------------------------------------------
                   [GRAPHIC OMITTED]                SVB
                                                 FINANCIAL
                                               SERVICES, INC.
                   ------------------------------------------
<PAGE>

                   ------------------------------------------
                   [GRAPHIC OMITTED]                SVB
                                                 FINANCIAL
                                               SERVICES, INC.
                   ------------------------------------------


                               Table of Contents

          2: SELECTED CONSOLIDATED FINANCIAL INFORMATION

          3: LETTER TO THE SHAREHOLDERS

          4: CONSOLIDATED BALANCE SHEETS

          5: CONSOLIDATED STATEMENTS OF INCOME

          6: CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

          7: CONSOLIDATED STATEMENTS OF CASH FLOWS

          8: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         21: REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

         22: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS
<PAGE>

SVB FINANCIAL SERVICES, INC.
Selected Consolidated Financial Information

<TABLE>
<CAPTION>
                                                                    As of or For the Years Ended
================================================================================================================
(in thousands except per share data)                  2002         2001         2000         1999         1998
================================================================================================================
<S>                                               <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:
Interest Income                                   $ 20,848     $ 19,867     $ 17,945     $ 14,412     $ 12,466
Interest Expense                                     7,471        9,030        7,972        6,093        5,665
----------------------------------------------------------------------------------------------------------------
Net Interest Income                                 13,377       10,837        9,973        8,319        6,801
Provision for Loan Losses                              455          365          375          440          300
----------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for
  Loan Losses                                       12,922       10,472        9,598        7,879        6,501
Non-Interest Income                                  1,732        1,329          991          787          770
Non-Interest Expense                                10,764        9,009        8,182        6,496        5,302
----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                           3,890        2,792        2,407        2,170        1,969
Income Tax Expense                                   1,435        1,048          900          815          766
----------------------------------------------------------------------------------------------------------------
Net Income                                        $  2,455     $  1,744     $  1,507     $  1,355     $  1,203
================================================================================================================
BALANCE SHEET DATA:
Total Assets                                      $404,984     $328,305     $241,630     $206,107     $185,227
Federal Funds Sold and Other
  Short Term Investments                            28,071       15,104           78        2,400       11,290
Interest Bearing Time Deposits                      13,839        9,670        8,075        5,283        4,090
Securities Available for Sale                       46,569       29,052       33,303       27,216       21,523
Securities Held to Maturity                         56,209       41,509        6,337        5,122       15,052
Loans, Net                                         235,399      207,280      177,251      151,425      120,176
Deposits                                           364,422      297,474      222,384      189,562      169,714
Other Borrowings                                     9,214        5,747          325           --           --
Guaranteed Preferred Beneficial Interest
  in the Corporation Subordinated Debentures         6,500        4,000           --           --           --
Shareholders' Equity                                23,178       19,628       17,366       15,364       14,365
================================================================================================================
PERFORMANCE RATIOS:
Return on Average Assets                               .65%         .61%         .67%         .69%         .75%
Return on Average Equity                             11.46%        9.49%        9.43%        9.19%        8.82%
Net Interest Margin                                   3.81%        4.02%        4.73%        4.53%        4.46%
================================================================================================================
ASSET QUALITY:
Loans Past Due Over 90 Days                       $     --     $     --     $     --     $     --     $      5
Non-Accrual Loans                                      658          510          482          692           96
Net Charge Offs                                        159           77          102          101           71
Allowance for Loan Losses to Total Loans              1.01%        1.01%        1.02%        1.01%        1.00%
================================================================================================================
PER SHARE DATA (1):
Earnings Per Share - Basic                        $    .68     $    .50     $    .45     $    .40     $    .36
Earnings Per Share - Diluted                           .67          .49          .43          .39          .34
Book Value                                            6.35         5.64         5.07         4.50         4.27
================================================================================================================
CAPITAL RATIOS:
Total Risked-Based Capital                           11.09%       10.39%        9.68%       10.17%       11.14%
Tier I Risked-Based Capital                          10.22%        9.50%        8.71%        9.21%       10.24%
Leverage Capital                                      7.53%        7.86%        7.31%        7.56%        8.54%
================================================================================================================
</TABLE>

(1) All data has been retroactively restated for stock splits and stock
dividends.


                                       2
<PAGE>

[PHOTO OMITTED]     /s/ John K. Kitchen
                    John K. Kitchen
                    CHAIRMAN OF THE BOARD

Dear Shareholders:

     A new era of uncertainties caused by threats against our homeland, a
possibility of our country at war, and a sluggish economy not quite able to
manage a sustainable recovery, has forced our nation's businesses to become more
agile in their response to these challenges. In meeting these challenges, SVB
Financial Services, Inc., through its subsidiary, Somerset Valley Bank has
continued to grow, improve its profitability, and flourish by focusing on
products and services that have been well received and sought after by its
customer base in a very healthy market area.

     Although our Net Interest Margin contracted slightly from 4.02% in 2001 to
3.81% in 2002 due to further Federal Reserve rate cuts, increased loan volume,
fee income, and gains on sales of loans and securities led to an increase of our
net income to $2,455,000 or 41% over 2001. This represents the highest earnings
reported in the Company's history and validates the course we have followed
relative to aggressive but orderly expansion and our focus on cost containment
and investment in technology.

     Our entrance into markets contiguous to our roots in Somerset County has
regionalized our presence and our recent branch openings in Bernards Township,
Aberdeen, Edison, and Warren Township have helped the Bank reach record deposit
and asset levels. Deposits grew from $297,474,000 in 2001 to $364,422,000 in
2002 or an increase of 23%. Total assets reached another milestone breaking
$400,000,000 and ending the year at $404,984,000, a 23% increase over
$328,305,000 reported for 2001. To augment this exceptional growth in 2002, we
have received regulatory approval to open our eleventh banking office on
Middlesex Avenue in the Borough of Metuchen and are negotiating for additional
sites in late 2003 and early 2004. Both sites will be outside of Somerset County
further increasing our penetration into additional markets.

     Loans continue to drive the growth and profitability of the bank and 2002
produced another double-digit growth rate with net loans reaching $235,399,000,
up from $207,280,000 in 2001 or an increase of 14%. Asset Quality remained
exceptionally strong with no loan past due over 90 days and loans in a
non-accrual status totaled $658,000 or .28% of total loans.

     To hedge against a potential out flow of deposits when the stock market
improves, the Company has embarked on a program of offering non-traditional bank
products as allowed by The Gramm-Leach-Bliley Act. We have undertaken the task
of retraining customer service representatives to be more skilled in
cross-selling bank products and licensed to sell fixed annuities and various
insurance products. We also have entered into a strategic alliance with Linsco
Private Ledger to enable the Banks through a dual employee arrangement to obtain
commissions for the sale of variable annuities, mutual funds, and other
investment products. Although this is a relatively new arrangement, we have had
significant activity and positive acceptance by both our customers and our
staff.

     This year has provided very positive results for our shareholder value with
the stock closing at $16.20 per share, an increase of 70% over December 31, 2001
when the stock closed at $9.53 per share as adjusted for the stock dividend. A
fourth consecutive 5% stock dividend was distributed to our shareholders on
November 29, 2002. We are confident that our strategic plan for taking the
company forward will continue to significantly enhance shareholder value.

     We would also like to assure you that in light of recent corporate
malfeasance and accounting scandals, the company is taking steps, with the
advice of counsel, to be sure we are in compliance with all elements of
corporate governance requirements imposed upon public companies by the Sarbanes
Oxley Act of 2002 and the rules formulated in accordance with that act by
NASDAQ, our listing agency. You should also be aware, that banks, unlike most
public companies are regulated and examined on a regular basis by the FDIC, the
State Department of Banking and Insurance, along with the Banks internal audit
firm, and an independent certified public accounting firm chosen by the Bank's
Audit Committee.

     The officers, directors, and staff of your company fully understand the
challenges that face us and all companies in the coming months. We are confident
that we have the experience, agility, and the dedication to meet those
challenges, to recognize both difficulties and opportunities, and to continue to
manage the successful growth and viability of your investment. As always we
appreciate your continued support and confidence.

[PHOTO OMITTED]     /s/ Robert P. Corcoran
                    Robert P. Corcoran
                    PRESIDENT AND CHIEF EXECUTIVE OFFICER


                                       3
<PAGE>

SVB FINANCIAL SERVICES, INC.
Consolidated Balance Sheets
AS OF DECEMBER 31, 2002 AND 2001

================================================================================
(in thousands)                                            2002           2001
================================================================================
ASSETS
Cash & Due from Banks                                 $ 11,672       $ 16,583
Federal Funds Sold                                      20,778          9,585
Other Short Term Investments                             7,293          5,519
--------------------------------------------------------------------------------
Total Cash and Cash Equivalents                         39,743         31,687
--------------------------------------------------------------------------------
Interest Bearing Time Deposits                          13,839          9,670
Securities
  Available for Sale, at Fair Value                     46,569         29,052
  Held to Maturity, (Fair Value $57,097 in 2002         56,209         41,509
  and $41,829 in 2001)
--------------------------------------------------------------------------------
Total Securities                                       102,778         70,561
--------------------------------------------------------------------------------
Loans                                                  238,185        209,592
  Allowance for Loan Losses                             (2,407)        (2,111)
  Unearned Income                                         (379)          (201)
--------------------------------------------------------------------------------
Net Loans                                              235,399        207,280
--------------------------------------------------------------------------------
Premises & Equipment, Net                                5,660          5,164
Bank Owned Life Insurance                                3,000             --
Other Assets                                             4,565          3,943
--------------------------------------------------------------------------------
Total Assets                                          $404,984       $328,305
================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand
  Non-interest Bearing                                $ 54,221       $ 40,993
  NOW                                                   73,426         56,965
Savings                                                 41,314         35,200
Money Market                                            49,951         37,131
Time
  Greater than $100,000                                 27,504         26,865
  Less than $100,000                                   118,006        100,320
--------------------------------------------------------------------------------
Total Deposits                                         364,422        297,474
--------------------------------------------------------------------------------
Other Borrowings                                         9,214          5,747
Obligation Under Capital Lease                             411            419
Guaranteed Preferred Beneficial Interest in the
  Corporation Subordinated Debentures                    6,500          4,000
--------------------------------------------------------------------------------
Total Borrowings                                        16,125         10,166
--------------------------------------------------------------------------------
Other Liabilities                                        1,259          1,037
--------------------------------------------------------------------------------
Total Liabilities                                      381,806        308,677
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common Stock, $2.09 Par Value: 20,000,000                7,631          6,932
  Shares Authorized; 3,651,003 Shares in 2002 and
  3,316,724 Shares in 2001 Issued and Outstanding
Additional Paid-in Capital                              12,041          8,690
Retained Earnings                                        3,111          3,762
Accumulated Other Comprehensive Income                     395            244
--------------------------------------------------------------------------------
Total Shareholders' Equity                              23,178         19,628
--------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity            $404,984       $328,305
================================================================================

