<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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


                                   Form 10-KSB

(Mark One)

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

For the fiscal year ended December 31, 1999.

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 (no fee required)

For the transition period from ____________________ to __________________.

                         Commission file number 0-17539

                         MADISON BANCSHARES GROUP, LTD.
                         ------------------------------
                 (Name of Small Business Issuer In Its Charter)

PENNSYLVANIA                                23-25132079
------------                                -----------
(State or Other jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

1767 SENTRY PARKWAY WEST, BLUE BELL, PA                 19422
---------------------------------------                 -----
(Address of Principal Executive Offices)                (ZipCode)

ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE:    (215) 641-1111

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None.

     TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED

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

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

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

COMMON STOCK, $1.00 PAR VALUE PER SHARE
--------------------------------------------------------------------------------
                                (TITLE OF CLASS)

--------------------------------------------------------------------------------
                                (TITLE OF CLASS)


<PAGE>

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

YES    X
      ---         ---

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


     [ ]

     State the Issuer's revenues for its most recent fiscal year. $16,443,137

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
of the bid and asked prices of such stock, as of a specified date within the
past 60 days. $5,595,611 based on the average of the bid and asked on the
National Association of Securities Dealers Automated Quotation System on March
27, 2000.*

     State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest publication date. 1,756,320 as of March 27,
2000.

     Transitional Small Business Disclosure Format (check one). YES      NO X
                                                                    ---    ---

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement to be utilized in connection with the
Issuer's 2000 Annual Meeting of Shareholders are incorporated by reference into
Part III hereof.

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

*   Excluded from such market value computation are the approximately 727,715
issued and outstanding shares beneficially owned by executive officers and
directors of Issuer and its subsidiary.

EXHIBIT INDEX APPEARS ON PAGE 48 IN SEQUENTIAL NUMBERING SYSTEM OF THIS FORM
10-KSB


                                   2
<PAGE>

                         MADISON BANCSHARES GROUP, LTD.

                                   FORM 10-KSB

                                      INDEX

<TABLE>
<CAPTION>


<S>          <C>                                                           <C>
PART 1                                                                     PAGE

Item 1       Description of Business.......................................   4
Item 2       Description of Property.......................................   7
Item 3       Legal Proceedings.............................................   7
Item 4       Submission of Matters to a Vote of Security Holders...........   7

PART II

Item 5       Market for Common Equity and Related Stockholder Matters......   8
Item 6       Management's Discussion and Analysis of Financial
             Condition and Results of Operations...........................   9
Item 7       Financial Statements..........................................  23
Item 8       Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure...........................  48

PART III

Item 9       Director, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act............   48
Item 10      Executive Compensation.......................................   48
Item 11      Security Ownership of Certain Beneficial Owners and
             Management...................................................   48
Item 12      Certain Relationships and Related Transactions...............   48
Item 13      Exhibits and Reports on Form 8-K   ......................... .  48

</TABLE>



                                   3
<PAGE>

                                     PART I

ITEM 1    -DESCRIPTION OF BUSINESS

          MADISON BANCSHARES GROUP, LTD.

          Madison Bancshares Group, Ltd. (the "Company") is a one-bank holding
     company registered under the Bank Holding Company Act of 1956, as amended.
     It was incorporated under the laws of the Commonwealth of Pennsylvania on
     May 31, 1988. The Company became a bank holding company on August 8, 1989
     when it consummated the acquisition of all of the capital stock to be
     issued of the Madison Bank in connection with the Bank's formation. The
     Company provides banking services through The Madison Bank, and does not
     engage in any activities other than banking and related activities. The
     principal executive offices of the Company are located at The Madison Bank
     Building, 1767 Sentry Parkway West, Blue Bell, PA 19422. Its telephone
     number at such location is (215) 641-1111. At present, the Bank has eight
     branch offices.

          As of the date hereof, the Company and Madison Bank had a total of 84
     employees.

          MADISON BANK

          The Madison Bank (the "Bank"), the Company's sole subsidiary,
     commenced operations on August 16, 1989. The Bank is a commercial bank,
     chartered pursuant to the laws of the Commonwealth of Pennsylvania and is a
     member of the Federal Reserve System. The deposits held by the Bank are
     insured, up to applicable limits, by the Federal Deposit Insurance
     Corporation (the "FDIC"). The regulatory agency with principal
     responsibility for oversight of the Company and the Bank is the Federal
     Reserve Board.

          The Bank conducts retail and commercial banking through its branch
     offices located at 1767 Sentry Parkway West, Blue Bell, PA, 202 West Ridge
     Pike, Conshohocken, PA , 1380 Skippack Pike, Center Square, PA, 600 W.
     Lancaster Avenue, Strafford, PA, 100 West Main Street, Century Plaza, Suite
     100, Lansdale, PA, 8000 Verree Road, Philadelphia, PA, 100 Gibraltar Road,
     Horsham, PA and Route 413 and Doublewoods Road, Langhorne, PA, offering a
     broad range of consumer and commercial banking services. The Bank opened
     the West Ridge Pike office in September, 1991, the Center Square office in
     October, 1995, the Strafford office in August, 1996, the Lansdale office in
     August, 1997, the Northeast office in June, 1998, the Horsham office in
     December, 1999 and the Langhorne office in February, 2000. As of December
     31, 1999 and 1998, the Bank held deposits totaling $130,423,177 and
     $132,644,741, respectively, including deposits of the Company. As of the
     same dates, the Bank had gross loans receivable of $129,652,578 and
     $126,997,724 (inclusive of residential loans held for sale), respectively.
     The majority of such loans were made for commercial purposes.

          As of December 31, 1999 and 1998, the Company had total assets of
     $155,842,410 and $147,925,863 and total shareholders' equity of $10,282,531
     and $9,450,392, respectively. Investments amounted to $19,319,853 at year
     end 1999, of which $16,749,747 were classified as available for sale and
     the balance was classified as held to maturity. Investments amounted to
     $2,612,493 at the end of 1998, of which $1,010,000 were classified as
     available for sale and the balance classified as held to maturity.


                                   4
<PAGE>

          The Bank's branch offices serve an area that encompasses an eight mile
     radius. The addition of the Horsham and Langhorne branches strengthens the
     Bank's visibility in Montgomery and Bucks Counties and enhances the ability
     to meet the needs of the communities we serve. These added offices
     guarantee Madison Bank impact and influence within the five county regions.
     The Bank currently offers services to residents of approximately 109
     Townships/Boroughs.

          The Bank offers a broad range of consumer and commercial deposit
     banking services, including, but not limited to, both commercial and
     consumer insured deposit accounts, including checking accounts,
     interest-bearing "NOW" accounts, money market accounts, certificates of
     deposit, savings accounts, escrow accounting deposit services and
     individual retirement accounts. The Bank places an emphasis on serving the
     needs of individuals, small and medium-sized businesses, executives,
     professionals and professional organizations in its service area, offering
     a high level of personalized service to both its commercial and consumer
     customers. The Bank actively solicits non-interest and interest-bearing
     deposits from its borrowers.

          The Bank also offers a broad range of loan and credit facilities to
     the businesses and residents of its service area, including secured and
     unsecured loans, home improvement loans, mortgages and home equity lines of
     credit. The Bank also has its own mortgage department to better service
     mortgage applications.

          The Bank stresses loan quality. Management attempts to minimize the
     Bank's credit risk through loan application evaluation, approval and
     post-funding monitoring procedures.

          The Bank's other services include credit cards, traveler's checks and
     access to an automated teller network.

          The Bank is a state-chartered bank, member of the Federal Reserve
     System and is FDIC insured. The Federal Reserve Board, the FDIC and federal
     and state law extensively regulate various aspects of the banking business,
     including, but not limited to, permissible types and amounts of loans,
     investment and other activities, capital adequacy, branching, interest
     rates on loans and the safety and soundness of banking practices.

          Any Federal Reserve member bank that does not operate in accordance
     with, or conform to, Federal Reserve Board regulations, policies and
     directives, may be sanctioned for non-compliance. For example, proceedings
     may be instituted by the Federal Reserve Board against any bank which, or
     any director, officer or employee thereof who, engages in unsafe and
     unsound banking practices, including the violation of applicable laws and
     regulations. As noted above, the FDIC has the authority to terminate
     insurance of deposit accounts pursuant to procedures established for that
     purpose.

          As a consequence of the extensive regulation of commercial banking
     activities in the United States, the business of the Bank and the Company
     will be particularly impacted by changes in federal and state legislation
     and regulations.


                                   5
<PAGE>

          COMPETITION

          There is substantial competition among financial institutions in the
     Bank's service areas for deposits as well as loan customers. The Bank
     competes with new and established local commercial banks, as well as
     numerous Philadelphia and regionally-based commercial banks. In addition,
     the Bank competes directly and indirectly with savings banks, savings and
     loan associations, finance companies, credit unions, mortgage brokers,
     insurance companies, securities brokerage firms, mutual funds, money market
     funds, private lenders and other institutions for deposits, mortgages and
     consumer and commercial loans, as well as its other services. Competition
     among financial institutions is based upon a number of factors, including,
     but not limited to, the quality of services rendered, interest rates
     offered on deposit accounts, interest rates charged on loans and other
     credits, service charges, the convenience of banking facilities, locations
     and hours of operation and, in the case of loans to larger commercial
     borrowers, relative lending limits.

          Many of the banks with which the Bank competes have established
     depositor and borrowing relationships, greater financial resources, a wider
     range of deposit and credit instruments, and possess greater depth of
     management. The Bank is subject to potential additional competition from
     new branch banks which could open in its trade areas.

          In addition, there are banks and other financial institutions which
     serve surrounding areas and out-of-state financial institutions which
     currently, or in the future, may compete in the Bank's market. The Bank
     competes to attract deposits and loan applications both from customers of
     existing institutions and from customers new to its service areas.


                                   6
<PAGE>

ITEM 2    -DESCRIPTION OF PROPERTY

          The Company leases approximately 13,381 total square feet on the first
     floor and 3,355 total square feet of space on the second floor for its
     mortgage department operations of the Madison Bank Building, 1767 Sentry
     Parkway West, Blue Bell, Pennsylvania, (the "Building"). Of the 13,381
     square feet of space on the first floor, 3,381 square feet was leased by
     the Company on February 1, 1996 and an additional 1,400 square feet leased
     by the Company on January 21, 1997. The leased space is occupied by both
     the Company and the Bank and serves as the Bank's primary banking location.
     The space contains a banking area, lobby, operations center and a vault
     together with administrative and executive offices. The Bank's space also
     includes a drive-thru banking facility and an automated walk-up teller
     machine. The initial term of the original lease (the "Lease") expired on
     December 31, 1994. The Lease contains two renewal options of five years
     each. The Company exercised its option for the first five year renewal
     term. Base rental payments under the Lease until December 31, 1999 (the
     expiration of the first renewal option) were payable monthly at an annual
     rate of $142,092. The Company exercised its second renewal option,
     beginning January 1, 2000, and base rental payments increased to $164,700
     per annum. The Lease provides for a redecoration allowance based on $5.00
     per square foot or the sum of $45,395 for each option term and was paid to
     the Bank in February, 2000. In addition to the base rents referred to
     above, the Company is required to pay its pro rata share of the Building's
     operating costs, including real estate taxes, water and sewer charges,
     equipment maintenance charges, exterior maintenance and upkeep, common area
     electric charges, trash removal, and certain other similar items. For 1999,
     the amount of such expenses was $39,652. The maximum allocable portion of
     the Building's operating costs will be approximately $41,742 for 2000. The
     additional 3,381 square feet are leased at an annual rate of approximately
     $58,660 with a 3.5% increase each year through February 1, 2001. The
     additional 1,400 square feet were leased for approximately $28,078 during
     1997 and increases to $29,575 through February 1, 2001. The second floor
     space of 3,355 square feet was leased at an annual rate of approximately
     $70,722 and increases to $77,354 through November 30, 2001.

          The Bank also leases space for branch banking facilities at the
     following locations and through the years indicated in parentheses: (i)
     2,800 square feet in Horsham, Pennsylvania (2009) (ii) 3,965 square feet in
     Lansdale, Pennsylvania (2007), (iii) 3,000 square feet in Strafford,
     Pennsylvania (2006); (iv) 3,600 square feet in Center Square, Pennsylvania
     (2005), (v) 3,620 square feet in Conshohocken, Pennsylvania (2001), (vi)
     2,800 square feet in Horsham, Pennsylvania (2009) and (vii) 2,400 square
     feet in Langhorne, Pennsylvania (2009). The aggregate annual rent for the
     space leased for branch banking facilities is $436,842 and is subject to
     annual increases. The Bank is also responsible for its allocable share of
     operating costs for such space.

ITEM 3    -LEGAL PROCEEDINGS

          The Company and the Bank are involved from time to time in legal
     proceedings arising in the ordinary course of business. In the opinion of
     management, no pending proceedings will have a material adverse effect on
     the Company's results of operations or financial condition.

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

          NONE.


                                   7
<PAGE>

          PART II

ITEM 5    -MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS

          The common stock of the Company is traded on the NASDAQ SmallCap
     Market. As of March 27, 2000, there were approximately 451 holders of
     record of the Company's common stock.

          The high and low bid prices for the Company's common stock during each
     quarter of the last two fiscal years were as follows:


<TABLE>
<CAPTION>

                                           1999
                                           ----
                       1ST QTR      2ND QTR       3RD QTR      4TH QTR
                       -------      -------       -------      -------
<S>                    <C>           <C>          <C>           <C>
          High Bid     10            10           8-3/4         7-7/16
          Low Bid       6-13/16       7-3/64      7-1/8         4-7/8

<CAPTION>

                                       1998
                                       ----
                       1ST QTR      2ND QTR       3RD QTR      4TH QTR
                       -------      -------       -------      -------
<S>                    <C>           <C>          <C>           <C>
          High Bid     12-3/16       12-1/2           11          8-1/4
          Low Bid      10-13/16      10-3/8            7          7

</TABLE>

          Such quotations reflect inter-dealer prices, without retail mark-ups,
     mark-downs or commissions and may not necessarily reflect actual
     transactions. Trading in the Company's common stock during such periods was
     sporadic. The quotations do not reflect an adjustment for the Stock
     Dividends described below.

          The Company has not paid any cash dividends. The Board of Directors
     does not intend to declare cash dividends in the immediate future. At
     December 31, 1996 the Company's comon stock outstanding was 971,360 shares.
     In January 1997, a 7.5% stock dividend was declared, resulting in the
     issuance of 72,703 additional shares of common stock. In October, 1997, a
     20% stock dividend was declared, resulting in the issuance of 208,710
     additional shares of common stock. In May, 1998 a 20% stock dividend was
     declared, resulting in 259,040 additional shares of common stock, and in
     September, 1999 a 10% stock dividend was declared, resulting in 156,648
     additional shares of common stock being issued (collectively, the "Stock
     Dividends"). In addition to the dividends issued, a total of 79,486 options
     and warrants were exercised.

