<S>            <C>                            <C>                  <C>          <C>               
   3           Routes 191 and 590             Own                  2900         Hamlin Corners branch
               Hamlin, PA

   4           Routes 247 and 348             Own                  2400         Mt. Cobb branch
               Lake Ariel, PA

   5           Route 6                        Lease                2800         Eynon branch
               Scranton-Carbondale Highway

   6           Keyser Avenue                  Lease                3000         Keyser Valley branch
               Scranton, PA

   7           The Mall at Steamtown          Lease                1867         Steamtown branch
               Lackawanna Avenue
               Scranton, PA

   8           East Grove Street &            Own                  3000         Clarks Green branch
               South Abington Road
               Clarks Green, PA

   9           Route 6                        Lease                5535         Carbondale branch
               Ames Shopping Plaza

  10           Routes 6 and 209               Own                 11000         Milford branch
               Milford, PA

  11           Route 739                      Lease                1250         Lords Valley branch
               Lords Valley Shopping Plaza

  12           Route 191                      Own                  5900         Operations Center
               Hamlin, PA

  13           Keyser Avenue                  Lease                7500         Administration & Loan Center
               Scranton, PA
</TABLE>

                  For information with respect to obligations for lease rentals,
refer to Note 5 of the Notes to Consolidated Financial Statements in Bancorp's
Annual Report filed at Exhibit 13 hereto and is incorporated in its entirety by
reference. The branches that are under lease have customary commercial lease
options to extend the terms of the applicable lease.

                  It is management's opinion that the facilities currently
utilized are suitable and adequate for current and immediate future purposes.

                                       18
<PAGE>

Item 3.  Legal Proceedings

                  General
                  -------

                  The nature of Bancorp's and the Bank's business generates a
certain amount of litigation involving matters arising in the ordinary course of
business. However, in the opinion of management of Bancorp and the Bank, there
are no proceedings pending to which Bancorp and the Bank are a party or to which
their property is subject, which, if determined adversely to Bancorp and the
Bank, would be material in relation to Bancorp's and the Bank's undivided
profits or financial condition, nor are there any proceedings pending other than
ordinary routine litigation incident to the business of Bancorp and the Bank. In
addition, no material proceedings are pending or are known to be threatened or
contemplated against Bancorp and the Bank by government authorities or others.

                  Environmental Issues
                  --------------------

                  There are several federal and state statutes that govern the
obligations of financial institutions with respect to environmental issues.
Besides being responsible under such statutes for its own conduct, a bank also
may be held liable under certain circumstances for actions of borrowers or other
third parties on properties that collateralize loans held by the bank. Such
potential liability may far exceed the original amount of the loan made by the
bank. Currently, the Bank are not a party to any pending legal proceedings under
any environmental statue nor are the Bank aware of any circumstances that may
give rise to liability of them under any such statute.


                                     Part II

Item 5.  Market for the Common Equity and Related Stockholder Matters

                  Bancorp's Common Stock is listed on the NASDAQ Stock Market
under Small-Cap Issues under the symbol "LABN" or designation "Lake Ariel." The
following table sets forth: (1) the quarterly average bid and asked prices for a
share of Bancorp's Common Stock during the periods indicated; and (2) quarterly
dividends on a share of the Common Stock with respect to each quarter since
January 1, 1994. The following quotations represent prices between buyers and
sellers and do not include retail markup, markdown or commission. They may not
necessarily represent actual transactions.

                                Average Stock Prices               
                                ---------------------              Dividends
                                Bid           Asked                Declared
                                ---           -----                ---------
1994:
        First quarter           $14.00         $14.50               $.12
        Second quarter          $13.50         $14.50               $.12
        Third quarter           $15.25         $16.25               $.13
        Fourth quarter          $17.50         $18.50               $.18

                                       19
<PAGE>

                                Average Stock Prices               
                                ---------------------              Dividends
                                Bid           Asked                Declared
                                ---           -----                ---------
1995:
        First quarter           $16.50         $17.50               $.13
        Second quarter          $16.00         $17.00               $.13
        Third quarter           $14.50         $15.50               $.14
        Fourth quarter          $14.75         $16.25               $.19

                  As of March 19, 1996, Bancorp had approximately 1,161
shareholders of record.