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                       4
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                               Consolidated Statements of Income
                                  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
===============================================================================================
(in thousands except per share data)                                   2002             2001
===============================================================================================
<S>                                                                <C>              <C>
INTEREST INCOME
Loans                                                              $ 16,080         $ 15,872
Securities Available for Sale                                         1,649            1,592
Securities Held to Maturity                                           2,227            1,264
Other Short Term Investments                                             82               38
Interest Bearing Time Deposits                                          542              546
Federal Funds Sold                                                      268              555
-----------------------------------------------------------------------------------------------
Total Interest Income                                                20,848           19,867
-----------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                                              6,798            8,820
Other Borrowings                                                        351               60
Obligation Under Capital Lease                                           31               36
Guaranteed Preferred Beneficial Interest in the
   Corporation Subordinated Debentures                                  291              114
-----------------------------------------------------------------------------------------------
Total Interest Expense                                                7,471            9,030
-----------------------------------------------------------------------------------------------
Net Interest Income                                                  13,377           10,837
PROVISION FOR LOAN LOSSES                                               455              365
-----------------------------------------------------------------------------------------------

Net Interest Income after Provision for Loan Losses                  12,922           10,472
-----------------------------------------------------------------------------------------------
OTHER INCOME
Service Charges on Deposit Accounts                                     842              771
Gains/(Losses) on the Sale of Securities Available for Sale, Net        145              (11)
Gains on the Sale of Loans                                              205              225
Other Income                                                            540              344
-----------------------------------------------------------------------------------------------
Total Other Income                                                    1,732            1,329
-----------------------------------------------------------------------------------------------
OTHER EXPENSE
Salaries and Employee Benefits                                        5,477            4,538
Occupancy Expense                                                     1,591            1,389
Equipment Expense                                                       561              490
Other Expenses                                                        3,135            2,592
-----------------------------------------------------------------------------------------------
Total Other Expense                                                  10,764            9,009
-----------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes                              3,890            2,792
Provision for Income Taxes                                            1,435            1,048
-----------------------------------------------------------------------------------------------
NET INCOME                                                         $  2,455         $  1,744
===============================================================================================
EARNINGS PER SHARE - BASIC (1)                                     $    .68         $    .50
===============================================================================================
EARNINGS PER SHARE - DILUTED (1)                                   $    .67         $    .49
===============================================================================================
</TABLE>

(1) Amounts have been restated for stock dividends.

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                       5
<PAGE>

SVB FINANCIAL SERVICES, INC.
Consolidated Statement of Changes in Shareholders' Equity
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                             ACCUMULATED
                                                  ADDITIONAL                    OTHER                             TOTAL
                                        COMMON      PAID-IN     RETAINED    COMPREHENSIVE    COMPREHENSIVE    SHAREHOLDERS'
(in thousands)                           STOCK      CAPITAL     EARNINGS    INCOME/(LOSS)       INCOME           EQUITY
===========================================================================================================================
<S>                                     <C>          <C>         <C>             <C>            <C>              <C>
BALANCE, JANUARY 1, 2001                $6,490       $7,483      $3,454          $(61)                           $17,366
---------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock, Net              118          122                                                          240
5% Stock Dividend                          330        1,105      (1,436)                                              (1)
Stock Repurchase and Retirement             (6)         (20)                                                         (26)
Net Income                                                        1,744                         $1,744             1,744
Accumulated Other Comprehensive
   Income Net of Reclassification
   Adjustments and Taxes                                                          305              305               305
                                                                                                ------
Total Comprehensive Income                                                                      $2,049
===========================================================================================================================
BALANCE, DECEMBER 31, 2001               6,932        8,690       3,762           244                             19,628
---------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock, Net              338          612                                                          950
5% Stock Dividend                          361        2,739      (3,106)                                              (6)
Net Income                                                        2,455                         $2,455             2,455
Accumulated Other Comprehensive
   Income Net of Reclassification
   Adjustments and Taxes                                                          151              151               151
                                                                                                ------
Total Comprehensive Income                                                                      $2,606
===========================================================================================================================
BALANCE, DECEMBER 31, 2002              $7,631      $12,041      $3,111          $395                            $23,178
===========================================================================================================================
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                       6
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                           Consolidated Statements of Cash Flows
                                  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
=========================================================================================
(in thousands)                                                    2002            2001
=========================================================================================
<S>                                                           <C>             <C>
OPERATING ACTIVITIES
Net Income                                                    $  2,455        $  1,744
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities
Provision for Loan Losses                                          455             365
Depreciation and Amortization                                      638             593
Amortization of Securities Premium                                 561             112
(Gains)/Losses on the Sale of Securities
  Available for Sale                                              (145)             11
Gains on the Sale of Loans                                        (205)           (225)
Increase in Other Assets                                          (699)           (650)
Increase/(Decrease) in Other Liabilities                           222             (92)
Increase in Unearned Income                                        178              57
-----------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                        3,460           1,915
=========================================================================================
INVESTING ACTIVITIES
Increase in Interest Bearing Time Deposits                      (4,169)         (1,595)
Proceeds from the Sale of Securities Available for Sale          7,592             767
Proceeds from Maturities of Securities
Available for Sale                                              16,195          20,418
Held to Maturity                                                31,800           8,237
Purchases of Securities
Available for Sale                                             (41,143)        (16,439)
Held to Maturity                                               (46,849)        (43,565)
Increase in Loans, Net                                         (28,547)        (30,226)
Capital Expenditures                                            (1,134)           (901)
Purchase of Bank Owned Life Insurance                           (3,000)             --
-----------------------------------------------------------------------------------------
Net Cash Used for Investing Activities                         (69,255)        (63,304)
=========================================================================================
FINANCING ACTIVITIES
Net Increase in Demand Deposits                                 29,689          28,121
Net Increase in Savings Deposits                                 6,114          18,504
Net Increase in Money Market Deposits                           12,820          14,305
Net Increase in Time Deposits                                   18,325          14,160
Proceeds of Other Borrowings                                     3,467           5,422
Decrease in Obligation Under Capital Lease                          (8)             (7)
Issuance of Guaranteed Preferred Beneficial Interest in the
  Corporation Subordinated Debentures                            2,500           4,000
Proceeds from the Issuance of Common Stock, Net                    950             240
Purchase of Common Stock, Net                                       --             (26)
Cash in Lieu of Fractional Shares from Cash Dividend                (6)             (1)
-----------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                       73,851          84,718
Increase in Cash and Cash Equivalents                            8,056          23,329
Cash and Cash Equivalents, Beginning of Year                    31,687           8,358
-----------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                        $ 39,743        $ 31,687
=========================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest                        $  7,559        $  9,133
=========================================================================================
Cash Paid During the Year for Federal Income Taxes            $  1,495        $  1,043
=========================================================================================
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                       7
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

1: ORGANIZATION AND NATURE OF OPERATIONS

SVB Financial Services, Inc., (the "Company") is a one bank holding company, of
Somerset Valley Bank (the "Bank"). The Somerset Valley Investment Company, Inc.
is a wholly owned subsidiary of the Bank. West End One Corp. is a wholly owned
subsidiary of Somerset Valley Investment Company and is incorporated in the
state of Delaware.

     The Bank is a full service community bank and operates at locations in
Somerville, Hillsborough, Bridgewater, Manville, Bernards, Warren, Aberdeen and
Edison, New Jersey. The Bank's customers are predominately small and middle
market businesses and professionals. The Bank's market area is primarily
Somerset County, but it does obtain business from the adjacent counties of
Middlesex, Hunterdon, Monmouth, Mercer and Morris.

     The Bank competes with other banking and financial institutions in its
primary market area, including financial institutions with resources
substantially greater than its own. Commercial banks, savings banks, savings and
loan associations, credit unions and money market funds actively compete for
deposits and for all types of loans. Such institutions, as well as consumer
finance and insurance companies, may be considered competitors of the Bank with
respect to one or more of the services they render.

     In addition to being subject to competition from other financial
institutions, the Bank is subject to federal and state laws and to regulations
of certain federal agencies, and accordingly, it is periodically examined by
those regulatory agencies.

2: SIGNIFICANT ACCOUNTING POLICIES

BASIS OF FINANCIAL STATEMENT PRESENTATION: The consolidated financial statements
include the accounts of the Bank and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation and
certain reclassifications are made when necessary to conform the previous years'
financial statements to the current year's presentation.

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

     The principal estimate that is particularly susceptible to significant
change in the near term relates to the allowance for loan losses. The evaluation
of the adequacy of the allowance for loan losses includes an analysis of the
individual loans and overall risk characteristics and size of the different loan
portfolios, and takes into consideration current economic and market conditions,
the capability of specific borrowers to pay specific loan obligations and
current loan collateral values. However, actual losses on specific loans, which
are also encompassed in the analysis, may vary from estimated losses. These
estimates are reviewed periodically, and as adjustments become necessary, they
are reflected in operations in the period in which they become known.