          On July 13, 1998, Madison Capital Trust I, a Delaware business trust
     established by the Company (the "Trust"), sold $5,000,000 in liquidation in
     the amount of 9.00% Capital Securities, representing preferred beneficial
     interest in the assets of the Trust, to seven institutional accredited
     investors in a private offering exempt from registration under Regulation D
     under the Securities Act of 1933.

          On February 8, 2000, the Company received commitments to purchase, in
     a private placement to its Board of Directors, pursuant to Section 4(2) of
     the Securities Act of 1933, as amended, 335,000 shares of its common stock.
     In certain circumstances, some purchases may be subject to regulatory
     approval. If all of the shares are purchased, the private placement would
     raise $1,926,250 million. As of March 27, 2000, 175,000 of such shares have
     been sold for an aggregate of $1,006,250.


                                   8
<PAGE>

ITEM 6    -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

          This report contains "forward-looking" statements. The Company is
     including this statement for the express purpose of availing itself of the
     protections of the safe harbor provided by the Private Securities
     Litigation Reform Act of 1995 with respect to all of such forward-looking
     statements. Examples of forward-looking statements include, but are not
     limited to (a) projections of revenues, income or loss, earnings or loss
     per share, capital expenditures, growth prospects, dividends, capital
     structure and other financial items, (b) statements of plans and objectives
     of the Company or its management or Board of Directors (c) statements of
     future economic performance and (d) statements of assumptions underlying
     other statements and statements about the Company or its business.

          The Company's ability to predict projected results or to predict the
     effect of certain events on the Company's operating results is inherently
     uncertain. Therefore, the Company wishes to caution each reader of this
     report to carefully consider certain factors, including competition for
     deposits and loans; potential changes in interest rates; changes in
     governmental policy and other factors discussed herein, because such
     factors in some cases have affected and in the future (together with other
     factors) could affect, the ability of the Company to achieve its
     anticipated results and may cause actual results to differ materially from
     those expressed herein.

          CAPITAL RESOURCES

          In January, 1997, 72,703 shares of common stock were issued in
     connection with a stock dividend and in October, 1997, a 20% stock dividend
     was declared, resulting in the issuance of 208,710 additional shares of
     common stock being issued. In May, 1998, a 20% stock dividend was declared,
     resulting in the issuance of 259,040 additional shares of common stock
     being issued. Also, a total of 50,205 shares were exercised in 1998 in
     conjunction with stock options. At December 31, 1998, the common stock
     outstanding was 1,562,018 shares as compared to 1,747,947 shares at
     December 31, 1999. The book value per share of the Company's common stock
     at December 31, 1999, 1998 and 1997 was $5.88, $5.41 and $5.00,
     respectively, after giving retroactive effect to the issuance of stock
     dividends and options exercised.


                                   9
<PAGE>

          The chart below presents various capital ratios applicable to
     state-chartered, Federal Reserve member banks and bank holding companies.
     The requirements are compared to the Company's actual ratios at December
     31, 1999, which exceeded the levels required to be "well capitalized"
     under applicable Federal Deposit Insurance Corporations' regulations.

                             RISK WEIGHTED CATEGORY
<TABLE>
<CAPTION>

     RISK WEIGHTED ASSETS                 0%       20%      50%     100%     TOTAL
     --------------------------------------------------------------------------------
<S>                                   <C>      <C>        <C>      <C>      <C>
     Loans                                               $48,968  $80,348   $129,316
     Securities Available for Sale   $  323    $17,500                         17,823
     Securities Held to Maturity                   570               2,000      2,570
     Federal Funds Sold                            500                            500
     Cash and Due From Banks          2,254        335                          2,589
     Other Assets                                                    4,306      4,306
                                      -----------------------------------------------
     --------------------------------------------------------------------------------
     CATEGORY TOTALS                  2,577     18,905     48,968   86,654    157,104
     --------------------------------------------------------------------------------
     Off balance-sheet items
      (risk weighted)                              182
     --------------------------------------------------------------------------------
     Total risk-weighted assets     $     0     $3,817    $24,484  $86,654   $114,955
     ================================================================================
     Average Total Assets            156,072

</TABLE>

<TABLE>
<CAPTION>

     CAPITAL                                          TIER 1   TIER 2    TOTAL
     --------------------------------------------------------------------------
<S>                                                   <C>       <C>      <C>
     Shareholders' equity (inclusive of  Trust
       Preferred Securities eligible for Tier 1)    $13,979    $        $13,979
     Allowance for loan losses and Trust
       Preferred                                                2,767     2,767
                                                     ------    ------   -------
     --------------------------------------------------------------------------
     Total Capital                                   $13,979   $2,767   $16,746
     ==========================================================================

</TABLE>


                                  10
<PAGE>

<TABLE>
<CAPTION>

                                          REGULATORY
                                            MINIMUM      ACTUAL       ACTUAL
     RATIO                                  12/31/99    12/31/99     12/31/98
     -----                                  --------    --------     --------
<S>                                           <C>        <C>          <C>

     Qualifying Total Capital
     to Risk Weighted Assets                  8.0%       14.57%       10.72%

     Tier 1 Capital to Risk Weighted
     Assets                                   4.0%       12.16%        9.71%

     Tier 1 Ratio to
     Total Adjusted Average Assets            4.0%        8.96%        8.26%

</TABLE>

          The Company's capital-to-assets ratio increased from 6.39% as of
     December 31, 1998 to 6.60% at December 31, 1999. The increase in the
     capital-to-assets ratio was due to increased earnings of the Company during
     1999. The Company's return on average equity for 1999 was 9.39% and for
     1998 was 5.13%; and its return on average assets was .61% for 1999 as
     compared to .32% for 1998. The increase in the Company's return on equity
     and return on assets from 1998 to 1999 was directly attributable to
     increased net income. (See "Management's Discussion and Results of
     Operations.") For information concerning the Bank's Capital Ratios see
     footnote 17 of the Company's financial statements.

          The following table sets forth certain information from the Bank's
     average consolidated statement of financial condition and reflects the
     weighted average yield on its assets and weighted average cost of its
     liabilities for the periods ended December 31, 1998 and 1999. Such yields
     and costs were derived by dividing actual income or expense by the monthly
     average balance of assets or liabilities, respectively, for the respective
     period, and exclude unrecorded interest income related to non-accrual
     loans.


                                  11
<PAGE>

<TABLE>
<CAPTION>
                                                       1999                             1998
                                                  (IN THOUSANDS)                     (IN THOUSANDS)
                                         AVERAGE                  YIELD     AVERAGE                 YIELD
                                         BALANCE     INTEREST     COST      BALANCE     INTEREST    COST
                                        ---------    --------     ----     ---------    --------    ----
<S>                                     <C>           <C>         <C>      <C>           <C>        <C>
ASSETS
Interest-earning assets:
  Loans Receivable (includes
    mortgage loans held for sale)       $ 123,628     $12,037     9.74%    $ 110,761     $10,507    9.49%
  Other Investments                        11,255         302     2.68         4,135         236    5.71
Federal Funds Sold                          7,880         370     4.70         6,408         352    5.49
                                        ---------     -------              ---------     -------
Total Interest-Earning Assets           $ 142,763     $12,709     8.90     $ 121,304     $11,095    9.15
                                                      -------     ----                   -------    ----
Non-Interest-Earning Assets                 8,309                              8,203
                                        ---------                          ---------
    Total Assets                        $ 151,072                          $ 129,507
                                        =========                          =========
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
  Demand Interest-Bearing               $  12,624     $   249     1.97     $   9,237     $   189    2.05
  Money Market & Savings                   26,943         754     2.80        21,932         640    2.92
  Other Time Deposits                      71,933       3,810     5.30        69,010       3,919    5.68
    Borrowed Funds                          2,444         139     5.69
    Preferred Trust                         5,000         450     9.00         2,500         225    9.00
                                        ---------     -------              ---------     -------
Total Interest-Bearing Liabilities        118,944       5,402     4.54       102,679     $ 4,973    4.84
                                                      -------     ----                   -------    ----
Other Liabilities                          22,272                             18,132
                                           ------                             ------
    Total Liabilities                     141,216                            120,811
Shareholders' Equity                        9,856                              8,696
                                        ---------                          ---------
Total Liabilities and Shareholders'
  Equity                                $ 151,072                          $ 129,507
                                        =========                          =========
Net Interest Income/Rate Spread                       $ 7,307     4.36%                  $ 6,122   4.31%
                                                      =======     ====                   =======   ====
Net Interest Margin                                               5.12%                            5.05%
                                                                  ====                             ====
</TABLE>


          The following table analyzes the rate/volume variances between the
     Bank's interest-earning assets and interest-bearing liabilities for the
     fiscal years 1999 compared to 1998 and 1998 compared to 1997. For each
     category of interest-bearing assets and interest-bearing liabilities,
     information is provided on changes attributable to (i) changes in volume
     (change in volume multiplied by prior year rate), (ii) changes to rate
     (change in rate multiplied by prior year volume), and (iii) total change in
     rate and volume. The combined effect of changes in both rate and volume has
     been allocated proportionately to the change due to rate and the change due
     to volume.


                                  12
<PAGE>

<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31
                                                           ----------------------
                                                 1999 VS. 1998                     1998 VS. 1997
                                                 -------------                     -------------
                                                              (IN THOUSANDS)
                                         VOLUME       RATE       TOTAL      VOLUME       RATE        TOTAL
                                         -------    --------    --------    -------     -------     -------
<S>                                      <C>        <C>         <C>         <C>         <C>         <C>

Interest Income:
   Loan Portfolio (includes mortgages
     held for sale)                      $ 1,247    $   283     $ 1,530     $ 1,240     $   128     $ 1,368
   Other Investments                         242       (176)         66         (31)        (23)        (54)
   Federal Funds                              74        (56)         18         147           9         156
                                         -------    --------    --------    -------     -------     -------
Total Interest Earning Assets              1,563         51       1,614       1,355         115       1,470
                                         -------    --------    --------    -------     -------     -------
Interest Expense:
   Demand Interest - Bearing                  67         (7)         60          64          (2)         62
   Money Market & Savings                    141        (27)        114          86         (54)         32
   Other Time Deposits                       161       (270)       (109)        715         (53)        662
   Borrowed Funds                            139                    139        (399)                   (399)
   Preferred Trust                           225                    225         225                     225
                                         -------    --------     -------    -------     -------     -------
Total Interest Bearing Liabilities           733       (304)        429         691        (109)        582
                                         -------    --------    --------    -------     -------     -------
Net Change in Net Interest Income        $   830    $   355     $ 1,185     $   604     $   224     $   888
                                         -------    --------    --------    -------     -------     -------
                                         -------    --------    --------    -------     -------     -------

</TABLE>

          LIQUIDITY

          The Bank's Asset/Liability Management Committee, comprised of the
     members of the Bank's Executive Committee and its Treasurer, are
     responsible for managing the liquidity position and interest rate
     sensitivity of the Bank. The Committee's function is to balance the Bank's
     interest-sensitive assets and liabilities, while providing adequate
     liquidity for projected needs. The primary objective of the Asset/Liability
     Management Committee is to optimize net interest margin in an ever changing
     rate environment.

          Due to the nature of the Company's business, some degree of interest
     rate risk is inherent and appropriate. Management attempts to manage the
     level of earnings exposure arising from interest rate movements.

          Interest rate sensitivity is measured by the difference between
     interest-earning assets and interest-bearing liabilities which mature or
     reprice within a specific time interval ("Gap"). A positive


                                  13
<PAGE>

     gap indicates that interest-earning assets exceed interest-bearing
     liabilities within a given interval. A positive gap position results in
     increased net interest income when rates increase and the opposite when
     rates decline.

          At December 31, 1999, the risk management review included an "earnings
     at risk" analysis as well as a "risk sensitivity" analysis. Potential
     monthly net revenue change indicated that in a static rate environment,
     increased earnings would be approximately $19,600. If rates fell 200 basis
     points, monthly revenues a year from now would increase approximately
     $20,663 and a rise in rates by 200 basis points would represent a monthly
     loss in revenues of approximately $17,842.

          Management attempts to structure the Balance Sheet to provide for the
     repricing of assets and liabilities in approximately equal amounts.

          The table on the next page represents the interest rate sensitivity of
     the Company as of December 31, 1999 by listing major categories of
     interest-sensitive assets and compares them to interest-sensitive
     liabilities for various time periods. The repricing intervals primarily are
     determined by the first opportunity for the Company to change the interest
     rate on the subject instrument. The table shows the difference between
     interest-sensitive assets and interest-sensitive liabilities, or Gap, for
     each repricing interval and a cumulative Gap and certain calculations based
     on such information.


                                  14
<PAGE>

                        INTEREST RATIO SENSITIVITY REPORT
                             AS OF DECEMBER 31, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                     1-90       91-180      181-365          1-5           5 YEARS
                                     DAYS        DAYS         DAYS          YEARS          AND OVER       TOTAL
                                   --------    --------     ---------      --------       ---------      --------
<S>                                <C>         <C>          <C>            <C>            <C>            <C>

Interest-Sensitive Assets
Federal Funds Sold                 $    500    $      0     $       0      $      0       $       0      $    500
Loans                                52,478       6,815         6,257        43,635          18,869       128,054
Interest-Bearing Balances                 0           0             0             0               0             0
Investment Securities Held
   For Sale                               0           0             0        12,056           5,767        17,823
Investment Securities Held
   For Maturity                           0           0             0           400           2,170         2,570
                                   --------    --------     ---------      --------       ---------      --------

Totals                             $ 52,978    $  6,815     $   6,257      $ 56,091       $  26,806      $148,947
Cumulative Total                   $ 52,978    $ 59,793     $  66,050      $122,141       $ 148,947      $148,947
Interest-Sensitive Liabilities
Demand-Interest-bearing            $ 12,705    $      0     $       0      $      0       $       0      $ 12,705
Savings Accounts                      8,150           0             0             0               0         8,150
Money Market Accounts                15,205           0             0             0               0        15,205
Time Deposits                        21,048      10,679        21,488        14,804           5,719        73,738
Borrowed Funds                            0           0             0         9,000               0         9,000
Trust                                     0           0             0             0           5,000         5,000
                                   --------    --------     ---------      --------       ---------      --------
Totals                             $ 57,108    $ 10,679     $  21,488      $ 23,804       $  10,719      $123,798

Cumulative Totals                  $ 57,108    $ 67,787     $  89,275      $113,079       $ 123,798      $123,798

Gap                                $ (4,130)   $ (3,864)    $ (15,231)     $ 32,287       $  16,087      $ 25,149

Cumulative Gap                     $ (4,130)   $ (7,994)    $ (23,225)     $  9,062       $  25,149      $ 25,149

Interest-sensitive assets/
Interest-sensitive liabilities
   (cumulative)                         .93         .88           .74          1.08            1.20         1.20

Cumulative Gap/total earning
  assets                                 (3%)        (5%)         (16%)          (2%)            17%          17%

Total Earning Assets                          $148,947

</TABLE>


                                  15
<PAGE>

          Liquidity management allows a financial institution to meet its
     potential cash needs, at reasonable rates, from a variety of sources.
     Management monitors projected and current cash flows to maintain adequate
     levels of liquidity. Management believes that the utilization of core
     deposits, maturing existing earning assets, such as securities, and
     relatively short-term borrowings are the most appropriate approach to meet
     the Bank's liquidity needs. As a result of such liability repricing,
     management has been able to adjust for such slight declines during the
     first 90 days from which interest rates changed, with little effect on net
     interest income. During 1999, the Company's net interest spread was
     maintained at approximately 4.36%, as compared to 4.31% in 1998.