                  Since its formation in 1983 as the parent holding company of
the Bank, Bancorp has paid cash dividends. It is the present intention of
Bancorp's Board of Directors to continue the dividend payment policy, although
the payment of future dividends must necessarily depend upon earnings, financial
condition, appropriate restrictions under applicable law and other factors
relevant at the time the Board of Directors considers any declaration of
dividends. Cash available for the payment of dividends must initially come from
dividends paid by the Bank to Bancorp. Therefore, the restrictions on the Bank's
dividend payments are directly applicable to Bancorp.

                  Dividend Restrictions on the Bank
                  ---------------------------------

                  The OCC has issued rules governing the payment of dividends by
national banks. Consequently, the Bank (which is subject to these rules) may not
pay dividends from capital (unimpaired common and preferred stock outstanding)
but only from retained earnings after deducting losses and bad debts therefrom.
"Bad debts" are defined as matured obligations in which interest is past due and
unpaid for ninety (90) days, but do not include well-secured obligations that
are in the process of collection.

                  Previously, the Bank was permitted to add the balances in its
allowance for possible credit and lease losses in determining retained earnings,
but the OCC's new regulations prohibit that practice. However, to the extent
that (1) the Bank has capital surplus in an amount in excess of common capital
and (2) if the Bank can prove that such surplus resulted from prior period
earnings, the Bank, upon approval of the OCC, may transfer earned surplus to
retained earnings and thereby increase its dividend paying capacity.

                  If, however, the Bank has insufficient retained earnings to
pay a dividend, the OCC's regulations allow the Bank to reduce its capital to a
specified level and to pay dividends upon receipt of the approval of the OCC as
well as that of the holders of two thirds of the outstanding shares of the
Common Stock.

                  The Bank is allowed to pay dividends no more frequently than
quarterly. Moreover, the Bank must obtain the OCC's approval before paying a
dividend if the total of all dividends declared by the Bank in any calendar year
would exceed the total of (1) the Bank's net profits for that year plus (2) its
retained net profits for the immediately preceding two years less (3) any
required transfers to surplus or a fund for the retirement of preferred stock.

                                       20
<PAGE>

                  The Bank may not pay any dividends on its capital stock during
the period in which it may be in default in the payment of its assessment for
deposit insurance premium due to the FDIC, nor may it pay dividends on Common
Stock until any cumulative dividends on the Bank's preferred stock (if any) have
been paid in full. The Bank has never been in default in the payments of its
assessments to the FDIC; and, moreover, the Bank has no outstanding preferred
stock. In addition, under the Federal Deposit Insurance Act, dividends cannot be
declared and paid if the OCC obtains a cease and desist order because such
payment would constitute an unsafe and unsound banking practice. As of December
31, 1995, there was $2.6 million in unrestricted retained earnings and net
income available at the Bank that could be paid as a dividend to Bancorp under
the current OCC regulations.


                  Dividend Restrictions on Bancorp
                  --------------------------------

                  Under the Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"), Bancorp may not pay a dividend if, after giving effect
thereto, either (a) Bancorp would be unable to pay its debts as they become due
in the usual course of business or (b) Bancorp's total assets would be less than
its total liabilities. The determination of total assets and liabilities may be
based upon: (i) financial statements prepared on the basis of generally accepted
accounting principles; (ii) financial statements that are prepared on the basis
of other accounting practices and principles that are reasonable under the
circumstances; or (iii) a fair valuation or other method that is reasonable
under the circumstances.


Item 6.  Management's Discussion and Analysis

                   The caption "Management's Discussion and Analysis" contained
in excerpts from Bancorp's Annual Report (at page 21 thereto) filed at Exhibit
13 hereto is incorporated in its entirety by reference under this Item 6.


Item 7.  Financial Statements

                   Bancorp's Consolidated Financial Statements and notes thereto
contained in excerpts from Bancorp's Annual Report (beginning at page 30
thereto) filed at Exhibit 13 hereto are incorporated in their entirety by
reference under this Item 7.

                                       21
<PAGE>

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

                           INFORMATION AS TO NOMINEES,
                        DIRECTORS AND EXECUTIVE OFFICERS

                  The following table contains certain information with respect
to the nominees and the directors whose terms of office expire in 1996, 1997 and
1998, respectively.