     SECURITIES: The Company accounts for securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." A portion of the Company's
securities are carried at cost adjusted for amortization of premiums and
accretion of discounts using the interest method. These securities are carried
at amortized cost because the Company has the ability and intent to hold the
securities to maturity and are classified as such. The remainder of the
Company's securities are held for indefinite periods of time. These securities
which management intends to use as part of its asset/liability strategy, or that
may be sold in response to changes in interest rates, changes in prepayment
risk, increased capital requirements or other similar factors, are classified as
available for sale. These securities are carried at fair value with unrealized
gains and losses excluded from earnings and reported as Other Comprehensive
Income/(Loss) in a separate component of shareholders' equity, net of income
taxes. The net effect of unrealized gains or losses, caused by marking an
available for sale portfolio to market, could cause fluctuations in the level of
shareholders' equity and equity-related financial ratios as market interest rate
changes cause the market value of fixed rate securities to fluctuate. Realized
gains and or losses on securities available for sale are determined on a
specific identification basis and are included in the consolidated statements of
income. The Company had no securities held for trading purposes at December 31,
2002 and 2001.

     SFAS No. 133, As amended by SFAS No. 138, "Accounting for Certain
Derivative Financial Instruments and Certain Hedging Activities," established
accounting and reporting standards for derivitive instruments, including certain
derivitive instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivitives as either assets or
liabilities in the Statement of Financial Position and measure those instruments
at fair value. The Company adopted SFAS No. 138 as amended, and the adoption did
not have a material impact on its financial position or results of operations.

     SFAS No. 119 "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments" requires disclosures about financial
instruments, which are defined as futures, forwards, swap and option contracts
and other financial instruments with similar characteristics. On-balance sheet
receivables and payables are excluded from this definition. The Company did not
hold any derivative financial instruments as defined by SFAS No. 119 at December
31, 2002 or 2001.


                                       8
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

     LOANS: Loans, which management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
principal, adjusted for any charge-offs, the allowance for loan losses and any
deferred fees or costs on originated loans. Loans are stated at the principal
amount outstanding. Net loans represent the principal loan amount outstanding
reduced by unearned income and allowance for loan losses.

     The Company accounts for impaired loans under SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures." This
standard requires that a creditor measure impairment based on the present value
of expected future cash flows discounted at the loan's effective interest rate,
except that as a practical expedient, a creditor may measure impairment based on
a loan's observable market price, or the fair value of the collateral if the
loan is collateral dependent. Regardless of the measurement method, a creditor
must measure impairment based on the fair value of the collateral when the
creditor determines that foreclosure is probable.

     The Bank accounts for its transfers and servicing assets in accordance with
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which revised the accounting and reporting for
transfers and servicing of financial assets and extinguishments of liabilities.
SFAS No. 140 was effective for transfers and servicing of financial assets and
extinguishments of liabilities after March 31, 2001.

     The Company periodically sells certain commercial and mortgage loans to
other financial institutions without recourse to the Company. The gains and
losses are recognized in an amount which approximates the present value of the
difference between the effective interest rate to the Company and the net yield
to the purchaser, excluding normal future loan servicing fees, when applicable,
over the estimated remaining lives of the loans sold.

     Interest on loans is credited to operations primarily based upon the
principal amount outstanding. When management believes there is sufficient doubt
as to the ultimate collectibility of interest on any loan, the accrual of
applicable interest is discontinued.

     Loan origination fees and direct loan origination costs are deferred and
are recognized over the estimated life of the related loans as an adjustment of
the loan yield. The net loan origination fees recognized as yield adjustments
are reflected in total interest income in the consolidated statements of income
and the unamortized balance of such net loan origination fees is reported in the
consolidated balance sheets as part of unearned income.

     ALLOWANCE FOR LOAN LOSSES: The Company's process for evaluating the
adequacy of the allowance for loan losses has three basic elements: First, the
identification of problem loans when they occur; second, the establishment of
appropriate allowance for loan losses once specific problem loans are
identified; and third, a methodology for establishing general loan loss
allowances. The identification of problem loans is achieved mainly through
review of specific major loans based on delinquency criteria, size of loan and
location and value of collateral property. Specific loss reserves are
established for identified problem loans based on reviews of current operating
financial information and fair value appraisals. A range of loss allowances is
estimated based upon consideration of past experience of originated loans by
loan type, year of origination, location of collateral property and
loan-to-value ratios. Based upon this process, consideration of the current
economic environment and other factors, management determines what it considers
to be an appropriate allowance for loan losses. Although the Company's
management believes it has a sound basis for this estimation, actual write-offs
incurred in the future are highly dependent upon future events, including the
economy of the area in which the Company lends. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgement of information
available to them at the time of their examination.

     On July 6, 2001, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 102, "Selected Loan Loss Allowance Methodology and
Documentation Issues." SAB No. 102 provides guidance on the development,
documentation, and application of a systematic methodology for determining the
allowance for loans and leases in accordance with US GAAP. The adoption of SAB
No. 102 did not have a material impact on the Company's financial position or
results of operations.

     PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed primarily on the straight-line method over the shorter of the estimated
useful lives of the assets or the term of the related lease.

     On January 1, 2002, the Company adopted SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 retains the existing
requirements to recognize and measure the impairment of long-lived assets to be
held and used or to be disposed of by sale. SFAS No. 144 also changes the
requirements relating to reporting the effects of a disposal or discontinuation
of a segment of a business. The adoption of SFAS No. 144 did not have an impact
on the Company's financial position, results of operations, or cash flows.

     INCOME TAXES: The Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The principal types of
accounts, resulting in


                                       9
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

differences between assets and liabilities for financial statements and tax
return purposes, are the allowance for loan losses, depreciation and accretion
of securities discounts.

     EARNINGS PER SHARE: The Company accounts for earnings per share under the
provisions of SFAS No. 128, "Earnings Per Share." SFAS No. 128 eliminated
primary and fully diluted earnings per share and requires presentation of basic
and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding during the
period. Diluted earnings per share takes into account the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised and converted into common stock.

     OTHER REAL ESTATE OWNED: Other real estate owned includes foreclosed real
estate which is carried at the lower of cost (lesser of carrying value of loan
or fair value at date of acquisition) or estimated fair value less selling
costs. Any write-down, at or prior to the dates the real estate is considered
foreclosed, is charged to the allowance for loan losses. Subsequent write-downs
are recorded in other expenses, and expenses incurred in connection with holding
such assets and any gains or losses upon their sale are included in other income
and expenses.

     ADVERTISING COSTS: The Company expenses advertising costs as incurred.

     STATEMENTS OF CASH FLOWS: For purposes of the consolidated statements of
cash flows, the Company considers cash, non-interest bearing amounts due from
banks, Federal Funds sold and other short term investments to be cash
equivalents. Generally, Federal Funds are sold for a 60 day period or less.

     STOCK BASED COMPENSATION: The Company accounts for stock options under SFAS
No. 123, "Accounting for Stock-Based Compensation," which contains a fair
value-based method for valuing stock-based compensation that entities may use,
which measures compensation cost at the grant date based on the fair value of
the award. Compensation is then recognized over the service period, which is
usually the vesting period. Alternatively, the standard permits entities to
continue accounting for employee stock options and similar instruments under
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees." Entities that continue to account for stock options using APB
Opinion No. 25 are required to make pro forma disclosures of net income and
earnings per share, as if the fair value based method of accounting defined in
SFAS No. 123 had been applied. The Company's stock option plans are accounted
for under APB Opinion No. 25.

     In December 2002, SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" was issued. SFAS No. 148 amends SFAS
No. 123 "accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for fiscal years beginning
after December 15, 2002. The expanded annual disclosure requirements have been
provided for the year ended December 31, 2002. The adoption of SFAS No. 148 did
not have an impact on the financial condition or results of operations of the
Company.

     At December 31, 2002, the Company had three stock option plans.

     The 1997 Restated Incentive Stock Option Plan is a non-qualified stock
option plan. Under this Plan, the Board of Directors may grant options to
officers to purchase the Company's stock. Stock options are issued at prices
equal to the fair market value at the date of grant. The stock options have a
vesting period of one year from the date of issuance. All options under this
Plan were distributed as of December 31, 2002 of which 5,523 remain outstanding.

     The 2000 Incentive Stock Option Plan is a non-qualified stock option plan.
Stock options are issued at prices equal to the fair market value at the date of
grant. Shares totaling 173,643 are reserved for issuance under this Plan
including 90,459 shares outstanding at December 31, 2002.

     The 2000 Directors Stock Option Plan is a non-qualified stock option plan.
Under this Plan, stock options are issued at prices equal to the fair market
value at the date of grant. Shares totaling 69,458 are reserved for issuance
under this Plan, including 53,420 outstanding at December 31, 2002.


                                       10
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

     There were no options granted during 2002. Had compensation costs for the
plan year been determined based on the fair value of the options at the grant
dates consistent with the method SFAS No. 123 "Accounting for Stock Based
Compensation" the Company's net income and earnings per share, basic and
diluted, would have been as reduced to the proforma amounts indictated below:

                                                      Years Ended December 31,
================================================================================
(in thousands)                                            2002           2001
================================================================================
Net Income as Reported                                $  2,455       $  1,744
Less: Stock-Based Compensation
       Costs Under Fair Value Based
       Method for all Awards                                --           (101)
                                                      ==========================
Proforma Net Income                                   $  2,455       $  1,643
Earnings Per Share Basic
   As Reported                                             .68            .50
   Proforma                                                .68            .47
Earnings Per Share Basic
   As Reported                                             .67            .49
   Proforma                                                .67            .46
================================================================================

     The fair value of each option granted in 2001 is estimated on the date of
the grant using Black Scholes pricing model with the following weighted-average
assumptions, no dividend yield; expected volatility of 21.58% a risk free
interest rate of 4.54% and an expected life of 4.92 years.

     COMPREHENSIVE INCOME: The Company follows SFAS No. 130, "Reporting
Comprehensive Income." This standard requires entities presenting a complete set
of financial statements to include details of comprehensive income or loss.
Comprehensive income consists of net income or loss for the current period and
income, expenses, gains and losses that bypass the income statement and are
reported directly in a separate component of equity.