          RESULTS OF OPERATIONS

          At December 31, 1999, the Bank held deposits aggregating $130,338,463,
     of which $20,540,071, or approximately 16%, were non-interest-bearing
     deposits, (exclusive of the $84,714 deposits held by the Company). To the
     best of the Company's knowledge, none of such deposits were brokered
     deposits. As of the same date, outstanding loans receivable made to 1,762
     loan customers totaled approximately $124,233,606, resulting in an average
     loan size of approximately $70,507.

          At December 31, 1998, the Bank held deposits aggregating $132,594,518,
     of which $23,423,200, or approximately 18%, were non-interest-bearing
     deposits (exclusive of the $50,223 deposits of the Company). To the best of
     the Company's knowledge, none of such deposits were brokered deposits. As
     of the same date, outstanding receivables in connection with loans made to
     1,718 loan customers totaled approximately $115,404,086, (exclusive of
     residential mortgage loans held for sale) resulting in an average loan size
     of approximately $67,174.

          At December 31, 1997, the Bank held deposits aggregating $114,832,410,
     of which $16,076,381, or approximately 14%, were non-interest-bearing
     deposits, (exclusive of the $6,566 deposits of the Company). To the best of
     the Company's knowledge, none of such deposits were brokered deposits. As
     of the same date, outstanding loans receivable in connection with loans
     made to 1,423 loan customers totaled approximately $103,373,175 (exclusive
     of residential mortgage loans held for sale), resulting in an average loan
     size of approximately $72,645.


                                  16
<PAGE>

<TABLE>
<CAPTION>

                                  1999                        1998                         1997
                                  ----                        ----                         ----
                                        % OF                         % OF                         % OF
TYPE OF ACCOUNT          BALANCE      PORTFOLIO        BALANCE     PORTFOLIO       BALANCE      PORTFOLIO
                       ------------   ---------     ------------   ---------     ------------   ---------
<S>                    <C>                <C>       <C>                <C>       <C>                <C>
Non-Int.  Bearing      $ 20,540,071       16.00%    $ 23,423,200       18.00%    $ 16,076,381       14.00%
Interest-Bearing         12,704,649       10.00       11,785,117        9.00        8,164,080        7.00
Money Market             15,205,159       12.00       17,109,125       13.00       14,039,724       12.00
Savings                   8,150,269        6.00       11,089,034        8.00        5,270,011        5.00
CDs over $100,000        33,239,808       25.00       31,052,033       23.00       32,244,281       28.00
CDs under $100,000       40,498,507       31.00       38,136,009       29.00       39,037,933       34.00
                       ------------   ---------     ------------   ---------     ------------   ---------
Total Deposits         $130,338,463      100.00%    $132,594,518      100.00%    $114,832,410      100.00%
                       ============   =========     ============   =========     ============   =========

</TABLE>

          For the year ended December 31, 1999, the Company's total income was
     $16,443,137 and its total expenses were $15,517,362, resulting in a net
     profit for the year of $925,775. The increase in net income for the year
     ended December 31, 1999 was due to increased interest income from the
     Bank's earning assets and gain on sale of mortgage loans. For the year
     ended December 31, 1998, the Company's total income was $12,586,029 and its
     total expenses were $12,139,667, resulting in a net profit for the year of
     $446,362. For the year ended December 31, 1997, the Company's total income
     was $10,376,499 and its total expenses were $9,620,021, resulting in a net
     profit of $756,478. The decrease in net income for the year ended December
     31, 1998 as compared to December 31, 1997 was primarily due to an increase
     in operating expenses due to branch expansion and start up costs associated
     with the Bank's mortgage department.

          As of December 31, 1999, the allowance for loan loss equaled
     approximately 1.02% of outstanding loans, including non-accrual loans.
     As of December 31, 1998, the Bank's allowance for loan losses equaled
     approximately .96% of outstanding loans receivable, including
     non-accrual loans. At December 31, 1997, the Bank's allowance for loan
     losses equaled approximately .91% of outstanding loans receivable,
     including non-accrual loans. The chart below shows an analysis of the
     allowance for loan losses for the years ended December 31, 1999, 1998
     and 1997. The overall reserve has increased slightly from .96% of
     outstanding loans at December 31, 1998 to 1.02% of outstanding loans at
     December 31, 1999. Management continues to believe that the reserve
     adequately reflects the level of risk in the portfolio.

                                  17
<PAGE>

                ANALYSIS OF THE BANK'S ALLOWANCES FOR LOAN LOSSES
                                  DECEMBER 31,
<TABLE>
<CAPTION>

                                        1999              1998               1997
                                        ----              ----               ----

<S>                                 <C>               <C>               <C>
Balance at beginning of period:     $ 1,111,817       $   936,974       $   875,438
                                    -----------       -----------       -----------
Charge-offs:
  Commercial                           (216,480)         (214,952)         (295,581)
  Installment                          (104,880)          (61,675)           (4,283)
                                    -----------       -----------       -----------
       Total                           (321,360)         (276,627)         (299,864)
Recoveries:
  Commercial                                                9,740             1,400
  Installment                             1,799             1,730
                                    -----------       -----------       -----------
Net Charge-Offs                        (319,561)         (265,157)         (298,464)
                                    -----------       -----------       -----------
Additions charged to operations         470,000           440,000           360,000
                                    -----------       -----------       -----------
Balance at the end of period        $ 1,262,256       $ 1,111,817       $   936,974
                                    ===========       ===========       ===========
Ratio of net charge-offs during
  the period to average loans
  outstanding during the period             .26%              .24%              .31%
                                    ===========       ===========       ===========

</TABLE>


          As of December 31, 1999, the Bank had loans outstanding, totaling
     $124,233,606, excluding residential mortgage loans held for sale. The Bank
     grants loans to customers in its local market area. The ultimate repayment
     of these loans is dependent to a certain degree on the local economy and
     real estate market.

          The Bank manages asset quality through diversification in its loan
     portfolio and adherence to its credit policy. Management strives to
     identify loans experiencing difficulty early enough to correct the
     problems, to recognize non-performing loans in a timely manner, to record
     charge-offs promptly based on realistic assessments of current collateral
     values and the borrower's ability to repay, and to maintain adequate
     reserves to cover any inherent losses in the loan portfolio.

          The provision for possible loan losses represents the charge against
     earnings that is required to fund the allowance for possible loan losses.
     The level of the allowance is determined by inherent risks within the
     Bank's loan portfolio. Management's policy is to maintain the allowance for
     loan losses at a level sufficient to absorb all estimated losses inherent
     in the loan portfolio. The allowance for loan


                                  18
<PAGE>

     losses is increased by the provision for loan losses and recoveries and is
     decreased by charged-off loans.

          Management is currently utilizing a blended general portfolio
     allocation with segregated pools of loans and a specific loan-by-loan
     allocation mirroring bank regulatory classifications. Each classified
     credit is assigned a specific reserve allocation based upon the severity of
     its classification and its specific characteristics (i.e., industry, type
     of project, nature of collateral). General reserve allocations are also
     established against the unclassified major segments of the loan portfolio,
     as well as against unfunded commitments and exposures resulting from the
     issuance of letters of credit. Each quarter a comprehensive loan portfolio
     analysis is undertaken, and reserves are adjusted at such times to more
     adequately reflect the Bank's exposure in its loan portfolio. Additionally,
     past loss experience, current economic conditions, the results of the most
     recent regulatory examination, and other relevant factors are considered in
     the evaluation.

          The Bank places loans on non-accrual status when, (1) in the opinion
     of management, the principal or interest is deemed to be not collectable
     due to a deterioration in the financial position of the borrower; or (2)
     when the loan is more than 90 days delinquent, unless the obligation is
     both well secured and in the process of collection; or (3) when borrower
     declares bankruptcy and current payment ceases.

          Additions to the Bank's provision for possible loan losses for the
     period ended December 31, 1999, totaled $470,000. Loans charged off against
     the reserve in 1999 amounted to $321,360 and recoveries were $1,799, which
     resulted in net charged-off loans of $319,561. The principal amount of
     non-accrual loans at December 31, 1999 was $1,564,493, an increase of 44%
     over 1998. The increase is attributable to three (3) real estate related
     loans which are presently in the process of collection. A substantial
     portion of the non-accrual loans are partially or fully secured and in the
     process of collection.

          Additions to the Bank's provision for possible loan losses for the
     period ended December 31, 1998, totaled $440,000. Loans charged-off against
     the reserve in 1998 amounted to $276,627. Recoveries amounted to $11,470
     which resulted in $265,157 in net charged-off loans. The principal amount
     of nonaccrual loans at December 31, 1998 totaled $1,088,946. This is an
     increase of $197,094 over year end 1997.

          Additions to the Bank's provisions for possible loan losses for the
     period ended December 31, 1997 totaled $360,000. Loans charged off against
     the reserve in 1997 amounted to $299,864. Loans on non-accrual status as of
     December 31, 1997 amounted to $891,852.

          Other real estate owned at December 31, 1999 totaled $577,039 as
     compared to $734,089 at December 31, 1998. This consists of three
     properties acquired at sheriff's sale. The first property is a commercial
     building in Upper Darby, Pennsylvania. The property is currently listed for
     sale with a realtor and was appraised for $300,000. Management continues to
     monitor and evaluate the Bank's exposure on this property, which is carried
     at $248,669. The second property is a single family residential property in
     West Chester, Pennsylvania which was sold and settled in January of 2000.
     The third property is a single family residence in the Poconos section of
     Pennsylvania which was sold and settled in February of 2000.

          Interest expense of $5,401,780, represented 41% of gross interest
     income in 1999. Interest expense increased 9% over 1998. This slight
     increase was due to a slight increase in interest-bearing deposits and
     the increased borrowed funds.


                                  19
<PAGE>

          Interest expense of $4,973,136, represented 45% of gross interest
     income in 1998. Interest expense increased 14% over 1997. This increased
     expense was due to an increased average growth in interest-bearing deposits
     to $102,679,000 in 1998 from $88,171,006 in 1997 even though the average
     cost of funds decreased to 4.84% in 1998 from 4.98% in 1997.

          Interest expense of $4,391,096 represented 46% of gross interest
     income in 1997. Interest expense increased by 28% over 1996. The increase
     in interest expense rose due to interest bearing liabilities increasing
     from an average of $71,667,000 in 1996 to $88,171,000 in 1997, an average
     increase of 23%.

          Occupancy and equipment expenses totaled $1,414,580 for the year ended
     December 31, 1999, as compared to $1,169,651 at December 31, 1998. The 21%
     increase is representative of continued increased rents to accommodate the
     growth of the Bank. Additional increases in maintenance costs and equipment
     leases were reflective of the Bank's seventh branch opening in Horsham, PA
     and technology enhancements to accommodate the Bank's expansion and product
     offerings.

          Occupancy and equipment expenses totaled $1,169,651 for the year ended
     December 31, 1998, as compared to $939,804 at December 31, 1997. The 25%
     increase represented an increase in maintenance costs and equipment leases
     reflective of the Bank's newly formed mortgage department in June of 1998
     and the opening of its sixth branch location.

          Salary and employee benefits of $5,305,395 represented 58% of total
     non-interest expenses, or 34% of total Bank expenses, at December 31, 1999.
     The increase in salary and employee benefits of $1,986,765 or 60% over 1998
     is reflective of hiring additional employees and increased benefits expense
     related to the opening of the Bank's seventh branch.

          Salary and employee benefits of $3,318,630 in 1998 represented 52% of
     total non-interest expense, or 28% of total bank expenses as compared to
     $2,254,829 in 1997. The increase in salary and employee benefits of
     $1,063,801, or 48%, was attributable to the hiring of additional employees
     for the Bank's sixth branch opening and newly-formed mortgage department in
     1998.

          Other operating expenses in 1999, exclusive of occupancy and equipment
     and salary and employee benefits totaled $2,376,821 as compared to
     $1,911,095 at December 31, 1998. This increase of 24% for the 1999 year is
     a result of branch expansion and asset growth. Legal expenses increased
     from $115,013 to $143,211, a 25% increase over 1998. This increase was due
     to loan and collection expenses on certain non-accrual loans and loan
     closings on new loan originations. Professional fees decreased from $84,775
     in 1998 to $64,410 in 1999. The 24% decrease was related to a decrease in
     outside service fees. The $2,169,200 in other operating expenses was
     comprised primarily of increases of 55% in telephone expense, 61% in
     postage and freight and 28% in business related auto and travel and
     miscellaneous expenses. Other components of other operating expenses also
     include insurance expense, shares tax expense and accounting and audit
     fees. These expenses increased 65% over 1998 and were directly related to
     branch expansion and marketing efforts to increase business. Deposit
     insurance increased by 90% in 1999 from $22,773 at December 31, 1998, to
     $43,217 at December 31, 1999. The Bank pays premiums in accordance with the
     deposit size of its portfolio and its insurance category rating.

          Other operating expenses in 1998, exclusive of occupancy and equipment
     and salary and employee benefits totaled $1,911,095 as compared to
     $1,257,479 in 1997. The increase in these operating expenses was primarily
     related to computer expense, supplies, telephone, postage, loans expense,
     and outside service fees, for the opening of our sixth branch in
     Philadelphia and our newly formed mortgage department in June of 1998.
     Computer expenses increased from $253,196 to


                                  20
<PAGE>

     $288,378, a 14% increase over 1997. This increase was due to the increased
     deposit and loan accounts processed in conjunction with the asset growth of
     the Bank. Deposit insurance increased from $13,768 in 1997 to $22,773 in
     1998. The Bank pays premiums in accordance with the deposit size of its
     portfolio and its insurance category rating. Legal expenses increased
     $64,682 or 129% from 1997 due to the Bank setting up a mortgage department
     and increased legal and collection services. Business development expenses
     were $214,773 in 1998 as compared to $176,770 in 1997. This 22% increase
     was a direct result of the Bank's efforts to develop business and to become
     increasingly visible in its branch location communities. The decrease in
     advertising expense from $56,352 in 1997 to $43,846 in 1998 was a result of
     more monies being allocated to business development rather than
     advertising.