<TABLE>
<CAPTION>
                                            Principal Occupation                          Director Since
Name                       Age               for Past Five Years                        Corporation/Bank
----                       ---              --------------------                        ----------------
<S>                       <C>               <C>                                         <C>
Nominees for Class 3 Directors Whose Term Will Expire In 1999 and Current
Class 3 Directors Whose Term Expires in 1996

John G. Martines           49               President of the Bank and                        1983/1979
(1)(3)(5)(7)                                Chief Executive Officer of
                                            the Corporation

Harry F.                   60               Partner of Schoenagel and                        1985/1985
Schoenagel                                  Schoenagel (general civil
(1)(2)(6)(7)                                engineering and surveying)
</TABLE>

<TABLE>
<CAPTION>
                                            Principal Occupation                          Director Since
Name                       Age               for Past Five Years                        Corporation/Bank
----                       ---              --------------------                        ----------------
<S>                       <C>               <C>                                         <C>
Class 2 Directors Whose Term Expires In 1997

Bruce D. Howe              64               President of John T. Howe, Inc.                  1983/1977
(3)(4)(5)                                   (a company that operates local
                                            fuel and heating oil companies,
                                            a motel and an interstate truck
                                            stop) and President of Howe's
                                            Twin Rocks, Inc. (a local restaurant).

Peter O. Clauss            66               Retired; Former President of                     1988/1988
(3)(5)(6)(7)                                C & D Builders Inc.
                                            (construction of residential and
                                            light commercial buildings)
</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                            Principal Occupation                          Director Since
Name                       Age               for Past Five Years                        Corporation/Bank
----                       ---              --------------------                        ----------------
<S>                       <C>               <C>                                         <C>
Class 1 Directors Whose Term Expires In 1998

Donald E.                  59               Self-employed insurance broker                   1983/1972
Chapman                                     and real estate developer
(1)(2)(4)(6)(7)

Arthur M. Davis            68               President of Lake Ariel                          1983/1969
(1)(2)(6)(7)                                Hardware & Supply Co., Inc.

William C. Gumble          58               Retired Attorney-at-law                          1985/1985
(3)(4)(5)
</TABLE>

------------------------------
(1)   Member of the Loan Review Committee of the Bank. This committee reviews
      past due and classified loans and actions to be taken. Moreover, this
      committee determines the adequacy of the loan loss reserve and the
      amount to be charged for the provision of loan losses. The committee
      met six (6) times in 1995.
(2)   Member of the Audit Committee of the Bank. This committee reviews the
      reports of the auditors and the results of examinations by the Federal
      Reserve System and Comptroller of the Currency. This committee makes
      recommendations to the Board based upon a review of the reports and
      regulatory examinations. This committee met three (3) times in 1995.
(3)   Member of the Asset/Liability Management Committee of the Bank. This
      committee reviews quarterly the asset/liability management report and
      the investment portfolio. In addition, this committee reviews
      strategies for GAP analysis, liquidity, tax position and various
      profitability ratios. Moreover, this committee determines product
      pricing and development. This committee met five (5) times in 1995.
(4)   Member of the Executive Committee of the Bank. This committee reviews
      annually the profit sharing and benefit plans of the Bank as well as
      salaries and promotions. The committee makes recommendations to the
      Board of Directors of the Bank on changes in the employee benefit
      plans, compensation, promotions and the contribution to the profit
      sharing plan. This committee also reviews non-personnel matters such as
      bank expansion and profitability. This committee met two (2) times in
      1995.
(5)   Member of the Loan Committee of the Bank. This committee meets to
      consider and recommend approval of loans in the principal amount of
      $100,000 or more. Directors receive no additional compensation for
      attendance at meetings of this committee. This committee met
      twenty-four (24) times in 1995.
(6)   Member of Benefit/Compensation Committee of the Bank. This committee
      meets to perform on annual review of executive salary increases and
      executive stock option grants. This committee met one (1) time in 1995.
(7)   Member of 401(k) Committee of the Bank. This committee meets to review
      semi-annual investment results of plan funds, makes recommendations and
      changes to available investment options, reviews IRS and DOL legal
      participation, discrimination and other issues, and recommends annual
      Bank contributions to plan. This committee met one (1) time in 1995.
      