The income tax effects allocated to comprehensive income at December 31, are as
follows:

<TABLE>
<CAPTION>
=================================================================================================================
                                                    2002                                     2001
=================================================================================================================
                                      BEFORE                      NET         BEFORE          TAX           NET
                                        TAX          TAX         OF TAX         TAX         BENEFIT        OF TAX
(in thousands)                        AMOUNT      (EXPENSE)      AMOUNT       AMOUNT       (EXPENSE)       AMOUNT
=================================================================================================================
<S>                                    <C>          <C>           <C>          <C>           <C>           <C>
Unrealized Gains on Securities
  Unrealized Holding Gains
  Arising During the Period            $ 374        $(127)        $ 247        $ 450         $(152)        $ 298
Less Reclassification
  Adjustment for Gains (Losses)
  Realized in Net Income                 145          (49)           96          (11)            4            (7)
Other Comprehensive
  Income, Net                          $ 229        $ (78)        $ 151        $ 461         $(156)        $ 305
=================================================================================================================
</TABLE>

     SEGMENT REPORTING: SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, establishes standards for the way public
business enterprises report information about operating sements in annual
financial statements. The Company has one operating and, accordingly, one
reportable segment, "Community Banking." All of the Company's activities are
interrelated, and each activity is dependent and assessed based on how each of
the activities of the Company supports the others. For example, commercial and
industrial lending is dependent upon the ability of the Company to fund itself
with retail deposits and other borrowings and to manage interest rate and credit
risk. This situation is also similar for consumer and residential and commercial
mortgage lending. All significant operating decisions are based upon analysis of
the Company as one operating segment.


                                       11
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

3: SECURITIES

Information relative to the Company's securities portfolio are as follows:

<TABLE>
<CAPTION>
=========================================================================================
                                                     GROSS          GROSS
                                     AMORTIZED    UNREALIZED      UNREALIZED     FAIR
(in thousands)                         COST          GAINS          LOSSES      VALUE
=========================================================================================
<S>                                   <C>           <C>              <C>       <C>
2002
AVAILABLE FOR SALE
U.S. Treasury Securities              $   502       $    3           $  --     $   505
U.S. Government Agency Securities      13,569          304              --      13,873
Mortgage-Backed Securities             28,250          332              37      28,545
Other Securities                        3,650           47              51       3,646
-----------------------------------------------------------------------------------------
                                      $45,971       $  686           $  88     $46,569
=========================================================================================
HELD TO MATURITY
U.S. Treasury Securities              $ 1,016       $    2           $  --     $ 1,018
U.S. Government Agency Securities      24,499          401              --      24,900
Mortgage-Backed Securities             28,033          498              30      28,501
Other Securities                        2,479           17              --       2,496
Municipal Securities                      182            0              --         182
-----------------------------------------------------------------------------------------
                                      $56,209       $  918           $  30     $57,097
=========================================================================================
2001
AVAILABLE FOR SALE
U.S. Government Agency Securities     $13,171       $  235           $   4     $13,402
Mortgage-Backed Securities             12,602          134              42      12,694
Other Securities                        2,910           46              --       2,956
-----------------------------------------------------------------------------------------
                                      $28,683       $  415           $  46     $29,052
=========================================================================================
HELD TO MATURITY
U.S. Government Agency Securities     $25,343       $  335           $  16     $25,662
Mortgage-Backed Securities             14,075           72              77      14,070
Other Securities                        2,091           11               5       2,097
-----------------------------------------------------------------------------------------
                                      $41,509       $  418           $  98     $41,829
=========================================================================================
</TABLE>

     There are no significant concentrations of securities (greater than 10% of
shareholders' equity) in any individual security issue. There were no losses on
securities sold in 2002.

     The amortized cost and fair value of securities at December 31, 2002, by
contractual maturity, are shown in the table at the right for securities to be
held to maturity and available for sale. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

================================================================================
                                                     AMORTIZED          FAIR
(in thousands)                                          COST           VALUE
================================================================================
AVAILABLE FOR SALE
Due in 1 year or less                                 $  5,144       $  5,202
Due after 1 year through 5 years                        11,523         11,818
Mortgage-Backed Securities                              28,250         28,545
Other Securities                                         1,054          1,004
--------------------------------------------------------------------------------
                                                      $ 45,971       $ 46,569
================================================================================
HELD TO MATURITY
Due in 1 year or less                                 $  8,122       $  8,199
Due after 1 year through 5 years                        20,054         20,397
Mortgage-Backed Securities                              28,033         28,501
--------------------------------------------------------------------------------
                                                      $ 56,209       $ 57,097
================================================================================

     At December 31, 2002, securities having a book value of approximately $9.8
million were pledged to secure public deposits and for other purposes as
required by law.


                                       12
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

4: LOANS

The composition of outstanding loans is summarized as follows:

================================================================================
(in thousands)                                            2002           2001
================================================================================
Secured by Real Estate:
  Residential Mortgage                                $ 73,084       $ 67,598
  Commercial Mortgage                                  102,623         75,905
  Construction                                          25,011         21,438
Commercial & Industrial                                 24,229         28,105
Loans to Individuals
  for Automobiles                                        3,732          6,640
Loans to Individuals                                     8,592          9,249
Other Loans                                                914            657
--------------------------------------------------------------------------------
                                                      $238,185       $209,592
================================================================================

     There were no loans restructured during 2002. Loans totaling $301,000 were
restructured during 2001 and as of December 31, 2002 the outstanding balance
remaining on these loans was $257,000. There were no loans past due 90 days or
more as to principal and interest and $658,000 in a non-accrual status as of
December 31, 2002. There were no loans past due 90 days or more as to principal
and interest and $510,000 in a non-accrual status as of December 31, 2001.

     A loan is considered to be impaired when it is probable that the Company
will be unable to collect all amounts due according to the contractual terms of
the loan agreement. These loans consist primarily of non-accrual loans but may
include performing loans to the extent that situations arise which would reduce
the probability of collection in accordance with the contractual terms. As a
general rule, a loan that is in arrears in excess of 120 days will be charged
off unless circumstances exist that would make charge off unnecessary such as
the borrower is in the process of refinancing elsewhere or is liquidating
collateral within a short period of time.

     As of December 31, 2002 there were $844,000 of loans deemed to be impaired.
A valuation reserve of $242,000 was recorded for these loans. As of December 31,
2001, there were $685,000 of loans deemed to be impaired, a valuation reserve of
$174,000 was recorded for these loans.

     The Company had loans totaling $25.0 million or 10.5% of total loans
outstanding to borrowers engaged in construction activity in 2002. Loans
totaling $21.4 million or 10.2% of total loans outstanding to borrowers engaged
in construction activity in 2001. The Company continues to pursue new lending
opportunities while seeking to maintain a portfolio that is diverse as to
industry concentration, type and geographic distribution. The Company's
geographic lending area is primarily concentrated in Somerset County, but also
includes Middlesex, Hunterdon, Mercer, Morris and Monmouth counties.

5: ALLOWANCE FOR LOAN LOSSES

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

================================================================================
(in thousands)                                            2002           2001
================================================================================
Balance at January 1,                                 $  2,111       $  1,823
Provision Charged to Operations                            455            365
Charge Offs                                               (206)          (109)
Recoveries                                                  47             32
--------------------------------------------------------------------------------
Balance at December 31,                               $  2,407       $  2,111
================================================================================

6: PREMISES AND EQUIPMENT

Premises and equipment consists of the following at December 31, 2002 and 2001:

================================================================================
                                      ESTIMATED
(in thousands)                       USEFUL LIVES         2002           2001
================================================================================
Construction in Progress                      --      $     30       $    194
Premises & Improvements               5-30 years         5,541          4,827
Furniture & Equipment                 3-10 years         2,930          2,536
--------------------------------------------------------------------------------
                                                         8,501          7,557
Less: Accumulated Depreciation
      and Amortization                                  (2,841)        (2,393)
--------------------------------------------------------------------------------
                                                      $  5,660       $  5,164
================================================================================

Depreciation and amortization charged to operations was $638,000 and $593,000
for the years ended December 31, 2002 and 2001 respectively.

7: DEPOSITS

At December 31, 2002, scheduled maturities of certificates of deposit are as
follows:

<TABLE>
<CAPTION>
                                            OVER THREE        OVER ONE YEAR
                      THREE MONTHS OR     MONTHS THROUGH      THROUGH THREE     OVER THREE
(in thousands)             LESS            TWELVE MONTHS          YEARS            YEARS         TOTAL
=========================================================================================================
<S>                      <C>                 <C>                <C>               <C>          <C>
$100,000 or more         $ 9,412             $ 9,331            $ 7,208           $ 1,553      $ 27,504
Less than $100,000        34,281              54,629             19,026            10,070       118,006
=========================================================================================================
</TABLE>


                                13
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

8: OTHER EXPENSES
The major components of other expenses are as follows:

================================================================================
(in thousands)                                            2002           2001
================================================================================
Data Processing Services                              $    458       $    413
Marketing & Business Development                           308            244
Stationery, Forms & Supplies                               302            280
Insurance                                                  112            175
Legal, Examination & Accounting                            275            249
Postage & Telephone                                        289            224
FDIC Insurance Assessment                                  100            112
Other, Net                                               1,291            895
--------------------------------------------------------------------------------
                                                      $  3,135       $  2,592
================================================================================

9: COMMITMENTS AND CONTINGENCIES

Based on consultation with the Company's legal counsel, management is not aware
of any litigation that would have a material adverse effect on the consolidated
financial position of the Company. There are no proceedings pending other than
the ordinary routine litigation incident to the business of the Company and its
subsidiaries. In addition, no material proceedings are pending or are known to
be threatened or contemplated against the Company or its subsidiaries by
government authorities.

     The Company leases its banking facilities under operating leases which
expire at various dates through 2007 and thereafter, but which contain certain
renewal options. The Somerville facilities are leased from a partnership
consisting of, among others, all but one of the Company's directors. The Company
leases its Warren branch from a partnership which consists of among others one
of the Company's directors. As of December 31, 2002, future minimum rental
payments, under all leases are as follows:

(in thousands)
================================================================================
Lease Year                                               Minimum Rental Payments
================================================================================
2003                                                                    $  1,040
--------------------------------------------------------------------------------
2004                                                                       1,035
--------------------------------------------------------------------------------
2005                                                                       1,058
--------------------------------------------------------------------------------
2006                                                                         982
--------------------------------------------------------------------------------
2007                                                                         863
--------------------------------------------------------------------------------
Thereafter                                                                 6,545
--------------------------------------------------------------------------------
                                                                        $ 11,523
================================================================================

     The amounts in the previous table represent minimum rentals not adjusted
for possible future increases due to escalation provisions or the exercise of
renewal options by the Company. Rent expenses aggregated $881,000 and $760,000
for the years ended December 31, 2002 and 2001, respectively.