          Other operating expenses in 1997, exclusive of occupancy and equipment
     and salary and employee benefits totaled $1,257,479 as compared to
     $1,522,108 in 1996. The decrease in these operating expenses was primarily
     related to non-recurring proxy and meeting expenses that occurred in 1996.
     Computer expenses increased from $210,688 to $253,196, a 20% increase over
     1996. This increase was due to the increased deposit and loan accounts
     processed in conjunction with the asset growth of the Bank. Deposit
     insurance increased from $1,500 in 1996 to $13,768 in 1997. The Bank pays
     premiums in accordance with the deposit size of its portfolio and its
     insurance category rating. Legal expenses decreased $29,049 or 36% from
     1996. This was a result of fewer legal and collection issues arising in the
     normal course of the Bank's business. Business development expenses were
     $176,770 in 1997 as compared to $124,637 in 1996. This 42% increase was a
     direct result of the Bank's efforts to develop business and become
     increasingly visible in its branch location communities. In addition, the
     Bank had hired two business development officers and implemented a
     bank-wide sales call program. The decrease in advertising expense from
     $82,009 in 1996 to $56,352 in 1997 was a result of more monies being
     allocated to business development rather than advertising.

          Interest income on investment securities relates primarily to interest
     on U.S. Government Obligations. Interest income of $507,834 for the year
     ended December 31, 1999 increased 256% from $142,652 for the year ended
     December 31, 1998. The increase is a direct result of employing borrowed
     funds and Federal Funds Sold to invest in such securities. The average
     balance of government obligations increased from $4,135,000 in 1998 to
     $9,859,000 in 1999. Interest income of $142,652 for the year ended December
     31, 1998, decreased 23% from $185,263 for the year ended December 31, 1997.
     The decrease was a direct result of the change in liquidity position of the
     Company.

          Interest income on temporary investments represents Federal Funds
     sold. For the year ended December 31, 1999, interest income on Federal
     Funds sold was $370,274, as compared to $352,432 at December 31, 1998, a 5%
     increase. The deposit growth allowed the Bank to invest in overnight funds.
     For the year ended December 31, 1998, interest income on Federal Funds sold
     was $352,432, as compared to $196,425 for the year ended December 31, 1997,
     a 79% increase. The deposit growth of the Bank provided for an improved
     liquidity position as well as growth in federal funds, which better
     prepared the Bank for potential loan demand.

          Interest income on other investments represent the Bank's investments
     in municipal securities and dividends paid on Federal Reserve and Federal
     Home Loan Bank Stocks. For the years ended December 31, 1999, 1998 and
     1997, interest income on other investments was $244,517, $93,490 and
     $104,511, respectively. The fluctuation from year to year is due to
     changes in the amounts of Federal Home Loan Bank dividend payments.
     The Bank did not invest in any new municipal bonds in 1999, 1998 or 1997.

          Interest and fees on loans were $12,037,116 in 1999, 91% of gross
     interest income, as compared to $10,506,782, or 95% of gross interest
     income in 1998. The average loan portfolio grew 12% while


                                  21
<PAGE>

     the Bank's yield increased from 9.49% in 1998 to 9.74% in 1999. Interest
     and fees on loans were $10,506,782 in 1998, 95% of gross interest income as
     compared to $9,138,864, or 95% in 1997. The average loan portfolio grew 14%
     while the Bank's yield increased from 9.35% to 9.49%. Interest and fees on
     loans were $9,138,864 in 1997, 95% of gross interest income. The Bank
     experienced a 20% growth in average loans while the average yield on the
     portfolio decreased from 9.42% to 9.35%. The slight decrease in rates had
     little effect on earnings due to the ability of the Bank to reprice
     liabilities on a timely basis with market fluctuations as described above.
     These factors were directly related to the change in interest and fees on
     loans during 1997.

          An analysis of the Bank's loan portfolio is presented in Note 4,
     "Loans and Allowance for Loan Losses", to the consolidated financial
     statements. The primary lending activity of the Bank is to originate loans
     to individuals and business entities for business related purposes. The
     Bank's loans receivable earn interest at either fixed rates or rates that
     vary overnight with changes in the Bank's prime rate. Certain loans
     receivable earn interest at rates that are fixed to a specific spread over
     the rate being paid on certificates of deposit which are pledged as
     collateral on the loans.

          RECENT ACCOUNTING PRONOUNCEMENTS

          There are several accounting pronouncements that were effective for
     fiscal year 1998 and issued, not yet adopted for 1999. These
     pronouncements are discussed in footnote No. 2 of the consolidated
     financial statements.


          YEAR 2000 MATTERS

          The "Year 2000" issue is the result of computer programs written using
     two digits rather than four to define the applicable year. Any of the
     Company's computer programs, systems or devices that have time sensitive
     software may have recognized a date using "00" as the year 1900 rather than
     the year 2000. The Company did not experience any year 2000 related
     computer problems.


                                  22
<PAGE>

ITEM 7    - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               Independent Auditors' Report dated March 10, 2000.
               Consolidated Statements of Financial Condition as of
                December 31, 1999 and 1998.
               Consolidated Statements of Income for the years ended
                December 31, 1999, 1998 and 1997.
               Consolidated Statements of Changes in Shareholders'
               Equity for the years ended December 31, 1999, 1998 and
                1997.
               Consolidated Statements of Cash Flows for the years
                ended December 31, 1999, 1998 and 1997.
               Notes to Consolidated Financial Statements.

          The remainder of this page is intentionally left blank. The Financial
     Statements of the Company begin on the following page.


                                 23

<PAGE>



-----------------------------------------------------------------------------
    Madison Bancshares Group, Ltd.
    and Subsidiary
    Consolidated Financial Statements as of
    December 31, 1999 and 1998 and for
    Each of the Three Years in the Period
    Ended December 31, 1999, and
    Independent Auditors' Report

                                      24
<PAGE>



INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Madison Bancshares Group, Ltd.
Blue Bell, Pennsylvania

We have audited the accompanying consolidated statements of financial condition
of Madison Bancshares Group, Ltd. and subsidiary (the "Company") as of December
31, 1999 and 1998, and the related consolidated statements of income, changes in
shareholders' equity and comprehensive income and cash flows for each of the
three years in the period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Madison Bancshares
Group, Ltd. and subsidiary as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
March 10, 2000

                                       25

<PAGE>



MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

                                                                                               1999           1998
<S>                                                                                         <C>             <C>
ASSETS
CASH AND CASH EQUIVALENTS:

  Cash and amounts due from banks                                                            $ 2,588,835     $ 7,793,484
  Federal funds sold                                                                             500,000       7,500,000
                                                                                           -------------    -------------
        Total cash and cash equivalents                                                        3,088,835      15,293,484

INVESTMENT SECURITIES:

  Held to maturity (fair value - 1999, $2,567,857; 1998, $1,613,597)                           2,570,106       1,602,493
  Available for sale (amortized cost - 1999, $17,055,709; 1998, $1,000,046)                   16,749,747       1,010,000
  Federal Home Loan Bank Stock                                                                   750,000         527,300
  Federal Reserve Bank Stock                                                                     323,400         176,400

LOANS (Net of allowance for loan losses - 1999, $1,262,256; 1998, $1,111,817)                122,635,380     113,819,315

MORTGAGE LOANS HELD FOR SALE                                                                   5,418,972      11,593,638

REAL ESTATE OWNED                                                                                577,039         734,089

FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET                                           1,661,814       1,583,473

ACCRUED INTEREST RECEIVABLE                                                                    1,281,928       1,076,682

OTHER ASSETS                                                                                     785,189         508,989
                                                                                           -------------    -------------
TOTAL                                                                                       $155,842,410   $ 147,925,863
                                                                                           -------------    -------------
                                                                                           -------------    -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS:

  Noninterest-bearing demand deposits                                                       $ 20,540,071    $ 23,423,200
  Interest-bearing demand deposits                                                            12,704,649      11,785,117
  Savings deposits                                                                             8,150,269      11,089,034
  Money market deposits                                                                       15,205,159      17,109,125
  Time deposits                                                                               73,738,315      69,188,042
                                                                                           -------------    -------------
        Total deposits                                                                       130,338,463     132,594,518

BORROWED FUNDS                                                                                 9,000,000

GUARANTEED PREFERRED BENEFICIAL INTEREST IN SUBORDINATED DEBT                                  5,000,000       5,000,000

ACCRUED INTEREST PAYABLE                                                                         960,268         804,222
ACCRUED EXPENSES AND OTHER LIABILITIES                                                           261,148          76,731
                                                                                           -------------    -------------
        Total liabilities                                                                    145,559,879     138,475,471
                                                                                           -------------    -------------
COMMITMENTS

SHAREHOLDERS' EQUITY:

  Preferred stock, $5 par value - authorized, 5,000,000 shares; issued and
   outstanding, 0 shares
  Common stock, $1 par value - authorized, 20,000,000 shares;
    issued and outstanding - 1999, 1,747,947; 1998, 1,562,018 shares)                          1,747,947       1,562,018
  Capital surplus                                                                              8,745,557       7,563,433
  Accumulated earnings (deficit)                                                                  (9,038)        318,371
  Accumulated other comprehensive income (loss)                                                 (201,935)          6,570
                                                                                           -------------    -------------
        Total shareholders' equity                                                            10,282,531       9,450,392
                                                                                           -------------    -------------
TOTAL                                                                                      $155,842,410   $ 147,925,863
                                                                                           -------------    -------------
                                                                                           -------------    -------------
</TABLE>

See notes to consolidated financial statements.

                                      26

<PAGE>

MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                                    1999          1998          1997
<S>                                                                              <C>           <C>           <C>
INTEREST INCOME:

  Interest and fees on loans                                                     $ 12,037,116  $ 10,506,782  $ 9,138,864
  Interest and dividends on investment securities:
    U.S. Government obligations                                                       507,834       142,652      185,263
    Other securities                                                                  244,517        93,490      104,511
    Interest on temporary investments                                                 370,274       352,432      196,425
                                                                                  -----------   -----------   ----------
           Total interest income                                                   13,159,741    11,095,356    9,625,063
                                                                                  -----------   -----------   ----------

INTEREST EXPENSE:
  Interest on:

    Demand deposits                                                                   248,507       188,770      127,143
    Savings and money market deposits                                                 754,109       637,589      607,838
    Time deposits                                                                   3,809,686     3,918,856    3,256,833
    Guaranteed preferred beneficial interest in subordinated debt                     450,000       225,000
    Other interest                                                                    139,478         2,921      399,282
                                                                                  -----------   -----------   ----------
           Total interest expense                                                   5,401,780     4,973,136    4,391,096
                                                                                  -----------   -----------   ----------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES                                7,757,961     6,122,220    5,233,967

PROVISION FOR LOAN LOSSES                                                             470,000       440,000      360,000
                                                                                  -----------   -----------   ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                                 7,287,961     5,682,220    4,873,967
                                                                                  -----------   -----------   ----------
OTHER NONINTEREST INCOME:

  Service charges on deposit accounts                                                 577,953       719,541      573,493
  Gain on the sale of mortgage loans                                                2,582,212       599,065       83,339
  Other                                                                               123,231       172,067       94,604
                                                                                  -----------   -----------   ----------
           Total noninterest income                                                 3,283,396     1,490,673      751,436
                                                                                  -----------   -----------   ----------
OTHER NONINTEREST EXPENSES:

  Salaries and employee benefits                                                    5,305,395     3,318,630    2,254,829
  Occupancy                                                                           976,081       842,264      715,145
  Equipment                                                                           438,499       327,387      224,659
  Computer processing                                                                 339,649       288,378      253,196
  Deposit insurance                                                                    43,217        22,773       13,768
  Legal                                                                               143,211       115,013       50,331
  Professional fees                                                                    64,410        84,775       51,166
  Business development                                                                323,216       214,773      176,770
  Office and stationery supplies                                                      186,880       167,244      132,818
  Advertising                                                                          86,375        43,846       56,352
  Director's fees                                                                     138,375       154,975      107,025
  Amortization expense                                                                 50,519        21,050
  Other operating                                                                   1,000,969       798,268      416,053
                                                                                  -----------   -----------   ----------
           Total other noninterest expenses                                         9,096,796     6,399,376    4,452,112
                                                                                  -----------   -----------   ----------
INCOME BEFORE TAXES                                                                 1,474,561       773,517    1,173,291

PROVISION FOR INCOME TAXES                                                            548,786       327,155      416,813
                                                                                  -----------   -----------   ----------
NET INCOME                                                                          $ 925,775     $ 446,362    $ 756,478
                                                                                  -----------   -----------   ----------
                                                                                  -----------   -----------   ----------
BASIC EARNINGS PER SHARE                                                               $ 0.54        $ 0.26       $ 0.46
                                                                                  -----------   -----------   ----------
                                                                                  -----------   -----------   ----------
DILUTED EARNINGS PER SHARE                                                             $ 0.51        $ 0.25       $ 0.47
                                                                                  -----------   -----------   ----------
                                                                                  -----------   -----------   ----------

</TABLE>


See notes to consolidated financial statements.

                                       27

<PAGE>

MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE
 INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                   Accumulated
                                                                                      Other
                                                                    Accumulated     Comprehensive
                                            Common      Capital       Earnings         Income                      Comprehensive
                                            Stock       Surplus       (Deficit)        (Loss)           Total         Income
<S>                                       <C>          <C>          <C>            <C>              <C>           <C>
BALANCE, JANUARY 1, 1997                  $  971,360   $7,185,686    $(175,907)       $(6,919)      $ 7,974,220

    Issuance of 7 1/2% stock dividend         72,703      635,859     (708,562)

    Issuance of 20% stock dividend           208,710     (208,710)

  Comprehensive income:

    Net income                                                         756,478                          756,478      $ 756,478

    Net change in unrealized gain
      on securities available for sale
      net of taxes of $(4,049)                                                          7,520             7,520          7,520
                                                                                                                   ------------

  Comprehensive income                                                                                               $ 763,998
                                         -----------  -----------  -----------    ------------     ------------    ------------
                                                                                                                   ------------
BALANCE, DECEMBER 31, 1997                 1,252,773    7,612,835     (127,991)           601         8,738,218

    Exercise of stock options and
     stock warrants                           50,205      209,638                                       259,843

    Issuance of 20% stock dividend           259,040     (259,040)

  Comprehensive income:

    Net income                                                         446,362                          446,362      $ 446,362

    Net change in unrealized gain
     on securities available for sale
     net of taxes of $(3,214)                                                           5,969             5,969          5,969
                                                                                                                   ------------

  Comprehensive income                                                                                               $ 452,331
                                         -----------  -----------  -----------    ------------     ------------    ------------
                                                                                                                   ------------

BALANCE, DECEMBER 31, 1998                 1,562,018    7,563,433      318,371          6,570         9,450,392

  Exercise of stock warrants                  29,281       85,588                                       114,869

  Issuance of 10% stock dividend             156,648    1,096,536   (1,253,184)

  Comprehensive income:

    Net income                                                         925,775                          925,775      $ 925,775

    Net change in unrealized loss
     on securities available for sale
     net of tax benefit of $106,971                                                  (208,505)         (208,505)      (208,505)
                                                                                                                  -------------
  Comprehensive income                                                                                               $ 717,270
                                         -----------  -----------  -----------    ------------     ------------    ------------
                                                                                                                   ------------
BALANCE, DECEMBER 31, 1999                $1,747,947   $8,745,557     $ (9,038)     $(201,935)      $10,282,531
                                         -----------  -----------  -----------    ------------     ------------
                                         -----------  -----------  -----------    ------------     ------------

</TABLE>

                See notes to consolidated financial statements.