                  During 1995, the Board of Directors of the Corporation held
six (6) meetings. Directors received no additional remuneration for attendance
at meetings of the Board of Directors of the Corporation.

                  Each of the Directors attended at least 75% of the combined
total number of meetings of the Corporation's and Bank's Board of Directors and
of the committees on which they serve.

                                       23
<PAGE>

                  The Board of Directors of the Corporation has at present no
standing committees. The Corporation does not have a nominating committee. A
shareholder who desires to propose an individual for consideration by the Board
of Directors as a nominee for director should submit a proposal in writing to
the Secretary of the Corporation in accordance with Section 202 of the
Corporation's By-laws.

Principal Officers of the Corporation

                  The following table sets forth selected information about the
principal officers of the Corporation, each of whom is selected by the Board of
Directors and each of whom holds office at the discretion of the Board of
Directors:

<TABLE>
<CAPTION>
                                                         Bank
                                         Held          Employee        Number of Shares            Age as of
Name                                     Since           Since       Beneficially Owned(1)      March 19, 1996
----                                     -----         --------      ---------------------      --------------
<S>                                      <C>              <C>                <C>                        <C>
Bruce D. Howe, President                 1983             (2)                170,720                    64

John G. Martines, Chief                  1983             (3)                 96,426                    49
Executive Officer

Donald E. Chapman, Secretary             1983             (2)                 55,666                    59

Louis M. Martarano, Vice                 1989             (3)                 35,502                    45
President and Assistant Secretary

Joseph J. Earyes, Vice President         1995             (3)                 16,625                    39
and Treasurer
</TABLE>

----------------------------
(1)   See notes under the caption "Beneficial Ownership by Officers,
      Directors and Nominees" for shareholdings of these officers.
(2)   Messrs. Howe, Chapman and Davis are not employees of the Corporation.
(3)   Messrs. Martines, Martarano, and Earyes are full-time salaried employees
      of the Bank.

Principal Officers of the Bank

                  The following table sets forth selected information about the
principal officers of the Bank, each of whom is elected by the Board of
Directors of the Bank and each of whom holds office at the discretion of the
Board of Directors of the Bank:

<TABLE>
<CAPTION>
                                                                          Bank         Number        Age as of
                                                              Held      Employee      of Shares      March 19,
Name                       Office/Position with Bank          Since       Since         Owned          1996
----                       -------------------------          -----    ----------     ---------      --------
<S>                        <C>                                <C>         <C>          <C>              <C>
Bruce D. Howe                Chairman of the Board            1986         (1)         170,720 (2)       64

John G. Martines             President and CEO                1986        1979          96,426 (2)       49

Louis M. Martarano           Senior Vice President and        1990        1981          35,502 (2)       45
                             Chief Operating Officer
</TABLE>

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                                          Bank         Number        Age as of
                                                              Held      Employee      of Shares      March 19,
Name                       Office/Position with Bank          Since       Since         Owned          1996
----                       -------------------------          -----    ----------     ---------      --------
<S>                        <C>                                <C>         <C>          <C>              <C>    
Joseph J. Earyes             Senior Vice President and        1995        1995          16,625 (2)       39
                             Chief Financial Officer

Christe A. Casciano          Vice President                   1990        1990             267           39
Kathleen L. Enslin           Vice President and               1992        1975           2,927           38
                             Cashier

Cynthia A. Smaniotto         Vice President                   1992        1974           1,214           38

Karen T. Pasternak           Vice President                   1992        1987             560           49

Gregory G. Gula              Vice President                   1992        1990             191           33

William R. Kerstetter        Vice President                   1992        1992             503           44

Theodore G. Daniels          Vice President                   1993        1993             161           65
</TABLE>

----------------------------
(1)  Mr. Howe is not an employee of the Bank.
(2)  See notes under the caption "Beneficial Ownership by Officers, Directors
     and Nominees" for shareholdings of these officers.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

                  Section 16(a) of the Securities Exchange Act of 1934 requires
the Corporation's officers and directors, and persons who own more than ten
percent of a registered class of the Corporation's equity securities (in this
case the Corporation's Common Stock), to file reports of ownership and changes
in ownership with the SEC. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Corporation with
copies of all Section 16(a) forms that they file.