     The Bank, Investment Company, and West End One Corp. have not entered into
any interest rate swaps, caps or floors and are not party to any forward or
future transactions. However, the Bank is party to various other financial
instruments which are not included in the financial statements, but are required
in the normal course of business to meet the financing needs of its customers
and to assist in managing its exposure to changes in interest rates. Management
does not expect any material losses from these transactions, which include
standby letters of credit and commitments to extend credit.

     The Company had outstanding commitments to extend credit of $40.2 million
and $40.1 million at December 31, 2002 and December 31, 2001, respectively.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on management's
credit evaluation of the customer. There is no material difference between the
notional amount and estimated fair value of off-balance sheet unfunded loan
commitments as of December 31, 2002.

10: BENEFIT PLAN

The Company has a 401(k) Pension Plan covering substantially all employees.
Under the terms of the Plan, the Company matched 67% of an employee's
contribution in 2002 and 2001, up to 6% of the employee's salary. Employees
become fully vested in the Company's contribution after five years of service.
The Company contributed $93,000 and $88,000 to the Plan in 2002 and 2001,
respectively.

     During 1999, the Company established a Supplemental Executive Retirement
Plan. The Plan covers three of the Company's executive officers. One officer is
covered under a defined benefit plan while the remaining two officers are
covered under a defined contribution plan. The Company expensed $157,000 in 2002
and $151,000 in 2001, in connection with these plans.

11: INCOME TAXES

The components of the provision for income taxes are as follows:

================================================================================
(in thousands)                                            2002           2001
================================================================================
Current
  Federal                                             $  1,481       $  1,037
  State                                                    160            174
Deferred Benefit                                          (206)          (163)
--------------------------------------------------------------------------------
                                                      $  1,435       $  1,048
================================================================================

     Deferred income taxes are provided for the differences between the
financial reporting basis and the tax basis of


                                       14
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

the Company's assets and liabilities. Cumulative temporary differences at
December 31, are as follows:

================================================================================
(in thousands)                                            2002           2001
================================================================================
Start-up and Organization Costs                       $     (1)      $     (1)
Depreciation                                               228            241)
Accretion of Securities Discount                           (62)           (48)
Allowance for Loan Losses                                  995            878
Unrealized Gain on Securities                             (203)          (125)
Deferred Pension                                           135             --
Other                                                      262            281
--------------------------------------------------------------------------------
Net Deferred Tax Asset, Included in
  Other Assets                                        $  1,354       $  1,226
================================================================================

A reconciliation of income taxes calculated at the statutory rate of 34% to the
actual income tax provision is as follows:

================================================================================
(in thousands)                                            2002           2001
================================================================================
Statutory Provision                                   $  1,323       $    949
State Taxes on Income,
  Net of Federal Tax Benefit                               106            115
Non-Deductible Expenses                                    (23)           (13)
Tax Exempt Interest                                         --              6
Other                                                       29             (9)
--------------------------------------------------------------------------------
                                                      $  1,435       $  1,048
================================================================================

12: EARNINGS PER SHARE

The following table illustrates the reconciliation of the numerators and
denominators of the basic and diluted EPS computations:

================================================================================
FOR THE YEAR ENDED                                     WEIGHTED           PER
DECEMBER 31, 2002(1)                                   AVERAGE           SHARE
(in thousands except per share data)     INCOME         SHARES          AMOUNT
================================================================================
EARNINGS PER SHARE - BASIC
Income available to Common
  Shareholders                           $2,455          3,598           $.68
Effect of Dilutive Securities
Stock Options                                --             55           (.01)
--------------------------------------------------------------------------------
EARNINGS PER SHARE - DILUTED
Income available to Common
  Shareholders plus assumed
  conversions                            $2,455          3,653           $.67
================================================================================

There were no antidilutive options at December 31, 2002.

================================================================================
FOR THE YEAR ENDED                                     WEIGHTED           PER
DECEMBER 31, 2001(1)                                   AVERAGE           SHARE
(in thousands except per share data)     INCOME         SHARES          AMOUNT
================================================================================
EARNINGS PER SHARE - BASIC
Income available to Common
  Shareholders                           $1,744          3,461           $.50
Effect of Dilutive Securities:
Stock Options                                --             69           (.01)
--------------------------------------------------------------------------------
EARNINGS PER SHARE - DILUTED
Income available to Common
  Shareholders plus assumed
  conversions                            $1,744          3,530           $.49
================================================================================

Antidilutive options totaling 55,125 with the exercise price of $9.52 have been
excluded in the computation of 2001 diluted EPS because the options exercise
prices were greater than the average market price of the common shares.

(1) Adjusted for the 5% stock dividend.

13: SHAREHOLDERS' EQUITY

On October 31, 2002, and October 25, 2001 the Company declared 5% stock
dividends to shareholders of record as of November 14, 2002 and November 6,
2001, respectively. Accordingly, earnings per share, options and
weighted-average shares of common stock have been restated to reflect the stock
dividends.

On August 31, 2000, the Board of Directors adopted a Stock Buy Back Plan. The
purpose of the Plan was to systematically purchase the amount of shares
necessary to fund a compensation plan for Bank Advisory Board members. Up to
18,000 shares could have been purchased over a period ending on December 31,
2001. During 2000, shares totaling 2,541 were purchased on the open market at
prices ranging from $7.98 to $8.21 as adjusted for the 5% stock dividend. During
2001, shares totaling 2,887 were purchased on the open market at prices ranging
from $8.21 to $9.52 as adjusted for the 5% stock dividend.


                                       15
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

14: STOCK BASED COMPENSATION

A summary of the status of the Company's option plans as of December 31 are as
follows:

<TABLE>
<CAPTION>
                                                2002(1)                            2001(1)
=====================================================================================================
                                                  WEIGHTED-AVERAGE                   WEIGHTED-AVERAGE
                                       SHARES      EXERCISE PRICE         SHARES      EXERCISE PRICE
=====================================================================================================
<S>                                   <C>              <C>                <C>             <C>
Outstanding at beginning of year       318,878         $ 6.93             331,837         $ 5.90
Options granted                             --             --              56,779           9.49
Options exercised                     (167,255)          5.58             (62,503)          3.83
Options expired or canceled             (2,221)          5.35              (7,235)          6.63
-----------------------------------------------------------------------------------------------------
Outstanding at end of year             149,402         $ 8.46             318,878         $ 6.93
=====================================================================================================
</TABLE>

(1) Amounts have been restated to show effects of a 5% stock dividend. All
options in the table were excercisable at December 31, 2002 and 2001.

The following table summarizes information about non-qualified stock options at
December 31, 2002:

================================================================================
                      OPTIONS OUTSTANDING AND EXERCISABLE
                     =====================================
     RANGE OF         OUTSTANDING AND     WEIGHTED-AVERAGE    WEIGHTED-AVERAGE
     EXERCISE         EXERCISABLE AT          REMAINING           EXERCISE
      PRICES         DECEMBER 31, 2002    CONTRACTUAL LIFE          PRICE
================================================================================
  $ 7.77 - $ 7.95          53,420            2.31 years            $ 7.77
  $ 7.96 - $ 8.04           5,523            2.15 years            $ 7.99
  $ 8.05 - $ 9.50          37,505            2.95 years            $ 8.05
  $ 9.51 - $ 9.75          52,954            3.91 years            $ 9.52
                          -------
                          149,402
================================================================================

15: OTHER BORROWINGS

Other Borrowings consist of advances from the Federal Home Loan Bank of New
York. These advances are secured by one to four family mortgage loans. Details
with respect to these advances are as follows:

($ in thousands)
================================================================================
                                                                WEIGHTED-AVERAGE
MATURITY                                        AMOUNT                RATE
================================================================================
2003                                           $ 3,000                3.55%
2004                                             1,000                3.84%
2005                                             1,500                4.16%
2006                                               500                4.64%
2007                                             1,500                4.57%
================================================================================

     In addition, the Company borrowed an amortizing advance, from Federal Home
Loan Bank in the amount of $1,750,000, at a rate of 5.03%. The advance matures
in 2006 and payments are made monthly based on a 25-year payout. The balance
outstanding at December 31, 2002 was $1,714,000.

16: GUARANTEED PREFERRED BENEFICIAL INTEREST IN THE CORPORATION SUBORDINATED
DEBENTURES

The Company participates in two pooled institutional placements of trust
preferred securities arranged by a third party. The Company purchased the common
stock of SVB Bald Eagle Statutory Trust I on July 30, 2001 and funding of the
trust preferred securities took place on July 31, 2001. This subordinated
debenture will be redeemed in the year 2031. At December 31, 2002, the rate paid
on this subordinated debenture of $4.0 million based on 3-month LIBOR plus 358
basis points was 5.34% and is adjusted in January, April, July and October.

     On June 25, 2002, the Company purchased common stock of SVB Bald Eagle
Statutory Trust II and funding of the trust preferred securities took place on
June 26, 2002. This subordinated debenture will be redeemed in the year 2032. At
December 31, 2002, the rate paid on this subordinated debenture of $2.5 million
based on 3-month LIBOR plus 345 basis points was 4.85% and is adjusted in March,
June, September and December.


                                       16
<PAGE>


                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

17: FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," requires
the disclosure of fair value information about financial instruments, whether or
not recognized in the balance sheet, for which it is practicable to estimate
value.

     The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced or liquidation sale. It is the Company's intent and general
practice to hold its financial instruments to maturity and not to engage in
trading activities. Therefore, significant estimations were used by the Company
for the purposes of this disclosure.

     Changes in the assumptions or methodologies used to estimate fair values
may materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the wide
range of permitted assumptions and methodologies in the absence of active
markets. This lack of uniformity gives rise to a high degree of subjectivity in
estimating financial instrument fair values.