                                        28

<PAGE>

MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                1999              1998            1997
<S>                                                                            <C>              <C>            <C>
OPERATING ACTIVITIES:

  Net income                                                                    $ 925,775       $ 446,362       $ 756,478
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation on equipment                                                     317,639         245,048         153,271
    Provision for loan losses                                                     470,000         440,000         360,000
    Net amortization (accretion) of bond premium/discount                           3,413           2,204          (1,913)
    Gain on sale of mortgage loans held for sale                               (2,582,212)       (599,065)        (83,339)
    Gain on sale of investments                                                                                      (575)
    Loss on sale of real estate owned                                              30,416
    Originations of loans held for sale                                      (143,306,366)    (41,628,024)    (10,474,740)
    Proceeds from sale of loans                                               152,063,244      30,924,351      12,402,193
  Changes in assets and liabilities which provided (used) cash:
    Accrued interest receivable                                                  (205,246)       (370,234)        401,296
    Other assets                                                                 (276,200)       (271,790)       (373,621)
    Accrued interest payable                                                      156,046         (34,291)        133,806
    Accrued expenses and other liabilities                                        184,417         (20,942)          5,715
    Deferred loan fees                                                            136,982         129,976          80,497
                                                                              ------------    ------------     -----------
        Net cash provided by (used in) operating activities                     7,917,908      (10,736,405)     3,359,068
                                                                              ------------    ------------     -----------
INVESTING ACTIVITIES:

  Purchase of investment securities held to maturity                           (2,000,000)
  Purchase of investment securities available for sale                        (17,056,249)                     (2,499,308)
  Purchase of Federal Reserve Stock                                              (147,000)
  Purchase of Federal Home Loan Bank Stock                                       (222,700)        (47,500)
  Proceeds from maturities of investment securities held to maturity            1,030,000                         500,000
  Proceeds from sale of investment securities available for sale                                                  998,750
  Proceeds from maturities of investment securities available for sale          1,000,000       2,000,000       1,446,200
  Proceeds from sale of furniture, equipment and leasehold improvements             3,500
  Loans purchased and originated, net of principal repayments                  (9,808,086)    (12,457,404)    (11,864,109)
  Cost capitalized for real estate owned                                           (1,008)        (20,108)
  Additions to furniture, equipment and leasehold improvements                   (399,480)       (912,037)       (484,991)
  Proceeds on sale of real estate owned                                           619,652                          50,000
                                                                              ------------    ------------     -----------
        Net cash used in investing activities                                 (26,981,371)    (11,437,049)    (11,853,458)
                                                                              ------------    ------------     -----------
FINANCING ACTIVITIES:

  Net (decrease) increase in demand, savings and time deposits                 (2,256,055)     17,762,109      27,632,419
  Exercise of stock warrants                                                      114,869         250,845
  Exercise of stock options                                                                         8,998
  Proceeds from issuance of capital securities                                                  5,000,000
  Advances of borrowed funds                                                    9,000,000                       9,000,000
  Repayments of borrowed funds                                                                 (9,000,000)    (10,000,000)
                                                                              ------------    ------------     -----------
        Net cash provided by financing activities                               6,858,814      14,021,952      26,632,419
                                                                              ------------    ------------     -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                          (12,204,649)     (8,151,502)     18,138,029

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   15,293,484      23,444,986       5,306,957
                                                                              ------------    ------------     -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                                        $ 3,088,835     $15,293,484     $23,444,986
                                                                              ------------    ------------     -----------
                                                                              ------------    ------------     -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:

    Interest                                                                  $ 5,401,780     $ 4,503,465     $ 3,858,282
                                                                              ------------    ------------     -----------
                                                                              ------------    ------------     -----------
    Income taxes                                                                $ 745,210       $ 357,000       $ 363,663
                                                                              ------------    ------------     -----------
                                                                              ------------    ------------     -----------

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:

  Issuance of 10% stock dividend in 1999, 20% stock dividend in 1998, and 7.5%
    and 20% stock dividend in 1997:

    Common stock                                                                $ 156,648       $ 259,040       $ 281,413
                                                                              ------------    ------------     -----------
                                                                              ------------    ------------     -----------
    Capital surplus                                                           $ 1,096,536      $ (259,040)      $ 427,149
                                                                              ------------    ------------     -----------
                                                                              ------------    ------------     -----------
    Accumulated deficit                                                       $(1,253,184)                     $ (708,562)
                                                                              ------------                     -----------
                                                                              ------------                     -----------
  Transfers from loans to real estate owned                                     $ 492,010       $ 248,669
                                                                              ------------    ------------
                                                                              ------------    ------------

</TABLE>

See notes to consolidated financial statements.

                                       29

<PAGE>

MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

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


1.    ORGANIZATION AND NATURE OF OPERATIONS

      Madison Bancshares Group, Ltd. (the "Company") is a one-bank holding
      company formed pursuant to Section 3 (a) (1) of the Bank Holding Company
      Act of 1956, as amended. The Company was incorporated under the laws of
      the Commonwealth of Pennsylvania (the "Commonwealth") on May 31, 1988, to
      engage in the business of commercial banking through its wholly owned
      subsidiary, The Madison Bank (the "Bank"). The Bank is a commercial bank
      chartered under the applicable laws of the Commonwealth and is regulated
      under the Federal Reserve System by the Federal Reserve Bank. The Bank
      offers a variety of services to individuals and businesses through its
      offices in Blue Bell, Conshohocken, Center Square, Strafford, Lansdale,
      Northeast Philadelphia and its seventh branch location in Horsham, which
      was opened in 1999. The Bank commenced its operations on August 16, 1989
      after receiving the necessary regulatory approval.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
      include the accounts of the Company and its wholly owned subsidiary, the
      Bank. All significant intercompany balances and transactions have been
      eliminated in consolidation.

      USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of income and expenses
      during the reporting period. The most significant of these estimates is
      the allowance for loan losses. Actual results could differ from those
      estimates.

      CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
      cash equivalents include cash on hand, amounts due from banks and federal
      funds sold. Generally, federal funds are purchased and sold for one-day
      periods. Cash maintained in vaults on premises of $1,124,506 and $773,342
      at December 31, 1999 and 1998, respectively, is sufficient to currently
      meet average reserve balances under federal requirements.

      INVESTMENT SECURITIES - The Bank classifies and accounts for debt and
      equity securities as follows:

      O  SECURITIES HELD TO MATURITY - Securities held to maturity are
         stated at cost adjusted for unamortized purchase premiums and
         discounts based on management's positive intent and the Bank's
         ability to hold such investments until maturity considering all
         reasonably foreseeable conditions and events.  Purchase premiums
         and discounts are amortized to income over the life of the related
         security.  The adjusted cost of a specific security sold is the
         basis for determining the gain or loss on the sale.


                                       30

<PAGE>

      O  SECURITIES AVAILABLE FOR SALE - Securities available for sale,
         carried at approximate fair value, are those management might sell
         in response to changes in market interest rates, increases in loan
         demand, changes in liquidity needs and other conditions.
         Unrealized gains and losses are excluded from earnings and are
         reported net of tax as a separate component of shareholders' equity
         until realized.  Realized gains and losses on the sale of
         investment securities are reported in the consolidated statement of
         operations and are determined using the adjusted cost of the
         specific security sold.

      LOANS - Loans are stated at the principal amount outstanding, net of any
      deferred loan fees. Interest income on commercial and mortgage loans is
      recorded on the outstanding balance method, using actual interest rates
      applied to daily principal balances. Accrual of interest income on loans
      will cease when collectibility of interest and/or principal is uncertain.
      If it is determined that the collection of interest previously accrued is
      uncertain, the accrued interest is reversed and charged to current
      earnings; thereafter, income is recognized as payments are received.

      ALLOWANCE FOR LOAN LOSSES - An allowance for loan losses is maintained at
      a level that management considers adequate to provide for estimated losses
      based upon an evaluation of known and inherent risk in the loan portfolio.
      Allowances for loan losses are based on estimated net realizable value
      unless it is probable that loans will be foreclosed, in which case
      allowances for loan losses are based on fair value. Management's periodic
      evaluation is based upon evaluation of the portfolio, past loss
      experience, current economic conditions, and other relevant factors. While
      management uses the best information available to make such evaluations,
      future adjustments to the allowance may be necessary if economic
      conditions differ substantially from the assumptions used in making the
      evaluations.

      The Company accounts for impairment of loans in accordance with Statement
      of Financial Accounting Standards ("SFAS") No. 114, ACCOUNTING BY
      CREDITORS FOR IMPAIRMENT OF A LOAN, and No. 118, ACCOUNTING BY CREDITORS
      FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE. SFAS Nos.
      114 and 118 require that certain impaired loans are measured based on the
      present value of expected future cash flows discounted at the loan's
      effective interest rate, observable market price, or the fair value of the
      collateral if the loan is collateral dependent.

      DEFERRED ORIGINATION FEES - Nonrefundable fees and certain direct costs
      associated with originating and acquiring loans are deferred. For loans
      held for investment, the net amount of fees and costs are amortized using
      a method which approximates the interest method as a yield adjustment over
      the life of the loan. For loans held for sale, the net amount is deferred
      and recognized as part of the gain or loss on the sale of the loans.

      MORTGAGE LOANS HELD FOR SALE - The Company originates residential mortgage
      loans for portfolio investment or for sale in the secondary market with
      servicing released to provide additional funds for lending. Loans held for
      sale are carried at the lower of cost or market value, determined on a net
      aggregate basis.

      REAL ESTATE OWNED - Real estate owned consists of three properties
      acquired by foreclosure. These assets are carried at the lower of cost or
      estimated fair value less the costs to dispose. Write-downs, if any, at
      the time of foreclosure are charged against the allowance for loan loss.
      Subsequent losses in value are charged directly to operations. Costs
      relating to the development and improvement of real estate owned are
      capitalized and those relating to the holding of the properties are
      charged to expense.

                                       31

<PAGE>

      FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET - Furniture,
      equipment and leasehold improvements are stated at cost less accumulated
      depreciation and amortization. Depreciation is computed by the
      straight-line method and charged to operating expenses over the estimated
      useful lives of the related assets. Buildings are depreciated over 40
      years. The average life for furniture and equipment is 7 years. Leasehold
      improvements are amortized over the shorter of the estimated useful life
      or the term of the lease.

      INCOME TAXES - The Company accounts for income taxes in accordance with
      SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under this method, deferred
      income taxes are recognized for the tax consequences of "temporary
      differences" by applying enacted statutory tax rates applicable to future
      years to differences between the financial statement carrying amounts and
      the tax bases of existing assets and liabilities. Also, under SFAS No.
      109, the effect on deferred taxes of a change in tax rates is recognized
      in income in the period that includes the enactment date.

      EARNINGS PER SHARE - Basic net income per share is based on the weighted
      average number of common shares outstanding, while diluted net income per
      share is based on the weighted average number of common shares outstanding
      and common share equivalents that would arise from the exercise of
      dilutive securities. The average common shares outstanding have been
      retroactively restated to reflect the effect of the 10% stock dividend
      issued in 1999, the 20% stock dividend issued in 1998 and the 20% and 7.5%
      stock dividends issued in 1997. The calculation of the weighted average
      shares, after giving effect to the stock split, was as follows:


<TABLE>
<CAPTION>
                                                                          1999             1998              1997
<S>                                                                    <C>               <C>              <C>
       Average common shares outstanding                                1,724,225        1,694,498        1,656,184
       Increase in shares due to options and warrants -
         diluted basis                                                     86,358            97,765         114,732
                                                                        ---------         ---------       ----------
       Adjusted shares outstanding - diluted                            1,810,583         1,792,263       1,770,916

                                                                        ---------         ---------       ----------
                                                                        ---------         ---------       ----------
</TABLE>

      ACCOUNTING FOR STOCK OPTIONS AND WARRANTS - The Company accounts for stock
      options and warrants in accordance with SFAS No. 123, ACCOUNTING FOR
      STOCK-BASED COMPENSATION, which allows the Company to account for
      compensation expense of the options and warrants using the intrinsic value
      method as defined in Accounting Principles Bulletin ("APB") Opinion No.
      25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company is required to
      disclose the pro forma net income and earnings per share, calculated using
      the fair value method for measuring compensation as defined in SFAS No.
      123 at the grant date of options and warrants. The Company has not
      recognized any compensation expense under the intrinsic value method.

      COMPREHENSIVE INCOME - In June 1998, the FASB issued SFAS No. 130,
      REPORTING COMPREHENSIVE INCOME, which requires an entity to present, as a
      component of comprehensive income, the amounts from transactions and other
      events which currently are excluded from the statement of income and are
      recorded directly to shareholders' equity.

      ACCOUNTING PRINCIPLES ISSUED AND NOT YET ADOPTED - In June 1998, SFAS No.
      133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was
      issued. This statement requires an entity to recognize all derivatives as
      either assets or liabilities in the statement of financial position and
      measure those instruments at fair value. The accounting for changes in the
      fair value of a derivative depends on the intended use of the derivative
      and the resulting designation. This statement, as amended by SFAS No. 137,
      ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF
      THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, is effective for all fiscal
      quarters of fiscal years beginning after June 15,

                                       32

<PAGE>

      2000, and should not be applied retroactively to financial statements of
      prior periods. The impact of this statement will depend on the extent of
      derivatives and embedded derivatives at the date this statement is
      adopted.

      RECLASSIFICATIONS - Certain items in the 1997 and 1998 consolidated
      financial statements have been reclassified to conform with the
      presentation in the 1999 consolidated financial statements.