                  Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Corporation believes that,
during the period January 1, 1995 through December 31, 1995, all filing
requirements applicable to its officers, directors and greater than ten-percent
shareholders were complied with.

                                       25
<PAGE>

Item 10. Executive Compensation

                  The following table sets forth the total compensation for
services in all capacities paid by the Corporation and the Bank (1) during 1995,
1994, and 1993, to the Corporation's Chief Executive Officer and the Bank's
President, (2) during 1995, 1994 and 1993, to the Corporation's Vice President
and the Bank's Senior Vice President and Chief Operating Officer, and (3) during
1995, to the Corporation's Vice President and the Bank's Senior Vice President
and Chief Financial Officer. No other executive officer's annual compensation
exceeded $100,000 for the years presented and therefore is not required to be
presented.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                        Annual Compensation
                                                ------------------------------------------------------------------
                                                                                       Securities    
                                                                         Other Annual  Underlying     All Other
Name and                             Fiscal      Salary      Bonus       Compensation   Options/    Compensation
Principal Position                    Year        ($)         ($)           ($)          SARs(#)        ($)
------------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>          <C>         <C>           <C>          <C>    
John G. Martines (President of the    1995      138,007      35,000      26,108 (1)    40,000(2)    19,498 (3)
Bank and Chief Executive Officer      1994      130,005      30,000      19,811 (4)    25,000(2)    21,435 (5)
of the Corporation)                   1993      115,536      25,000      21,639 (6)                 20,212 (7)

Louis M. Martarano (Senior Vice       1995      97,154       13,500      8,796 (8)     15,000(2)    15,013 (9)
President and Chief Operating         1994      91,750       12,500      3,452 (10)    10,000(2)    15,903 (11)
Officer of the Bank and Vice          1993      80,301       10,000      4,002 (12)                 14,333 (13)
President of the Corporation)

Joseph J. Earyes (Senior Vice         1995      70,207       6,500       4,345 (14)    10,000(2)    11,398 (15)
President and Chief Financial
Officer of the Bank and Vice
President and Treasurer of the
Corporation)
</TABLE>

(1)   Includes $6,148 paid on behalf of Mr. Martines for initial and periodic
      club dues; $12,000 paid to Mr. Martines for directors' fees; $4,791
      paid pursuant to the Salary Continuation Plan; and $3,169 representing
      the personal use value of a company-owned automobile.
(2)   For further information on these stock options, see "Stock Option Plan"
      below.
(3)   Of the $19,498 paid to Mr. Martines in 1995 as All Other Compensation,
      $2,098 and $3,888 was for life and medical insurance premiums,
      respectively; and $13,512 was accrued by the Corporation for the
      benefit of Mr. Martines pursuant to a profit-sharing/401(k) plan.
(4)   Includes $3,405 paid on behalf of Mr. Martines for periodic club dues;
      $13,350 paid to Mr. Martines for directors' fees; $1,128 paid pursuant
      to the Salary Continuation Plan; and $1,928 representing the personal
      use value of a company-owned automobile.
(5)   Of the $21,435 paid to Mr. Martines in 1994 as All Other Compensation,
      $2,073 and $4,362 was for life and medical insurance premiums,
      respectively; and $15,000 was accrued by the Corporation for the
      benefit of Mr. Martines pursuant to a profit-sharing retirement plan.
(6)   Includes $4,202 paid on behalf of Mr. Martines for periodic club dues;
      $14,000 paid to Mr. Martines for directors' fees; $1,121 paid pursuant
      to the Salary Continuation Plan; and $2,316 representing the personal
      use value of a company-owned automobile.
(7)   Of the $20,212 paid to Mr. Martines in 1993 as All Other Compensation,
      $1,874 and $4,325 was for life and medical insurance premiums,
      respectively; and $14,013 was accrued by the Corporation for the
      benefit of Mr. Martines pursuant to a profit-sharing retirement plan.