     Estimated fair values have been determined by the Company using the best
available data and an estimation methodology suitable for each category of
financial instruments. The estimation methodology used, the estimated fair
values and the recorded book balances at December 31, 2002 and 2001 are outlined
below.

     For short term investments, such as cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.

<TABLE>
<CAPTION>
===========================================================================================
                                          2002                            2001
(in thousands)                 FAIR VALUE    CARRYING VALUE    FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                             <C>             <C>             <C>             <C>
Cash and Cash Equivalents       $ 39,743        $ 39,743        $ 31,687        $ 31,687
===========================================================================================
</TABLE>

For securities held in the Company's investment portfolio, fair value was
determined by reference to quoted market prices as of December 31.

<TABLE>
<CAPTION>
===========================================================================================
                                          2002                            2001
(in thousands)                 FAIR VALUE    CARRYING VALUE    FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                             <C>             <C>             <C>             <C>
Available for Sale Securities   $ 46,569        $ 46,569        $ 29,052        $ 29,052
Held to Maturity Securities       57,097          56,209          41,829          41,509
===========================================================================================
</TABLE>

     For long term assets and liabilities, such as loans and deposits, the
Company's policy is to manage its interest rate exposure on deposits with
earning assets with matching maturities. Fair values of loans were estimated
using the present value of future cash flows expected to be received. Loan rates
currently offered by the Company were used in determining the appropriate
discount rate. Deposits with stated maturities have been valued using a present
value discounted cash flow with a discount rate approximating current market for
similar maturities. Deposits with no stated maturities have an estimated rate of
fair value equal to the funds outflow as determined by historical trends.

<TABLE>
<CAPTION>
===========================================================================================
                                          2002                            2001
(in thousands)                 FAIR VALUE    CARRYING VALUE    FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                             <C>             <C>             <C>             <C>
Loans                           $240,034        $238,185        $213,075        $209,592
Deposits                         364,860         364,422         293,570         297,474
</TABLE>

     The fair value of commitments to extend credit and letters of credit are
considered immaterial.

18: BANKED OWNED LIFE INSURANCE (BOLI)

During 2002, the Bank has made investments in Bank Owned Life Insurance (BOLI)
policies. The Bank's total investment in BOLI as of December 31, 2002 was
approximately $3.0 million. Earnings from BOLI are recognized as other income.


                                       17
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

19: REGULATORY MATTERS

The Company and its subsidiary 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 must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios, set forth in the
following tables, 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, 2002, that the
Company and its subsidiary Bank met all capital adequacy requirements to which
they are subject.

     As of December 31, 2002 the most recent notification from the Bank's
regulatory authority categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based; Tier 1 risk-based,
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.

     The improvement in the ratios from 2001 to 2002 was due to the issuance of
$2.5 million of subordinated debentures, which may be considered components of
Tier 1 Capital. The aggregate amount of these securities may not exceed 25% of
all Tier 1 elements at any time. At December 31, 2002, the inclusion of these
securities of $6.5 million represents 23% of Tier 1 Capital. At December 31,
2001, the inclusion of these securities of $4.0 million represented 18% of Tier
1 capital. The proceeds from the sale of subordinated debentures were invested
by the Company into additional common stock of the Bank, thereby, improving the
Bank's capital ratio.

     The Company and its subsidiary Bank's actual capital amounts and ratios are
presented in the following tables.

<TABLE>
<CAPTION>
=========================================================================================================================
SVB FINANCIAL SERVICES, INC. AND SOMERSET VALLEY BANK

                                                                         TO BE ADEQUATELY               TO BE WELL
                                                   ACTUAL                   CAPITALIZED                CAPITALIZED
                                            --------------------       --------------------       --------------------
($ in thousands)                            AMOUNT         RATIO       AMOUNT         RATIO       AMOUNT         RATIO
=========================================================================================================================
<S>                                         <C>            <C>         <C>             <C>        <C>            <C>
SVB FINANCIAL SERVICES, INC
As of December 31, 2002
Total Capital to Risk Weighted Assets       $30,617        11.09%      $22,080         8.00%           --           --
Tier 1 Capital to Risk Weighted Assets      $28,210        10.22%      $11,040         4.00%           --           --
Tier 1 Leverage                             $28,210         7.53%      $14,991         4.00%           --           --
=========================================================================================================================
As of December 31, 2001
Total Capital to Risk Weighted Assets       $24,548        10.39%      $18,898         8.00%           --           --
Tier 1 Capital to Risk Weighted Assets      $22,437         9.50%      $ 9,449         4.00%           --           --
Tier 1 Leverage                             $22,437         7.86%      $11,415         4.00%           --           --
=========================================================================================================================
SOMERSET VALLEY BANK
As of December 31, 2002
Total Capital to Risk Weighted Assets       $29,998        10.89%      $22,044         8.00%      $27,555        10.00%
Tier 1 Capital to Risk Weighted Assets      $27,591        10.01%      $11,022         4.00%      $16,533         6.00%
Tier 1 Leverage                             $27,591         7.37%      $14,976         4.00%      $18,720         5.00%
=========================================================================================================================
As of December 31, 2001
Total Capital to Risk Weighted Assets       $23,652        10.03%      $18,871         8.00%      $23,589        10.00%
Tier 1 Capital to Risk Weighted Assets      $21,541         9.13%      $ 9,435         4.00%      $14,153         6.00%
Tier 1 Leverage                             $21,541         7.56%      $11,402         4.00%      $14,252         5.00%
=========================================================================================================================
</TABLE>


                                       18
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

20: CONDENSED FINANCIAL INFORMATION FOR SVB FINANCIAL SERVICES, INC. (PARENT
COMPANY) IS AS FOLLOWS:

<TABLE>
<CAPTION>
BALANCE SHEET (in thousands)                                   DECEMBER 31, 2002      DECEMBER 31, 2001
==========================================================================================================
<S>                                                                      <C>                    <C>
ASSETS
Cash and Due from Banks                                                  $   261                $   595
Other Assets                                                                 245                    161
Investment in Subsidiaries                                                29,278                 22,856
Securities Available for Sale                                                134                    180
----------------------------------------------------------------------------------------------------------
Total Assets                                                             $29,918                $23,792
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Other Liabilities                                                        $    38                $    40
Guaranteed Preferred Beneficial Interest
  in the Corporation Subordinated Debentures                               6,702                  4,124
----------------------------------------------------------------------------------------------------------
Total Liabilities                                                          6,740                  4,164
==========================================================================================================
SHAREHOLDERS' EQUITY
Common Stock                                                               7,631                  6,932
Additional Paid-in Capital                                                12,041                  8,690
Retained Earnings                                                          3,111                  3,762
Accumulated Other Comprehensive Income                                       395                    244
----------------------------------------------------------------------------------------------------------
Total Shareholders' Equity                                                23,178                 19,628
----------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity                               $29,918                $23,792
==========================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                               YEARS ENDED
STATEMENT OF INCOME (in thousands)                             DECEMBER 31, 2002      DECEMBER 31, 2001
==========================================================================================================
<S>                                                                      <C>                    <C>
OPERATING INCOME
Interest Income                                                          $    10                $    35
Losses on the Sale of Securities Available for Sale                           --                    (20)
----------------------------------------------------------------------------------------------------------
Total Income                                                                  10                     15
----------------------------------------------------------------------------------------------------------
OPERATING EXPENSE
Interest Expense                                                             291                    114
Other Expense                                                                124                     81
----------------------------------------------------------------------------------------------------------
Total Expense                                                                415                    195
----------------------------------------------------------------------------------------------------------
Loss Before Equity in Undistributed Income of Subsidiaries                  (405)                  (180)
Equity in Undistributed Income of Subsidiaries                             2,860                  1,924
----------------------------------------------------------------------------------------------------------
NET INCOME                                                               $ 2,455                $ 1,744
==========================================================================================================
</TABLE>


                                       19
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                               YEARS ENDED
STATEMENTS OF CASH FLOWS (in thousands)                        DECEMBER 31, 2002      DECEMBER 31, 2001
==========================================================================================================
<S>                                                                      <C>                    <C>
OPERATING ACTIVITIES
Net Income                                                               $ 2,455                $ 1,744
Adjustments to Reconcile Net Income to Net Cash
Used In Operating Activities:
Equity in Undistributed Income of Subsidiaries                            (2,860)                (1,924)
Amortization of Organization Costs                                            --                     11
Losses on the Sale of Securities Available for Sale                           --                     20
Increase in Other Assets                                                     (68)                  (126)
(Decrease)/Increase Other Liabilities                                         (2)                    40
----------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities                                       (475)                  (235)
==========================================================================================================
INVESTING ACTIVITIES
Proceeds from the Sale of Securities Available for Sale                       --                     51
Purchases of Securities Available for Sale                                    (3)                    --
Payments for Investments and Advances in Subsidiaries                     (3,378)                (4,124)
----------------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities                                    (3,381)                (4,073)
==========================================================================================================
FINANCING ACTIVITIES
Proceeds from the Issuance of Long Term Debt                               2,578                  4,124
Proceeds from the Issuance of Common Stock, Net                              950                    240
Purchases of Common Stock, Net                                                --                    (26)
Cash in Lieu of Fractional Shares from Cash Dividend                          (6)                    (1)
----------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                                  3,522                  4,337
(Decrease)/Increase in Cash and Cash Equivalents, Net                       (334)                    29
Cash and Cash Equivalents, Beginning of Year                                 595                    566
----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                                   $   261                $   595
==========================================================================================================
</TABLE>

                                       20
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                              Report of Independent Certified Public Accountants
                                                           Grant Thornton [LOGO]

Accountants and Business Advisors


               Report of Independent Certified Public Accountants


Board of Directors and Shareholders
SVB Financial Services, Inc.


We have audited the accompanying consolidated balance sheets of SVB Financial
Services, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the two years in the period ended December 31, 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SVB Financial
Services, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.