3.    INVESTMENT SECURITIES

      A summary of investment securities and their expected maturities, as well
      as estimated fair values at December 31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                   Gross          Gross
                                                   Amortized     Unrealized     Unrealized        Fair
                                                     Cost          Gains          Losses          Value
<S>                                                <C>           <C>            <C>             <C>
Securities to be held to maturity:
  December 31, 1999:
    Debt securities:
      U.S. Government and Federal Agencies        $ 2,000,000                                 $ 2,000,000
      Municipal and State Government bonds            570,106       $ 248         $ (2,497)       567,857
                                                  ------------     -------        ---------   -----------
Total                                             $ 2,570,106       $ 248         $ (2,497)   $ 2,567,857
                                                  ------------     -------        ---------   -----------
Securities available for sale:
  December 31, 1999:
    Debt securities - U.S. Government
      and Federal Agencies                       $ 17,055,709       $             $(305,962)  $16,749,747
                                                  ------------     -------        ---------   -----------
Total                                            $ 17,055,709       $             $(305,962)  $16,749,747
                                                  ------------     -------        ---------   -----------
Securities to be held to maturity:
  December 31, 1998:
    Debt securities:
      U.S. Government and Federal Agencies         $  500,000     $ 7,031         $           $  507,031
      Municipal and State Government bonds          1,102,493       4,073                      1,106,566
                                                  ------------     -------        ---------   -----------
Total                                             $ 1,602,493    $ 11,104         $           $1,613,597
                                                  ------------     -------        ---------   -----------
Securities available for sale:
  December 31, 1998:
    Debt securities - U.S. Government
      and Federal Agencies                        $ 1,000,046     $ 9,954         $           $1,010,000
                                                  ------------     -------        ---------   -----------
Total                                             $ 1,000,046     $ 9,954         $           $1,010,000
                                                  ------------     -------        ---------   -----------
                                                  ------------     -------        ---------   -----------

</TABLE>

                                       33

<PAGE>

      The scheduled maturities of debt securities to be held to maturity and
      debt securities available for sale at December 31, 1999 were as follows:


<TABLE>
<CAPTION>
                                         Securities to be                          Securities
                                         Held to Maturity                      Available for Sale
                                 ------------------------------------  ----------------------------------------
                                      Amortized          Fair               Amortized             Fair
                                        Cost             Value                Cost                Value
<S>                               <C>               <C>                 <C>                 <C>
Due from 1 to 5 years               $  400,000        $  400,248           $12,055,709        $11,830,997
Due from 5 to 10 years               2,170,106         2,167,609             5,000,000          4,918,750
                                    ----------        ----------           -----------        ------------
Total                               $2,570,106        $2,567,857           $17,055,709        $16,749,747
                                    ----------        ----------           -----------        ------------
                                    ----------        ----------           -----------        ------------
</TABLE>




      There were no sales of investment securities in 1999 or 1998. Gross
      proceeds from the sale of investment securities available for sale in 1997
      totaled $998,750, resulting in a gross gain of $575.

4.    LOANS AND ALLOWANCE FOR LOAN LOSSES

      Loans outstanding are summarized as follows:


<TABLE>
<CAPTION>
                                                           1999                 1998
<S>                                                      <C>               <C>
Real estate mortgage loans                               $ 24,652,775      $ 33,743,039
Commercial loans                                           89,988,247        72,425,657
Consumer loans                                              9,592,584         9,235,390
                                                        -------------     -------------
  Total                                                   124,233,606       115,404,086
Less:
  Allowance for loan losses                                (1,262,256)       (1,111,817)
  Deferred origination fees, net                             (335,970)         (472,954)
                                                        -------------     -------------
                                                        $ 122,635,380      $113,819,315
                                                        -------------     -------------
                                                        -------------     -------------
</TABLE>



      The Bank grants loans to customers in its local market area which consists
      primarily of Montgomery County, Pennsylvania. The ultimate repayment of
      these loans is dependent to a certain degree on the local economy and real
      estate market.

      At December 31, 1999, commercial loans have maturities ranging from six
      months to five years. Further, these loans are granted at both fixed and
      adjustable rates. Fixed rates range from 7.10% to 10.07% with adjustable
      rates ranging from the Bank's prime rate to 2% in excess of prime.

                                       34

<PAGE>

      The composition of fixed and adjustable rate loans as of December 31, 1999
      was as follows:

<TABLE>
<CAPTION>
                     Fixed Rate                                                Adjustable Rate
------------------------------------------------------       ----------------------------------------------------
<S>                                 <C>                     <C>                                <C>
                                                             Term to Rate
Term to Maturity                      Book Value             Adjustment                           Book Value

1 month - 1 year                     $17,736,816             Less than 1 month                   $44,468,094
1 year - 3 years                      21,734,604             1 month to 1 year                     2,687,000
3 years - 5 years                     22,440,874             1 year - 3 years
5 years - 30 years                    14,317,218             3 years - 30 years                      849,000
                                     -----------                                                 ------------
                                     $76,229,512                                                 $48,004,094
                                     -----------                                                 ------------
                                     -----------                                                 ------------
</TABLE>

      An analysis of the activity in the allowance for loan losses is as
follows:

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                              -----------------------------------------------------
                                                                   1999                 1998             1997
<S>                                                           <C>                   <C>               <C>
Balance, beginning of year                                        $ 1,111,817          $ 936,974       $ 875,438
                                                                  -----------        -----------       ---------
Provision charged to operations                                       470,000            440,000         360,000
                                                                  -----------        -----------       ---------
Loans charged off:
  Commercial loans                                                   (216,480)          (214,952)       (295,581)
  Consumer loans                                                     (104,880)           (61,675)         (4,283)
                                                                  -----------        -----------       ---------
                                                                     (321,360)          (276,627)       (299,864)
                                                                  -----------        -----------       ---------
Recoveries - commercial loans and installments                          1,799             11,470           1,400
                                                                  -----------        -----------       ---------
Balance, end of year                                              $ 1,262,256        $ 1,111,817       $ 936,974
                                                                  -----------        -----------       ---------
                                                                  -----------        -----------       ---------
</TABLE>

      The provision for loan losses charged to expense is based upon past loan
      and loss experience and an evaluation of losses in the current loan
      portfolio, including the evaluation of impaired loans under SFAS Nos. 114
      and 118. A loan is considered to be impaired when, based upon current
      information and events, it is probable that the Bank will be unable to
      collect all amounts due according to the contractual terms of the loan. An
      insignificant delay or insignificant shortfall in amount of payments does
      not necessarily result in the loan being identified as impaired. For this
      purpose, delays less than 90 days are considered to be insignificant. As
      of December 31, 1999 and 1998, 100% of the impaired loan balance was
      measured for impairment based on the fair value of the loans' collateral.
      Impairment losses are included in the provision for loan losses. SFAS Nos.
      114 and 118 do not apply to large groups of smaller balance homogeneous
      loans that are collectively evaluated for impairment, except for those
      loans restructured under a troubled debt restructuring. Loans collectively
      evaluated for impairment include consumer loans and residential real
      estate loans, and are not included in the data that follows:

                                       35


<PAGE>

      The following table summarizes impaired loan information.

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                  --------------------------------
                                                                                        1999              1998
      <S>                                                                         <C>                  <C>
      Impaired loans with related reserve for loan losses
        calculated under SFAS No. 114                                                $ 2,138,635       $ 2,142,265
      Impaired loans with no related reserve for loan losses
        calculated under SFAS No. 114                                                         --                --
                                                                                    ------------       -----------
      Total                                                                          $ 2,138,635       $ 2,142,265
                                                                                    ------------       -----------
                                                                                    ------------       -----------
</TABLE>


<TABLE>
                                                                                              Year Ended
                                                                                             December 31,
                                                                                  --------------------------------
                                                                                        1999              1998
      <S>                                                                         <C>                   <C>
      Average impaired loans                                                         $ 2,140,450       $ 1,842,643
      Interest income recognized on impaired loans                                       233,646            78,724
      Cash basis interest income recognized on impaired loans                             19,319            46,353

</TABLE>

      At December 31, 1999, all of the Bank's nonaccrual loans were considered
      to be impaired loans.

      Interest payments on impaired loans are typically applied to principal
      unless collectibility of the principal amount is fully assured, in which
      case interest is recognized on the cash basis.

      Commercial loans and commercial real estate loans are placed on nonaccrual
      at the time the loan is 90 days delinquent unless the credit is well
      secured and in the process of collection. Generally, commercial loans are
      charged off no later than 120 days delinquent unless the loan is well
      secured and in the process of collection, or other extenuating
      circumstances support collection. Residential real estate loans are
      typically placed on nonaccrual at the time the loan is 90 days delinquent.
      Other consumer loans are typically charged off at 90 days delinquent. In
      all cases, loans must be placed on nonaccrual or charged off at an earlier
      date if collection of principal or interest is considered doubtful.

      The principal amount of nonaccrual loans at December 31, 1999 and 1998
      totaled $1,564,493 and $1,088,946, respectively. Additional interest
      income that would have been recorded in 1999 and 1998 under the original
      terms of nonaccrual loans totaled approximately $151,000 and $92,000,
      respectively.

      Accruing loans which are contractually past due 90 days or more totaled
      $1,196,854 and $2,321,101 at December 31, 1999 and 1998, respectively.
      Interest due on these loans totaled $117,362 and $221,608 at December 31,
      1999 and 1998, respectively.

                                       36

<PAGE>

5.    FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

      A summary of furniture, equipment and leasehold improvements is as
      follows:

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                --------------------------------------
                                                                      1999              1998
      <S>                                                         <C>                <C>
      Building and land                                            $  681,436        $  678,236
      Furniture and equipment                                       1,791,173         1,515,903
      Leasehold improvements                                          485,531           368,022
                                                                   -----------       ----------
        Total                                                       2,958,140         2,562,161
      Accumulated depreciation and amortization                    (1,296,326)         (978,688)
                                                                   -----------       ----------
                                                                   $1,661,814        $1,583,473
                                                                   -----------       ----------
                                                                   -----------       ----------
</TABLE>

6.    DEPOSITS

      Interest-bearing deposits have stated rates ranging from 2.02% to 6.08%
      with a weighted average cost on all deposits of 4.41% at December 31, 1999
      and from 2.05% to 5.68% with a weighted average cost on all deposits of
      4.74% at December 31, 1998.

      Time deposit accounts outstanding at December 31, 1999 and 1998 mature as
      follows:

<TABLE>
<CAPTION>
                                                           1999               1998
      <S>                                                <C>                <C>
      Three months or less                               $21,047,542        $24,816,936
      Four to twelve months                               32,167,264         35,803,925
      Over twelve months                                  20,523,509          8,567,181
                                                         -----------        -----------
                                                         $73,738,315        $69,188,042
                                                         -----------        -----------
                                                         -----------        -----------

</TABLE>

      The aggregate amount of certificates of deposit in denominations of
      $100,000 or more at December 31, 1999 and 1998 was $33,239,808 and
      $31,052,033, respectively. Interest expense attributable to certificates
      of deposit in denominations of $100,000 or more for the years ended
      December 31, 1999, 1998 and 1997 amounted to $1,532,485, $1,593,915 and
      $1,355,577, respectively. These certificates and their remaining
      maturities are as follows:

<TABLE>
<CAPTION>
                                                 1999
       <S>                                    <C>
       Three months or less                   $14,860,726
       Four to twelve months                   13,145,156
       Over 12 months                           5,233,926
                                             ------------
                                              $33,239,808
                                             ------------
                                             ------------
</TABLE>


                                       37

<PAGE>


7.       OTHER BORROWED MONEY

      Other borrowed money at December 31, 1999 consisted of FHLB advances as
      follows:

<TABLE>
<CAPTION>
                                           Investment
       Date                                   Rate
       <S>                                  <C>                  <C>
       January 2000                           5.80%              $ 5,000,000
       February 2000                          5.75%                1,000,000
       May 2000                               5.84%                1,000,000
       August 2000                            5.96%                2,000,000
                                                                 ------------
                                                                 $ 9,000,000
                                                                 ------------
                                                                 ------------
</TABLE>

      The advances are collateralized by FHLB stock and substantially all first
      mortgage loans.

8.    GUARANTEED PREFERRED BENEFICIAL INTEREST IN SUBORDINATED DEBT

      On June 26, 1998, Madison Capital Trust I (the "Trust"), a statutory
      business trust created under Delaware law that is a subsidiary of the
      Company, issued $5,000,000, 9.00% Capital Securities ("Capital
      Securities") with a stated value and liquidation preference of $1,000 per
      share. The Trust's obligations under the Capital Securities issued are
      fully and unconditionally guaranteed by the Company. The proceeds from the
      sale of the Capital Securities of the Trust were utilized by the Trust to
      invest in $5,000,000, 9.00% Junior Subordinated Debentures (the
      "Debentures") of the Company. The Debentures are unsecured and rank
      subordinate and junior in right of payment to all indebtedness,
      liabilities and obligations of the Company. The Debentures represent the
      sole assets of the Trust. Interest on the Capital Securities is cumulative
      and payable semi-annually in arrears. The Company has the right to
      optionally redeem the Debentures prior to the maturity date of June 30,
      2028, on or after June 30, 2003, at 100% of the stated liquidation amount,
      plus accrued and unpaid distributions, if any, to the redemption date.
      Under the occurrence of certain events, the Company may redeem in whole,
      but not in part, the Debentures prior to June 30, 2003. Proceeds from any
      redemption of the Debentures would cause a mandatory redemption of the
      Capital Securities having an aggregate liquidation amount equal to the
      principal amount of the Debentures redeemed.

      The Trust is a wholly owned subsidiary of the Company, has no independent
      operations and issued securities that contained the full and unconditional
      guarantee of its parent, the Company.

                                       38


<PAGE>


9.    INCOME TAXES

      The Bank's provision for income taxes differs from the amounts determined
      by applying the statutory federal income tax rate to income before income
      taxes for the following reasons:

<TABLE>
<CAPTION>
                                                                  December 31,
                                   --------------------------------------------------------------------------------
                                       1999                         1998                      1997
                                      Amount      Percentage       Amount      Percentage    Amount      Percentage
<S>                                  <C>          <C>             <C>          <C>           <C>         <C>
Tax at federal tax rate                $516,096      35.0%         $270,731       35.0%      $410,652       35.0%

Increase (decrease) resulting from:
  Benefit of surtax exemptions          (14,746)     (1.0)           (7,735)      (1.0)       (11,733)       (1.0)
  Meals and entertainment
    disallowed                           54,947       3.7            36,512        4.7         30,051         2.6
  Tax exempt income                     (12,020)     (0.8)          (18,653)      (2.4)       (18,355)       (1.6)
  Other                                   4,509       0.3            46,300        6.0          6,198         0.5
                                       --------      -----         --------       -----      --------        -----
                                       $548,786      37.2%         $327,155       42.3%      $416,813        35.5%
                                       --------      -----         --------       -----      --------        -----
                                       --------      -----         --------       -----      --------        -----
</TABLE>


      Items that give rise to significant portions of the Company's deferred tax
      asset, calculated at 35%, are as follows:

<TABLE>
<CAPTION>
                                                                      December 31,
                                                             --------------------------------
                                                                  1999            1998
<S>                                                          <C>              <C>
      Deferred tax assets:
        Allowance for loan losses                               $298,063        $242,381
        Deferred fees                                              4,710           7,133
        Other                                                     36,071          68,343
        Unrealized loss on securities available for sale          68,658           2,234
                                                               ---------       ----------
      Net deferred tax asset                                    $407,502        $320,091
                                                               ---------       ----------
                                                               ---------       ----------
</TABLE>


      The deferred tax asset is included in other assets on the consolidated
      statements of financial condition.