                                       26
<PAGE>

(8)   Includes $6,500 paid on behalf of Mr. Martarano for initial and periodic
      club dues and $2,296
      representing the personal use value of a company-owned automobile.
(9)   Of the $15,013 paid to Mr. Martarano in 1995 as All Other Compensation,
      $1,022 and $4,281 was for life and medical insurance premiums,
      respectively; and $9,710 was accrued by the Corporation for the benefit
      of Mr. Martarano pursuant to a profit-sharing/401(k) plan.
(10)  Includes $1,510 paid on behalf of Mr. Martarano for periodic club dues
      and $1,942 representing the personal use value of a company-owned
      automobile.
(11)  Of the $15,903 paid to Mr. Martarano in 1994 as All Other Compensation,
      $1,050 and $4,428 was for life and medical insurance premiums,
      respectively; and $10,425 was accrued by the Corporation for the
      benefit of Mr. Martarano pursuant to a profit-sharing retirement plan.
(12)  Includes $1,362 paid on behalf of Mr. Martarano for periodic club dues
      and $2,640 representing the personal use value of a company-owned
      automobile.
(13)  Of the $14,333 paid to Mr. Martarano in 1993 as All Other Compensation,
      $949 and $4,325 was for life and medical insurance premiums,
      respectively; and $9,059 was accrued by the Corporation for the benefit
      of Mr. Martarano pursuant to a profit-sharing retirement plan.
(14)  Includes $3,580 paid on behalf of Mr. Earyes for periodic club dues and
      $765 representing the personal use value of a company-owned automobile.
(15)  Of the $11,398 paid to Mr. Earyes in 1995 as All Other Compensation,
      $406 and $4,280 was for life and medical insurance premiums,
      respectively; and $6,712 was accrued by the Corporation for the benefit
      of Mr. Earyes pursuant to a profit-sharing/401(k) plan.

Directors' Compensation

                  During 1995, the Bank's Board of Directors met on a monthly
basis; Directors received $1,000 per month and were allowed one paid absence per
year; and Bruce D. Howe, the Chairman, received $500 in addition to his monthly
Directors' fee of $1,000 or $1,500 per month in the aggregate. Mr. Howe was also
allowed one paid absence per year from a meeting of the Bank's Board of
Directors. During 1995, the Board of Directors of the Corporation held six (6)
meetings. Directors received no remuneration for attendance at meetings of the
Board of Directors of the Corporation in excess of remuneration each of them
received for attendance at meetings of the Board of Directors of the Bank.


Item 11. Security Ownership of Certain Beneficial Owners and Management


             PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK


Principal Owners

                  The following table sets forth, as of March 19, 1996, the name
and address of each person who owns of record or who is known by the Board of
Directors to be the beneficial owner of more than five percent (5%) of the
Corporation's outstanding Common Stock, the number of shares beneficially owned
by such person and the percentage of the Corporation's outstanding Common Stock
so owned.

                                       27
<PAGE>

<TABLE>
<CAPTION>
                                                                   Percent of Outstanding
                                       Shares Beneficially              Common Stock                          
Name and Address                          Owned (1)                  Beneficially Owned
----------------                       -------------------         -----------------------
<S>                                     <C>                              <C>  
Bruce D. Howe(4)(11)                       170,720                          10.3%
R.D. #6, Box 6332
Lake Ariel, PA  18436

John G. Martines (5)(13)                    96,426                           5.5%
RD #1 Newton Lake
824 Sunset Avenue
Carbondale, PA 18407
</TABLE>

Beneficial Ownership by Officers, Directors and Nominees

                  The following table sets forth as of March 14, 1995, the
amount and percentage of the Common Stock of the Corporation beneficially owned
by each director, each nominee, each executive officer, and all officers and
directors of the Corporation as a group.

Name of Individual                    Amount and Nature of            Percent
or Identity of Group               Beneficial Ownership(1)(2)         of Class
--------------------               --------------------------         --------
Donald E. Chapman(3)(6)                    55,666                      3.3%
Peter O. Clauss(4)(7)                      21,975                      1.3%
Arthur M. Davis(3)(8)                      33,638                      2.0%
Joseph J. Earyes(9)                        16,625                      1.0%
William C. Gumble(3)(10)                   50,707                      3.0%
Bruce D. Howe(4)(11)                      170,720                     10.3%
Louis M. Martarano(12)                     35,502                      2.1%
John G. Martines(5)(13)                    96,426                      5.5%
Harry F. Schoenagel(5)(14)                 41,145                      2.5%