/s/ Grant Thornton LLP

Philadelphia, Pennsylvania
January 24, 2003


Suite 3100
Two Commerce Square
2001 Market Street
Philadelphia, PA 19103-7080
T 215.561.4200
F 215.561.1066
W www.grantthornton.com

Grant Thornton LLP
US Member of Grant Thornton International


                                       21
<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

Management of SVB Financial Services, Inc. (the "Company") is not aware of any
known trends, events or uncertainties that will have or are reasonably likely to
have a material effect on the Company's liquidity, capital resources or results
of operations. The following discussion and analysis should be read in
conjunction with the detailed information and consolidated financial statements,
including notes thereto, included elsewhere in this report. This discussion and
analysis generally reviews the financial condition and results of operations of
the Company for the quarter and year to date periods ended December 31, 2002 and
2001. Some tables may cover more periods to comply with the Securities and
Exchange Commission disclosure requirements or to illustrate trends over a
longer period of time. The consolidated financial condition and results of
operations of the Company are essentially those of the Bank. Therefore, the
analysis that follows is directed to the performance of the Bank. Such financial
condition and results of operations are not intended to be indicative of future
performance.

     In addition to historical information, this discussion and analysis
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference include, but
are not limited to, those discussed in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

The Company's business is dynamic and complex. Consequently, management must
exercise judgment in choosing and applying accounting policies and
methodologies. These choices are important; not only are they necessary to
comply with accounting principles generally accepted in the United States, they
also reflect the exercise of management's judgment in determining the most
appropraite manner in which to record and report the Company's overall financial
performance. All accounting policies are important, and all policies contained
in Note 2 ("Significant Accounting Policies"), which begins on page 8 of this
report, should be reviewed for greater understanding of how the Company's
financial performance is recorded and reported.

     In management's opinion, some areas of accounting are likely to have a more
significant effect than others on the Company's financial results and expose
those results to potentially greater volatility. This is because they apply to
areas of relatively greater business importance and/or require management to
exercise judgment in making assumptions and estimates that affect amounts
reported in the financial statements. Because these assumptions and estimates
are based on current circumstances, they may change over time or prove to be
inaccurate based on actual experience. For the Company, the area that relies
most heavily on the use of assumptions and estimates includes but is not limited
to accounting for the allowance for loan losses. Our accounting policies related
to these areas are discussed in Note 2 of this report and further described on
page 29 under "Allowance for Loan Losses."

RESULTS OF OPERATIONS (A SUMMARY)

Net income for the year ended December 31, 2002 was $2,455,000 an increase of
$711,000 or 41% from the previous year and represents a record for net income
during the Company's eleven year history.

     Net interest income growth of $2,540,000 or 23% was the major contributor
to the growth of net income. Net interest income was heavily impacted by the
growth in the Company's average earning assets of $82.0 million, which helped to
offset a decline in the net interest margin to 3.81% in 2002 from 4.02% in 2001.
This is discussed in greater detail under "Net Interest Income."

     Non-interest income increased $403,000 or 30%. Gains on the sale of
securities accounted for $156,000 of the increase. Other income increased
$196,000 on the strength of expansion in mortgage origination as well as non
bank product sales and loan servicing income. A detailed discussion is included
under "Other Income."

     Other expenses increased $1,755,000 or 19%. There were a number of factors
contributing to the increase including the opening of the Warren office in
September 2002 as well as the Company's 23% growth in assets. A detailed
discussion is included under "Other Expense."

NET INTEREST INCOME

Net interest income is the difference between the interest earned on the
Company's earning assets and the interest paid on its interest bearing
liabilities. It is the Company's principal source of revenue.

     The following table sets forth for the periods indicated the daily average
balances of certain balance sheet items, the interest rate earned on earning
assets and the average interest rate paid on interest bearing liabilities, net
interest income and the net interest margin. The net interest margin is a major
indicator of the profitability of the Company's earning assets.


                                       22
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

SUMMARY OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
================================================================================================================================
                                                  2002                           2001                           2000
                                     ============================   ============================   =============================
                                      AVERAGE   AVERAGE              AVERAGE   AVERAGE              AVERAGE   AVERAGE
($ in thousands)                      BALANCE     RATE   INTEREST    BALANCE     RATE   INTEREST    BALANCE     RATE    INTEREST
================================================================================================================================
<S>                                  <C>          <C>     <C>       <C>          <C>     <C>       <C>          <C>      <C>
ASSETS:
Federal Funds Sold                   $ 18,409     1.46%   $   268   $ 15,281     3.58%   $   555   $  5,478     6.25%    $   348
Other Short Term Investments            4,977     1.65%        82      1,577     2.41%        38         54     5.56%          3
Interest Bearing Time Deposits         12,339     4.39%       542      8,680     6.29%       546      6,918     6.48%        448
Securities
   Available for Sale                  39,022     4.23%     1,649     27,739     5.74%     1,592     28,818     6.24%      1,799
   Held to Maturity                    50,859     4.38%     2,227     24,124     5.24%     1,264      4,747     6.28%        298
--------------------------------------------------------------------------------------------------------------------------------
Total Securities                       89,881     4.31%     3,876     51,863     5.51%     2,856     33,565     6.25%      2,097
Loans (1)                             225,814     7.12%    16,080    192,047     8.26%    15,872    164,875     9.13%     15,049
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Earning Assets        $351,420     5.93%   $20,848   $269,448     7.37%   $19,867   $210,890     8.51%    $17,945
Cash and Due from Banks                17,175                         10,345                          9,295
Allowance for Loan Losses              (2,208)                        (1,955)                        (1,672)
Premises and Equipment, Net             5,561                          5,079                          4,824
Other Assets                            3,867                          3,412                          2,983
--------------------------------------------------------------------------------------------------------------------------------
Total Assets                         $375,815                       $286,329                       $226,320
================================================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits
   Savings                           $ 41,500     1.72%   $   712   $ 22,154     2.81%   $   622   $ 17,190     2.86%    $   492
   Money Market                        48,838     1.93%       942     28,988     3.05%       883     24,882     3.62%        900
   NOW                                 64,007      .89%       571     44,400     1.85%       822     32,489     2.43%        788
   Time                               135,171     3.38%     4,573    126,184     5.15%     6,493    100,028     5.75%      5,755
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits       289,516     2.35%     6,798    221,726     3.98%     8,820    174,589     4.54%      7,935
Federal Funds Purchased                    --       --         --          4       --         --         12     8.33%          1
FHLB Advances                           8,183     4.29%       351      1,440     4.11%        60         --       --          --
Obligation Under Capital Lease            415     7.47%        31        422     8.53%        36        429     8.39%         36
Guaranteed Preferred Beneficial
   Interest in the Corporation
   Subordinated Debentures              5,294     5.50%       291      1,687     6.66%       114         --       --          --
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities   $303,408     2.46%   $ 7,471   $225,279     4.01%   $ 9,030   $175,030     4.55%    $ 7,972
Demand Deposits                        49,837                         41,236                         34,316
Cost to Fund Earning Assets                       2.13%                          3.35%                          3.78%
Other Liabilities                       1,329                          1,429                            987
Shareholders' Equity                   21,241                         18,385                         15,987
--------------------------------------------------------------------------------------------------------------------------------
Total Liabilities
and Shareholders' Equity             $375,815                       $286,329                       $226,320
================================================================================================================================
Net Interest Income                                       $13,377                        $10,837                         $ 9,973
================================================================================================================================
Net Interest Margin (2)                           3.81%                          4.02%                          4.73%
================================================================================================================================
</TABLE>

(1)  Non-accrual loans are included in the average loan balances, but interest
     on non-accrual loans has not been included for purposes of determining
     interest income.

(2)  Net interest margin is defined as net interest income divided by total
     average earning assets.


                                       23
<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following table presents the approximate changes in net interest income
attributable to either a change in volume or a change in rate.

<TABLE>
<CAPTION>
===============================================================================================================
                                                              YEARS ENDED DECEMBER 31,
                                               2002 VS 2001                           2001 VS 2000
                                             =======================================================
                                                      INCREASE (DECREASE) DUE TO CHANGES IN:
(in thousands)                       VOLUME        RATE         TOTAL       VOLUME        RATE         TOTAL
===============================================================================================================
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Increase (Decrease) in
Interest Income:
Federal Funds Sold                  $    96      $  (383)     $  (287)     $   403      $  (196)     $   207
Other Short Term Investments             59          (15)          44           38           (3)          35
Interest Bearing Time Deposits          190         (194)          (4)         111          (13)          98
Securities
   Available for Sale                   544         (487)          57          (66)        (141)        (207)
   Held to Maturity                   1,200         (237)         963        1,023          (57)         966
---------------------------------------------------------------------------------------------------------------
Total Securities                      1,744         (724)       1,020          957         (198)         759
Loans                                 2,575       (2,367)         208        2,331       (1,508)         823
---------------------------------------------------------------------------------------------------------------
Total Interest Income               $ 4,664      $(3,683)     $   981      $ 3,840      $(1,918)     $ 1,922
---------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits
   Savings                          $   397      $  (307)     $    90      $   139      $    (9)     $   130
   Money Market                         460         (401)          59          137         (154)         (17)
   NOW                                  276         (527)        (251)         247         (213)          34
   Time                                 435       (2,355)      (1,920)       1,392         (654)         738
---------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits       1,568       (3,590)      (2,022)       1,915       (1,030)         885
Federal Funds Purchased                  --           --           --           (1)          --           (1)
FHLB Advances                           289            2          291           60           --           60
Obligations Under Capital Lease          (1)          (4)          (5)          --           --           --
Guaranteed Preferred Beneficial
   Interest in the Corporation
   Subordinated Debentures              202          (25)         177          114           --          114
---------------------------------------------------------------------------------------------------------------
Total Interest Expense              $ 2,058      $(3,617)     $(1,559)     $ 2,088      $(1,030)     $ 1,058
---------------------------------------------------------------------------------------------------------------
Change in Net Interest Income       $ 2,606      $   (66)     $ 2,540      $ 1,752      $  (888)     $   864
---------------------------------------------------------------------------------------------------------------
</TABLE>


                                       24
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

     It is important to note at the outset of this discussion that the years
2002 and 2001 were periods of historically low interest rates. During 2001, the
Federal Reserve reduced its target rate for Federal Funds eleven times. The
Federal Funds rate began the year at 6.50% and ended the year at 1.75%. Rates
remained at this level, the lowest in forty years until November 2002 when the
Federal Reserve reduced this target rate again to 1.25%. The Prime Lending Rate
which the bank uses to price a large portion of its loan portfolio fell in
lockstep with the Federal Funds rate from 9.50% at the beginning of 2001 to
4.25% at the end of 2002, a forty-one year low.