      The provision for income taxes for the years ended December 31, 1999, 1998
      and 1997 includes the following:

<TABLE>
<CAPTION>
                                    1999            1998            1997
       <S>                      <C>             <C>             <C>
       Current taxes              $569,773        $419,400       $ 481,821
       Deferred taxes              (20,987)        (92,245)        (65,008)
                                  --------        --------       ---------
       Total                      $548,786        $327,155       $ 416,813
                                  --------        --------       ---------
                                  --------        --------       ---------
</TABLE>

                                       39

<PAGE>

10.   COMMITMENTS

      LETTERS OF CREDIT AND COMMITMENTS TO LEND - In the normal course of
      business, the Bank had commitments to advance funds under outstanding
      letters of credit of $910,932 and $911,954 and unadvanced loan commitments
      of $17,985,739 and $13,074,237 at December 31, 1999 and 1998,
      respectively. The unadvanced loan commitments at December 31, 1999 and
      1998 were primarily at variable rates. In addition, the Bank had
      commitments to sell fixed rate residential mortgages of $5,418,972 and
      $11,593,638 at December 31, 1999 and 1998, respectively. Commitments are
      issued in accordance with the same loan policies and underwriting
      standards as settled loans and represent credit risk should the borrowers
      fail to repay the amounts extended.

      LEASING ARRANGEMENTS - The Company leases branch offices and certain
      equipment under noncancelable agreements requiring various minimum annual
      rentals. In addition to the minimum rents, the Company pays its pro rata
      share of the building's operating costs. Total operating lease expense for
      1999, 1998 and 1997 was $629,652, $541,901, and $456,489, respectively.

      Future minimum lease payments under noncancelable leases are as follows:

<TABLE>
<CAPTION>
                                                            Year Ending
                                                           December 31,
                                                               1999
      <S>                                                  <C>
       2000                                                    $ 785,549
       2001                                                      827,806
       2002                                                      522,128
       2003                                                      522,731
       2004                                                      585,872
       Thereafter                                               1,586,091
                                                              -----------
       Total                                                  $ 4,830,177
                                                              -----------
                                                              -----------
</TABLE>

11.   STOCK OPTION PLANS

      In 1989, the Company's shareholders adopted a Stock Incentive Plan (the
      "1989 Plan") providing for the issuance of qualified and non-qualified
      stock options to the officers and key executives of the Company. The price
      at which such options were issued was determined by a special committee.
      The exercise price of options under the 1989 Plan has been equal to the
      fair market value of the Company's common stock at the date of grant. All
      options expire ten years after issuance.

      In 1996, the Board of Directors approved the adjustment of the exercise
      price to reflect stock dividends issued.

      In 1997, the Company's shareholders adopted the 1997 Stock Option Plan
      (the "1997 Plan") providing for the issuance of qualified and
      non-qualified stock options to the officers and key executives of the
      Company. The purpose of the 1997 Plan is to promote the interests of the
      Company by providing incentives to (i) designated officers and other key
      employees of the Company and (ii) nonemployee members of the Company's
      Board of Directors, to attract and retain such persons and to encourage
      them to acquire or increase their proprietary interest in the Company and
      to maximize the Company's performance during the term of their employment
      or period of service with the Company. The 1997 Plan replaced the 1989
      Plan which was due to expire in 1999. A total of 774,633 shares of common
      stock have been reserved for issuance pursuant to the 1997 Plan including
      options which remained issuable under the 1989 Plan. The price at which
      such options may be issued is determined by a special committee.

                                       40
<PAGE>

      At December 31, 1999, a total of 517,599 options were available for grant
      under the 1997 Plan. The per share price of exercisable options at
      December 31, 1999 reflects the adjusted exercise price resulting from
      stock dividends.

      Transactions during each of the last three years, adjusted for stock
      dividends, are as follows:

<TABLE>
<CAPTION>
                                                              Exercise Price            Weighted
                                                                 Per Share           Average Exercise
                                                   Shares         Price              Price Per Share
       <S>                                         <C>         <C>                   <C>
       Exercisable, January 1, 1997                 58,097     $4.31 - $4.81            $ 4.72

       Issued                                        9,568     $6.50
                                                   -------
       Exercisable, December 31, 1997               67,665     $4.31 - $6.50            $ 4.72

       Issued                                        7,920     $9.36

       Exercised                                    (2,351)    $4.45 - $4.62
                                                   -------
       Exercisable, December 31, 1998               73,234     $3.45 - $9.36            $ 4.45

       Issued                                      183,800     $7.08
                                                   -------

       Exercisable, December 31, 1999              257,034     $3.45 - $9.36            $ 6.33
                                                   -------
                                                   -------
</TABLE>


      At December 31, 1999, the options exercisable had a weighted average
      remaining contractual life of 7.65 years.

      The Company accounts for stock-based compensation in accordance with SFAS
      No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits the use of
      the intrinsic value method described in APB Opinion No. 25, ACCOUNTING FOR
      STOCK ISSUED TO EMPLOYEES, and requires the Company to disclose the pro
      forma effects of accounting for stock-based compensation using the fair
      value method as described in the optional accounting requirements of SFAS
      No. 123. As permitted by SFAS No. 123, the Company will continue to
      account for stock-based compensation under APB Opinion No. 25, under which
      the Company has recognized no compensation expense.

      Had compensation cost for the Company's stock option plan been determined
      based on the fair value at the dates of awards under the fair value method
      of SFAS No. 123, the Company's net income and income per share would have
      been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                   1999            1998
      <S>                                 <C>                    <C>             <C>
      Net income:                         As reported            $ 925,775       $ 446,362
                                          Pro forma                157,958         412,695
      Diluted earnings per share:         As reported               $ 0.51          $ 0.27
                                          Pro forma                   0.09            0.25

</TABLE>

                                       41

<PAGE>


      Significant assumptions used to calculate the above fair value of the
      awards are as follows:

<TABLE>
<CAPTION>
                                                     1999                   1998
       <S>                                       <C>                     <C>
       Risk free interest rate of return             6.00 %                  6.00 %
       Expected option life                      120 months              120 months
       Expected dividends                              $0                     $0
       Expected volatility                          35.00 %                 35.00 %
</TABLE>

12.   WARRANTS AUTHORIZED

      In connection with the initial offering of the Company's common stock, the
      Company's directors received warrants to purchase shares of common stock.
      These offering warrants are nontransferable and expire in 2009. The
      warrants had an initial exercise price of $10 per share. As a result
      of stock dividends issued by the Company, the exercise price was
      adjusted by the Board of Directors. At December 31, 1999, warrants have an
      exercise price of $3.84 per share. As of December 31, 1999, there were
      63,007 warrants outstanding and 29,281 were exercised in 1999. Warrants
      outstanding have been adjusted to reflect stock dividends.

13.   PROFIT SHARING

      Effective March 1, 1993, the Bank adopted a 401(k) profit sharing plan to
      provide eligible employees with additional income upon their retirement.
      Participants may contribute up to 15% of their annual compensation to the
      plan subject to Internal Revenue Service limitations. The Bank contributes
      an amount equal to 50% of each participant's contribution, up to 2% of
      their compensation. Contributions made by the Bank during the years ended
      December 31, 1999, 1998 and 1997 were approximately $52,915, $41,881 and
      $20,313 respectively.

14.   SHAREHOLDERS' EQUITY

      On January 22, 1997, the Board of Directors declared a 7.5% stock dividend
      payable to all shareholders of record of the Company's common stock as of
      February 5, 1997. On October 9, 1997, the Board of Directors declared a
      20% stock dividend payable to all shareholders of record on October 7,
      1997.

      On May 19, 1998, the Board of Directors declared a 20% stock dividend
      payable to all shareholders of record on June 3, 1999.

      On August 17, 1999, the Board of Directors declared a 10% stock dividend
      payment to all shareholders of record on September 16, 1999. Per share
      computations reflect the changes in the number of shares resulting from
      these dividends.

15.   RELATED PARTY TRANSACTIONS

      Loans to directors, officers, employees, and their affiliates and/or
      business interests must be made on substantially the same terms, including
      interest rates, as those prevailing for comparable transactions and must
      not involve more than the normal risk of repayment.

                                       42

<PAGE>

      A summary of unpaid principal balances of loans outstanding to directors,
      officers, employees and their business interests is as follows:

<TABLE>
<CAPTION>
                                                      December 31,
                                           ------------------------------------
                                                  1999              1998
       <S>                                    <C>                <C>
       Beginning of period                     $7,830,641        $6,123,101
       Borrowings                               4,264,622         2,414,893
       Principal repayments                    (3,307,034)         (707,353)
                                              -----------        -----------
       End of period                           $8,788,229        $7,830,641
                                              -----------        -----------
                                              -----------        -----------
</TABLE>

      Certain directors of the Company are partners in an entity from which the
      Bank leases office space (Note 10). Rental payments for the office space
      were approximately $316,000, $284,000 and $263,000, for the years ended
      December 31, 1999, 1998 and 1997, respectively. In the opinion of
      management, all aspects of this transaction, including the lease and
      amendments thereto, have been negotiated on an arms-length basis and the
      resultant terms are no less favorable than those that could be obtained
      from third parties.

16.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following disclosure of the carrying amounts and the estimated fair
      value of financial instruments is made in accordance with the requirements
      of SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.
      The estimated fair value amounts have been determined by the Company using
      available market information and appropriate valuation methodologies.
      However, considerable judgment is necessarily required to interpret market
      data to develop the estimates of fair value. Accordingly, the estimates
      presented herein are not necessarily indicative of amounts the Company
      could realize in a current market exchange. The use of different market
      assumptions and/or estimation methodologies may have a material effect on
      the estimated fair value amounts.

<TABLE>
<CAPTION>
                                                                   1999                              1998
                                                       ------------------------------     -----------------------------
                                                                        Estimated                         Estimated
                                                          Carrying         Fair             Carrying         Fair
                                                           Amount         Value              Amount         Value
                                                              (In Thousands)                     (In Thousands)
      <S>                                                <C>           <C>                 <C>            <C>
      Assets:

        Cash and cash equivalents                        $ 3,089        $ 3,089            $15,293        $15,293
        Investment securities held to maturity             2,570          2,568              1,602          1,614
        Investment securities available for sale          16,750         16,750              1,010          1,010
        Federal Home Loan Bank stock                         750            750                527            527
        Federal Reserve Bank stock                           323            323                176            176
        Loans, net                                       122,635        121,851            113,819        113,957
        Mortgage loans held for sale                       5,419          5,419             11,594         11,594

      Liabilities:
        Deposits:
          Noninterest-bearing deposits                    20,540         20,540             23,423         23,423
          Interest-bearing deposits                       12,705         12,705             11,785         11,785
          Savings deposits                                 8,150          8,150             11,089         11,089
          Money market deposits                           15,205         15,205             17,109         17,109
          Time deposits                                   73,738         74,230             69,188         69,238
        Borrowed funds                                     9,000          9,000                  -              -
        Guaranteed preferred beneficial
          interest in subordinated debt                    5,000          5,000              5,000          5,000
</TABLE>

                                            43

<PAGE>


      CASH AND CASH EQUIVALENTS - For cash and cash equivalents, the carrying
      amount is a reasonable estimate of fair value.

      INVESTMENT SECURITIES - For investment securities, fair values are based
      on quoted market prices or dealer quotes.

      FEDERAL HOME LOAN BANK (FHLB) AND FEDERAL RESERVE BANK (FRB) STOCK -
      Although FHLB and FRB stock is an equity interest in an FHLB or FRB, it is
      carried at cost because it does not have a readily determinable fair value
      as its ownership is restricted and it lacks a market. The estimated fair
      value approximates the carrying amount.

      LOANS - The fair value was estimated based on quoted market prices and
      current rates.

      MORTGAGE LOANS HELD FOR SALE - The carrying amount is a reasonable
      estimate of fair value.

      DEPOSITS - The fair value of all deposit accounts except time deposits is
      the amount payable on demand at the reporting date. The fair value of time
      deposits is estimated using rates currently offered for deposits of
      similar remaining maturities.

      BORROWED FUNDS - The fair value of borrowed funds is the amount payable on
      demand at the reporting date.

      GUARANTEED PREFERRED BENEFICIAL INTEREST IN SUBORDINATED DEBT - The fair
      value is based on a present value estimate using rates currently offered
      for instruments of similar remaining maturity.

      COMMITMENTS TO EXTEND CREDIT AND LETTERS OF CREDIT - The majority of the
      Company's commitments to extend credit and letters of credit carry current
      market interest rates if converted to loans. Because commitments to extend
      credit and letters of credit are generally unassignable by either the
      Company or the borrower, they only have value to the Company and the
      borrower. The estimated fair value approximates the recorded deferred fee
      amounts, which are not significant.

      The fair value estimates presented herein are based on pertinent
      information available to management as of December 31, 1999 and 1998.
      Although management is not aware of any factors that would significantly
      affect the fair value amounts, such amounts have not been comprehensively
      revalued for purposes of these consolidated financial statements since
      that date and, therefore, current estimates of fair value may differ
      significantly from the amounts presented herein.

17.   REGULATORY MATTERS

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

                                      44

<PAGE>

      Quantitative measures established by regulation to ensure capital adequacy
      require the Company and the Bank to maintain minimum amounts and ratios
      (set forth in the table below) of total and Tier 1 capital (as defined in
      the regulations) to risk-weighted assets (as defined), and of Tier 1
      capital (as defined) to average assets (as defined). Management believes,
      as of December 31, 1999, that the Company and the Bank meet all capital
      adequacy requirements to which it is subject.

      The most recent notification from the Commonwealth of Pennsylvania
      Department of Banking (as of December 31, 1999) categorized the Bank as
      adequately capitalized under the regulatory framework for prompt
      corrective action. Due to the growth of assets, the capital ratios at
      December 31, 1999 do not meet the requirement to be categorized as well
      capitalized. To be categorized as adequately capitalized, the Bank must
      maintain minimum Tier 1 Capital, Total Risk-Based Capital and Leverage
      Ratios as set forth in the table.