All Officers and Directors
 as a Group (7 directors,
 5 officers, 9 persons in total)          522,404                     29.6%
------------------------------
(1)  The securities "beneficially owned" by an individual are determined in
     accordance with the definitions of "beneficial ownership" set forth in
     the General Rules and Regulations of the Securities and Exchange
     Commission ("SEC") and may include securities owned by or for the
     individual's spouse and minor children and any other relative who has
     the same home, as well as securities to which the individual has or
     shares voting or investment power or has the right to acquire
     beneficial ownership within 60 days after March 19, 1996. Beneficial
     ownership may be disclaimed as to certain of the securities.
(2)  Information furnished by the directors and the Corporation.
(3)  A Class 1 Director Whose Term Expires in 1998.
(4)  A Class 2 Director Whose Term Expires in 1997.
(5)  Nominees for Class 3 Director  Whose Term Will Expire in 1999 and Class 3
     Directors Whose Term Expires in 1996.

                                       28
<PAGE>

(6)  Of the 55,666 shares beneficially owned by Donald E. Chapman, 16,116
     are owned by him individually; 36,098 are owned jointly with his
     spouse; 2,393 are held individually by his spouse; and 1,059 are held
     jointly with his son.
(7)  Of the 21,975 shares beneficially owned by Peter O. Clauss, 8,644 are
     held by him individually, 12,331 are owned jointly with his wife; and
     1,000 are owned individually by his spouse.
(8)  Of the 33,638 shares beneficially owned by Arthur M. Davis, 15,205 are
     owned by him individually; 16,969 are owned jointly with his wife; and
     1,464 are owned by Lake Ariel Hardware & Supply Co., Inc., of which Mr.
     Davis is President..
(9)  Of the 16,625 shares beneficially owned by Joseph J. Earyes, 5,700 are
     owned by him individually, 925 are held jointly with his spouse; and
     10,000 shares may be acquired at any time by the exercise of stock
     options.
(10) All shares are held individually.
(11) Of the 170,720 shares beneficially owned by Bruce D. Howe, 152,794 are
     owned by him individually; 16,196 are owned jointly with his spouse;
     and 1,730 are owned individually by his spouse.
(12) Of the 35,502 shares beneficially owned by Louis M. Martarano, 1,014
     are owned by him individually; 7,582 are owned jointly with his wife;
     1,270 shares held as custodian for his two sons; 636 shares as
     custodian for his daughter; and 25,000 shares may be acquired at any
     time by the exercise of stock options.
(13) Of the 96,426 shares beneficially owned by John G. Martines, 7,474 are
     owned by him individually; 23,952 are held jointly with his spouse; and
     65,000 shares may be acquired at any time by the exercise of stock
     options.
(14) Of the 41,145 shares beneficially owned by Harry F. Schoenagel, 16,107
     are owned by him individually; 3,000 are owned jointly with his spouse;
     and 22,038 are owned by his spouse individually.


Item 12. Certain Relationships and Related Transactions

                  There have been no material transactions since January 1,
1995, nor are any such transactions currently proposed, to which the Corporation
or the Bank was or is to be a party and in which any director or executive
officer of the Corporation, or any beneficial owner of more than 5% of the
Common Stock of the Corporation (or any associate thereof, respectively), had or
will have a material interest. The Corporation and the Bank have had and intend
to continue to have banking and financial transactions in the ordinary course of
business with directors and executive officers of the Corporation and the Bank
and their respective associates on comparable terms and with similar interest
rates as those prevailing from time to time for other non-affiliated customers
of the Corporation and the Bank. Total loans outstanding from the Corporation
and the Bank, at December 31, 1995, to the Corporation's and the Bank's officers
and directors as a group and members of their immediate families and companies
in which they had an ownership interest of 10% or more was $953 thousand or 4.9%
of the Bank's total equity capital accounts. The largest amount of indebtedness
outstanding at any time during fiscal year 1995 to the above identified group
was $1.21 million or 6.2% of the Bank's total equity capital accounts. Such
loans do not involve more than the normal risk of collectibility nor do they
present other unfavorable features.