      The Bank's actual capital amounts and ratios are presented in the table
      below:

<TABLE>
<CAPTION>

                                                                                                To be Considered
                                                                                                Well Capitalized
                                                                           Required for           Under Prompt
                                                                         Capital Adequacy       Corrective Action
                                                      Actual                 Purposes              Provisions
                                              -----------------------   --------------------  ----------------------
                                                Amount      Ratio         Amount    Ratio       Amount     Ratio
      <S>                                     <C>           <C>          <C>        <C>         <C>        <C>
      At December 31, 1999:
        Tier 1 capital (to risk-weighted
           assets)                               $ 13,687    11.92 %       $ 4,591     4.00%     $ 6,886      6.00%
        Total capital (to risk-weighted
           assets)                                 14,949    13.02           9,182     8.00       11,477     10.00
        Tier 1 capital (to average assets)         13,687     9.06           6,043     4.00        7,554      5.00

      At December 31, 1998:
        Tier 1 capital (to risk-weighted
           assets)                               $ 10,694     9.71 %       $ 4,405     4.00%     $ 6,607      6.00%
        Total capital  (to risk-weighted
           assets)                                 11,806    10.72           8,809     8.00       11,012     10.00
        Tier 1 capital (to average assets)         10,694     8.26           5,180     4.00        6,475      5.00

</TABLE>


      The Company's Tier 1 capital (to risk-weighted assets), total capital (to
      risk-weighted assets) and Tier 1 capital (to average assets) ratios were
      12.16%, 14.57% and 8.96% at December 31, 1999, and 9.71%, 10.72% and 8.26%
      at December 31, 1998, respectively.

                                      45

<PAGE>




18.   PARENT COMPANY FINANCIAL INFORMATION

      The financial statements of Madison Bancshares Group, Ltd. (Parent Only)
      as of December 31, 1999 and 1998 and for each of the three years in the
      period ended December 31, 1999 are presented herein.

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                              ----------------------------
      BALANCE SHEETS                                                             1999          1998
      <S>                                                                     <C>             <C>

      ASSETS:
        Cash                                                                   $    84,714   $    50,223
        Investment in subsidiary                                                15,016,301    14,168,134
        Other assets                                                               181,516       232,035
                                                                               ------------  ------------
      TOTAL                                                                    $15,282,531   $14,450,392
                                                                               ------------  ------------
      LIABILITIES:
        Guaranteed preferred beneficial interest in subordinated debt          $ 5,000,000   $ 5,000,000
                                                                               ------------  ------------
      SHAREHOLDERS' EQUITY:
        Common stock                                                             1,747,947     1,562,018
        Capital surplus                                                          8,745,557     7,563,433
        Accumulated (deficit) earnings                                              (9,038)      318,371
        Accumulated other comprehensive (loss) income                             (201,935)       6,570
                                                                               ------------  ------------
                  Total shareholders' equity                                    10,282,531     9,450,392
                                                                               ------------  ------------
      TOTAL                                                                    $15,282,531   $14,450,392
                                                                               ------------  ------------
                                                                               ------------  ------------
</TABLE>


<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                  ------------------------------------------
      STATEMENTS OF OPERATIONS                                           1999          1998          1997
      <S>                                                          <C>              <C>           <C>
      Interest income                                                $      725    $   25,512     $     274
      Operating expenses                                               (606,622)     (335,163)      (87,613)
                                                                    ------------   -----------    ----------
      Loss before equity in undistributed income from subsidiary       (605,897)     (309,651)      (87,339)

      Equity in undistributed income of subsidiary, Madison Bank      1,531,672       756,013       843,817
                                                                    ------------   -----------    ----------
      NET INCOME                                                     $  925,775    $  446,362     $ 756,478
                                                                    ------------   -----------    ----------
      STATEMENTS OF CASH FLOWS

      Operating Activities:

        Net income                                                   $  925,775    $  446,362     $ 756,478
        Adjustments to reconcile net income to net
          cash used in operating activities:

          Equity in undistributed income of subsidiary               (1,531,672)     (756,013)     (843,817)
          Decrease in accrued expenses and other liabilities                                        (11,494)
          Decrease (increase) in receivable from subsidiary             475,000    (4,675,000)       63,110
          Decrease (increase) in other assets                            50,519      (231,535)
                                                                    ------------   -----------    ----------
                 Net cash used in operating activities                  (80,378)   (5,216,186)      (35,723)
                                                                    ------------   -----------    ----------
      Financing Activities:

        Proceeds from issuance of debentures                                        5,000,000
        Exercise of stock options                                                       8,998
        Exercise of stock warrants                                      114,869       250,845
                                                                    ------------   -----------
                 Net cash provided by financing activities              114,869     5,259,843
                                                                    ------------   -----------
      NET INCREASE (DECREASE) IN CASH                                    34,491        43,657       (35,723)

      CASH, BEGINNING OF YEAR                                            50,223         6,566        42,289
                                                                    ------------   -----------    ----------
      CASH, END OF YEAR                                                $ 84,714      $ 50,223       $ 6,566
                                                                    ------------   -----------    ----------
</TABLE>

                                            46

<PAGE>

19.   QUARTERLY DATA (UNAUDITED)

      The unaudited quarterly results of operations for 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                     Year Ended December 31, 1999
                                                  --------------------------------------------------------------------
                                                     March 31       June 30    September 30  December 31      Total
      <S>                                           <C>           <C>          <C>           <C>          <C>
      Interest income                                $3,080,806   $3,180,462   $3,312,414    $3,586,059   $13,159,741
      Interest expense                                1,271,589    1,317,847    1,334,117     1,478,227     5,401,780
                                                     ----------    ---------   ---------     ----------   -----------
      Net interest income                             1,809,217    1,862,615    1,978,297     2,107,832     7,757,961
      Provision for loan losses                         120,000      145,000       95,000       110,000       470,000
                                                     ----------    ---------   ---------     ----------   -----------
        Net                                           1,689,217    1,717,615    1,883,297     1,997,832     7,287,961

      Other noninterest income                          816,958      920,636      766,937       778,865     3,283,396
      Other noninterest expenses                      2,230,527    2,265,750    2,253,754     2,346,765     9,096,796
                                                     ----------    ---------   ---------     ----------   -----------
      Net income before income taxes                    275,648      372,501      396,480       429,932     1,474,561

      Provision for income taxes                        128,900      155,541      116,259       148,086       548,786
                                                     ----------    ---------   ---------     ----------   -----------
      Net income                                      $ 146,748    $ 216,960    $ 280,221     $ 281,846     $ 925,775
                                                     ----------    ---------   ---------     ----------   -----------
                                                     ----------    ---------   ---------     ----------   -----------
      Per share data - Diluted earnings per share        $ 0.09       $ 0.13       $ 0.16        $ 0.13        $ 0.51
                                                     ----------    ---------   ---------     ----------   -----------
                                                     ----------    ---------   ---------     ----------   -----------

</TABLE>


<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 1998
                                                    --------------------------------------------------------------------
                                                       March 31    June 30    September 30   December 31     Total
      <S>                                           <C>            <C>         <C>            <C>          <C>
      Interest income                                 $2,633,727   $2,596,151   $2,864,574    $3,000,904   $ 11,095,356
      Interest expense                                 1,218,746    1,185,654    1,242,921     1,325,815      4,973,136
                                                      ----------   ----------   ----------    ----------     ----------
      Net interest income                              1,414,981    1,410,497    1,621,653     1,675,089      6,122,220
      Provision for loan losses                          120,000      110,000       90,000       120,000        440,000
                                                      ----------   ----------   ----------    ----------     ----------
        Net                                            1,294,981    1,300,497    1,531,653     1,555,089      5,682,220

      Other noninterest income                           231,404      213,589      380,098       665,582      1,490,673
      Other noninterest expenses                       1,266,111    1,500,397    1,675,283     1,957,585      6,399,376
                                                      ----------   ----------   ----------    ----------     ----------
      Net income before income taxes                     260,274       13,689      236,468       263,086        773,517

      Provision for income taxes                          72,244       26,000       75,302       153,609        327,155
                                                      ----------   ----------   ----------    ----------     ----------
      Net income                                       $ 188,030    $ (12,311)   $ 161,166     $ 109,477      $ 446,362
                                                      ----------   ----------   ----------    ----------     ----------
                                                      ----------   ----------   ----------    ----------     ----------
      Per share data - Diluted earnings per share        $ 0.12       $ (0.01)     $ 0.09        $ 0.05         $ 0.25
                                                      ----------   ----------   ----------    ----------     ----------
                                                      ----------   ----------   ----------    ----------     ----------
</TABLE>

      Notes:   Per share data has been retroactively restated to reflect the
               effect of stock dividends. Net income per common share is
               computed independently for each period presented. Consequently,
               the sum of the quarters may not equal the total net income per
               common stock.

                                   ******

                                      47

<PAGE>



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

                Not Applicable.

                                           PART III

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

                    The information required by the Item is incorporated by
                reference from the definitive proxy materials of the Company to
                be filed with the Commission in connection with the Company's
                2000 annual meeting of shareholders.

ITEM 10       - EXECUTIVE COMPENSATION

                    The information required by the Item is incorporated by
                reference from the definitive proxy materials of the Company to
                be filed with the Commission in connection with the Company's
                2000 annual meeting of the shareholders.

ITEM 11       - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                   The information required by the Item is incorporated by
                reference from the definitive proxy materials of the Company to
                be filed with the Commission in connection with the Company's
                2000 annual meeting of the shareholders.

ITEM 12       - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                    The information required by the Item is incorporated by
                reference from the definitive proxy materials of the Company to
                be filed with the Commission in connection with the Company's
                2000 annual meeting of the shareholders.

ITEM 13       - EXHIBITS AND REPORTS ON FORM 8-K

                (a) Exhibits:

                The following Exhibits are filed as part of this report.
                (Exhibit numbers correspond to the exhibits required by Item
                601 of Regulation S-B for an Annual Report on Form 10-KSB)

                                      48


<PAGE>


<TABLE>
<CAPTION>
                                                                              PAGE NUMBER IN
EXHIBIT                                                                         SEQUENTIAL
NUMBER                       DESCRIPTION                                     NUMBERING SYSTEM
<S>        <C>                                                               <C>
3(a)     Amended and Restated Articles of Incorporation of the Company*              N/A

3(b)     Amended and Restated Bylaws of the Company**                                N/A

4(c)     Form of Warrant of the Company***                                           N/A

10(a)    Lease Agreement, dated February 20, 1989, by and between Madison
         Bancshares Group, Ltd. and Blue Bell Office Campus Associates****           N/A

10(b)    Madison Bancshares Group, Ltd.  1997 Stock Option Plan*****                 N/A

10(c)    Amended and Restated Declaration of Trust of Madison Capital
         Trust I dated July 13, 1998.******                                          N/A

10(d)    Indenture between Madison Bancshares Group, LTD. and Christiana
         Bank and Trust Company, as Trustee, dated July 13, 1998.******              N/A

10(e)    Capital Securities Guarantee between Madison Bancshares Group,
         Ltd. and Christiana Bank and Trust Company, as Trustee, dated
         July 13, 1998.******                                                        N/A

21       Subsidiaries of the Registrant

27       Financial Data Schedule
</TABLE>

----------------------------
*         Incorporated by reference from Exhibit No. 3 to the Registration
          Statement on Form S-1 of the Company, as amended, Registration
          No. 33-22492.

**        Incorporated by reference from Exhibit No. 3 to the Registration
          Statement on Form S-1 of the Company, as amended, Registration
          No. 33-22492.

***       Incorporated by reference from Exhibit No. 4 to the Registration
          Statement on Form S-1 of the Company, as amended, Registration
          No. 33-22492.

****      Incorporated by reference from Exhibit No. 10(d) to the Registration
          Statement on Form S-1 of the Company, as amended, Registration
          No. 33-22492.

*****     Incorporated by reference from Exhibit A to the Company's 1997
          Definitive Proxy Statement, dated April 18, 1997. All other schedules
          and exhibits are omitted because they are not applicable or the
          required information is set out in the financial statements or the
          notes thereto.

******    Incorporated by reference from Exhibit No. 10 to the Company's
          Quarterly Report on Form 10-QSB for the Quarterly Period Ended
          September 30, 1998.

                (b) Reports on Form 8-K

                         None.


                                      49


<PAGE>


                                   SIGNATURES

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

                                                 MADISON BANCSHARES GROUP, LTD.

                                                 By: /s/ Peter DePaul
                                                     --------------------
                                                     Peter DePaul,
                                                     Chairman of the Board

                                                 By: /s/  Vito A. DeLisi
                                                     --------------------
                                                     Vito A. DeLisi,
                                                     President

                                                 By: /s/ E. Cheryl Hinkle
                                                     --------------------
                                                     E. CHERYL Hinkle
                                                     Assistant Secretary and
                                                     Treasurer
                                                     (Principal Accounting and
                                                     Financial Officer)

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

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the date indicated.

March 21, 2000                                    /S/ Vito A. DeLisi
                                                      --------------------
                                                      Vito A. DeLisi,
                                                      President and Director

March 21, 2000                                    /s/ Peter DePaul
                                                      --------------------
                                                      Peter DePaul
                                                      Chairman of the Board

MARCH 21, 2000                                    /s/ Philip E. Hughes, Jr.
                                                      ---------------------
                                                      Philip E. Hughes, Jr.
                                                      Director and Vice
                                                      Chairman of the Board

MARCH 21, 2000                                    /s/ Frank R. Iacobucci
                                                      ---------------------
                                                      Frank R. Iacobucci,
                                                      Director

MARCH 21, 2000                                    /s/ Arnold M. Katz
                                                      ---------------------
                                                      Arnold M. Katz,
                                                      Director

MARCH 21, 2000                                    /s/ Lorraine C. King
                                                      ---------------------
                                                      Lorraine C. King,
                                                      Director


                                      50

<PAGE>


March 21, 2000                                    /S/ Kathleen A. Kucer
                                                      --------------------
                                                      Kathleen A. Kucer,
                                                      Director

March 21, 2000                                    /S/ Michael O'Donoghue
                                                      --------------------
                                                      Michael O'Donoghue,
                                                      Director

March 21, 2000                                    /S/ Salvatore Paone
                                                      --------------------
                                                      Salvatore Paone,
                                                      Director

March 21, 2000                                    /S/ Donald J. Reape
                                                      --------------------
                                                      Donald J. Reape,
                                                      Director

March 21, 2000                                    /S/ Blaine W. Scott
                                                      --------------------
                                                      Blaine W. Scott,
                                                      Director

                                      51