                                       29
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

                  (a)      Exhibits required by Item 601 of Regulation S-B:

Exhibit Number Referred to
Item 601 of Regulation S-B                     Description of Exhibit
--------------------------                     ----------------------

          2                            None.
          3A                           Amended Articles of Incorporation of
                                       Bancorp filed at Exhibit 3A on March 25,
                                       1988 and  March 24, 1993, to Forms 10-K
                                       for the fiscal year ended December 31,
                                       1987 (No. 2-85306), and 10-KSB for the
                                       period ended December 31, 1992
                                       (No. 2-85306), respectively, and hereby
                                       incorporated by reference. Photocopy of
                                       the Articles of Amendment of Bancorp,
                                       dated August 18, 1993, to effect, among
                                       other things, a 3-for-1 stock split,
                                       filed at Exhibit 3A on September 3, 1993,
                                       to Form S-1 (No. 33-68470) and hereby
                                       incorporated by reference.
          3B                           Amended By-laws of Bancorp filed on
                                       March 25, 1988, at Exhibit 3B, to Form
                                       10-K for the fiscal year ended December
                                       31, 1987 (No. 2-85306), and hereby
                                       incorporated by reference.
          4                            None.
          9                            None.
          10A                          Photocopy of the Executive Employment
                                       Agreement dated September 1, 1993, among
                                       Bancorp, the Bank and John G. Martines,
                                       the Chief Executive Officer of Bancorp
                                       and President of the Bank, filed at
                                       Exhibit 10A on September 3, 1993, to
                                       Form S-1 (No. 33-68470), and hereby
                                       incorporated by reference.
          10B                          Photocopy of the Executive Employment
                                       Agreement dated September 1, 1993, among
                                       Bancorp, the Bank and Louis M.
                                       Martarano, Vice President of Bancorp and
                                       Senior Vice President of the Bank, filed
                                       at Exhibit 10B on September 3, 1993, to
                                       Form S-1 (No. 33-68470), and hereby
                                       incorporated by reference.
          11                           None.
          13                           Portions of the Annual Report to 
                                       Shareholders for Fiscal Year Ended
                                       December 31, 1995.
          16                           None.
          18                           None.

                                       30
<PAGE>

Exhibit Number Referred to
Item 601 of Regulation S-B                     Description of Exhibit
--------------------------                     ----------------------
          21                           List of Subsidiaries of Bancorp.
          22                           None.
          23                           None.
          24                           None.
          27                           None.
          28                           None.

          (b)  Reports on Form 8-K.

          Bancorp filed no reports on Form 8-K for the quarter ended
December 31, 1995.

<PAGE>

                                   SIGNATURES


                  In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

LAKE ARIEL BANCORP, INC.
      (Bancorp)


By:      /s/ John G. Martines
         ----------------------
         John G. Martines
         Chief Executive Officer

Date:    March 19, 1996


                  In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.



By:      /s/ Bruce D. Howe
         ----------------------
         Bruce D. Howe
         President and Director

Date:    March 19, 1996



By:      /s/ John G. Martines
         ----------------------
         John G. Martines
         Chief Executive Officer
           and Director
         (Chief Executive Officer)

Date:    March 19, 1996



By:      /s/ Peter O. Clauss
         ----------------------
         Peter O. Clauss
         Director

Date:    March 19, 1996

                                       32
<PAGE>

By:      /s/ Donald E. Chapman
         ----------------------
         Donald E. Chapman
         Secretary and Director

Date:    March 19, 1996



By:      /s/ Arthur M. Davis
         ----------------------
         Arthur M. Davis
         Director

Date:    March 19, 1996



By:      /s/ Harry F. Schoenagel
         ------------------------
         Harry F. Schoenagel
         Director

Date:    March 19, 1996



By:      /s/ William C. Gumble
         ----------------------
         William C. Gumble
         Director

Date:    March 19, 1996



By:      /s/ Louis M. Martarano
         ----------------------
         Louis M. Martarano
         Vice President and Assistant
          Secretary

Date:    March 19, 1996

                                       33
<PAGE>

By:      /s/ Joseph J. Earyes
         ----------------------
         Joseph J. Earyes, CPA
         Vice President and Treasurer
         (Principal Financial and
          Accounting Officer)

Date:    March 19, 1996









                                       34
<PAGE>

                                INDEX TO EXHIBITS


Item Number         Description                                      Page
-----------         -----------                                      ----
   13               Portions of the Annual Report to 
                      Shareholders for the Fiscal Year 
                      Ended December 31, 1995......................   36

   21               List of Subsidiaries of Bancorp................