     These rates were the result of a weakening national economy since 2000
following a significant downturn in the equity markets. During this period of
time, the Company experienced significant growth in both its loans and deposits.
The deposit growth can be attributed to the continued expansion of its branch
network (the tenth branch was opened in 2002), as well as customers choosing the
safety of FDIC insured accounts as opposed to the equity markets. Loans
continued to increase as the central New Jersey Market continues to see
development and expansion of both a commercial and residential nature.

     Net Interest Income increased $2,540,000 or 23% in comparison to 2001.
During this same period the Company's net interest margin was reduced from 4.02%
in 2001 to 3.81% in 2002. The growth in the Company's net interest income was
attributed to the growth of the Company's earning assets especially its loan
portfolio and securities portfolio.

     Average earning assets increased $82.0 million or 30% from 2001 to 2002. Of
this amount $33.8 million was in the form of loans while securities accounted
for $38.0 million. The percentage of earning assets represented by loans, which
generally yield more than securities and other earning assets, declined from 71%
in 2001 to 64% in 2002. This decline coupled with the interest rate reduction
mentioned above caused the yield on earning assets to decline from 7.37% in 2001
to 5.93% in 2002.

     The increase in earning assets was funded mostly by average interest
bearing deposit growth of $67.8 million, non interest bearing deposit growth of
$8.6 million and an increase in Federal Home Loan Bank advances of $6.7 million.
With regard to the increase in interest bearing deposits, $58.8 million was in
the form of lower yielding "core deposits" such as savings, NOW and Money Market
deposits, as customers opted for liquidity without substantial differential in
yield. This change in deposit mix coupled with the decline in rates mentioned
above caused the cost to fund earning assets to decline from 3.35% in 2001 to
2.13% in 2002. Of the $2,540,000 increase in net interest income approximately
$2,606,000 resulted from the growth of the Company's balance sheet which was
offset by an approximately $66,000 reduction resulting from the change in
interest rates.

     For a further discussion of the effect of changes in interest rates on the
Company's income statement see "Asset and Liability Management" and "Interest
Rate Sensitivity Analysis."

     For a further discussion of the Company's loan portfolio see "Loans" and
"Asset Quality."

     For a further discussion of the Bank's investment portfolio see "Investment
Portfolio."

OTHER INCOME

A comparison of the major components of other income is included in the
following table:

================================================================================
                                                       YEARS ENDED DECEMBER 31,
(in thousands)                                            2002          2001
================================================================================
Service Charges on Deposit
  Accounts                                              $  842        $  771
Gains/(Losses) on the Sale of Securities                   145           (11)
Gains on the Sale of Loans                                 205           225
Other Income                                               540           344
--------------------------------------------------------------------------------
                                                        $1,732        $1,329
================================================================================

     Other income increased $403,000 or 30% during 2002 in comparison to 2001.
Service charges on deposit accounts increased $71,000 or 9%. Even though fees
were not raised in 2002, service charges for both return items and savings
increased 26%. In addition, wire transfer charges increased by $18,000 or 35%.
Additionally, the Bank generated $45,000 in fees from its commercial sweep
account.

     The Company sold a portion of its securities for a net gain of $145,000.
This was a result of realizing opportunities from improved values in the
portfolio due to low interest rates. Gains on sale of loans were $205,000 in
2002 compared to $225,000 in 2001, a decrease of $20,000 or 9%. The Company is a
preferred SBA lender and as such, originates SBA loans and sells the guaranteed
portion in the secondary market while retaining the servicing. SBA loans are not
the primary focus of the company and consequently, sales of these loans can vary
from period to period depending upon the volume of SBA loans generated.

     Other income increased $196,000 or 57% in 2002. A major portion of this
increase was related to loan origination processing and servicing fees. Also,
sales of insurance products resulted in $22,000 of commissions. Finally,
miscellaneous income increased by $52,000 of which $51,000 was due to the
demutualization of the Company's health insurance carrier.

OTHER EXPENSE

A comparison of the major components of other expense is included in the
following table:

================================================================================
                                                       YEARS ENDED DECEMBER 31,
(in thousands)                                            2002          2001
================================================================================
Salaries and Employee
  Benefits                                             $ 5,477        $4,538
Occupancy                                                1,591         1,389
Equipment                                                  561           490
Other Expense                                            3,135         2,592
--------------------------------------------------------------------------------
                                                       $10,764        $9,009
================================================================================


                                       25

<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

     Total other expense increased $1,755,000 or 19% in comparison to 2001.
Expenses were impacted by additional personnel, occupancy costs and other
expenses relating to the opening of the Warren branch as well as the growth of
the Company and a full year of expenses incurred by the Edison Branch, which
opened in 2001.

     Salaries and Benefits increased $939,000 or 21% in 2002. Additional
personnel were hired to staff the Warren branch. Other positions were also added
to the Company as a result of the significant growth rate. The increase in staff
combined with annual salary increases, and an increase in the number of
employees qualifying for various benefits, such as, medical, bonus, and 401(k)
pension accounted for the variance from 2001.

     Occupancy expense increased $202,000 or 15% from 2001. Most of the increase
resulted from rent, taxes and maintenance for the new branch. Also, Edison and
Hillsborough's new location experienced a full year of expenses, and the
additional space was leased at 70 East Main Street in December 2002.

     Other expenses increased $544,000 or 21% from 2001. Much of the increase
was related to a rise in costs for outside services. This variance of $172,000
included bank correspondent services and consulting fees. Also, examation costs
increased $48,000 or 34%. Furthermore, expenses of $48,000 and $52,000 were a
result of the write down of assets for the Hillsborough relocation and
operational losses, respectively. Finally, directors fees were increased in the
beginning of 2002.

INVESTMENT PORTFOLIO

     The Company's investment portfolio is made up of securities available for
sale and securities which it has the ability and the intent to hold to maturity.
The securities available for sale are to be used to fund increases in loan
demand or possible outflows of deposits. The securities held to maturity may be
matched against maturing liabilities in order to attempt to maintain a balance
in the repricing of the Company's earning assets and interest bearing
liabilities. Maturing securities may also be used to fund increases in loan
demand or allow for the outflow of deposits with which they are matched.

The following table sets forth the amortized cost and estimated market values of
securities in the investment portfolios as of December 31, 2002, 2001 and 2000.

<TABLE>
<CAPTION>
==================================================================================================================
                                               2002                      2001                      2000
                                     =======================   =======================   =======================
                                      AMORTIZED       FAIR      AMORTIZED       FAIR      AMORTIZED       FAIR
(in thousands)                           COST        VALUE         COST        VALUE         COST        VALUE
==================================================================================================================
AVAILABLE FOR SALE:
<S>                                    <C>          <C>          <C>          <C>          <C>          <C>
U.S. Treasury Securities               $   502      $   505      $    --      $    --      $    --      $    --
U.S. Government Agency Securities       13,569       13,873       13,171       13,402       19,276       19,273
Mortgage-Backed Securities (1)          28,250       28,545       12,602       12,694       11,983       11,918
Other Securities                         3,650        3,646        2,910        2,956        2,136        2,112
------------------------------------------------------------------------------------------------------------------
                                       $45,971      $46,569      $28,683      $29,052      $33,395      $33,303
==================================================================================================================
HELD TO MATURITY:
U.S. Treasury Securities               $ 1,016      $ 1,018      $    --      $    --      $    --      $    --
U.S. Government Agency Securities       24,499       24,900       25,343       25,662        4,242        4,249
Mortgage-Backed Securities (1)          28,033       28,501       14,075       14,070        1,549        1,568
Other Securities                         2,479        2,496        2,091        2,097           --           --
Municipal Securities                       182          182           --           --          546          545
------------------------------------------------------------------------------------------------------------------
                                       $56,209      $57,097      $41,509      $41,829      $ 6,337      $ 6,362
==================================================================================================================
</TABLE>

Note: (1) With regard to mortgage-backed securities, the Company does not hold
any private issue CMOs.

As of December 31, 2002, 2001 and 2000, there was not one issuer where the
aggregate book value or aggregate market value exceeds ten percent of
shareholders' equity.


                                       26
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

     The maturity distribution and weighted average yield of the Company's
investment portfolio as of December 31, 2002 is as follows:

<TABLE>
<CAPTION>
===============================================================================================
                                                       DUE IN     DUE AFTER ONE
                                                      ONE YEAR     YEAR THROUGH
($ in thousands)                                       OR LESS      FIVE YEARS         TOTAL
===============================================================================================
<S>                                       <C>          <C>            <C>            <C>
AVAILABLE FOR SALE:
U.S. Treasury Securities(2)
  Fair Value                                           $   505             --        $   505
  Yield                                                   2.79%            --           2.79%
U.S. Government Agency Securities(2)
  Fair Value                                           $ 2,865        $11,009        $13,874
  Yield                                                   4.04%          3.95%          3.97%
Mortgage-Backed Securities(1)
  Fair Value                              $28,545           --             --        $28,545
  Yield                                      4.05%          --             --           4.05%
Other Securities
  Fair Value                              $ 1,004(3)   $ 1,832        $   809        $ 3,645
  Yield                                      4.28%        4.32%          5.27%          4.52%
===============================================================================================
HELD TO MATURITY:
U.S. Treasury Securities(2)
  Book Value                                           $ 1,016             --        $ 1,016
  Yield                                                   1.46%            --           1.46%
U.S. Government Agency Securities(2)
  Book Value                                           $ 5,210        $19,289        $24,499
  Yield                                                   4.59%          3.34%          3.61%
Mortgage-Backed Securities(1)
  Book Value                              $28,033           --             --        $28,033
  Yield                                      4.25%          --             --           4.25%
Other Securities
  Book Value                                           $ 1,714        $   765        $ 2,479
  Yield                                                   3.91%          3.11%          3.66%
Municpal Securities
  Book Value                                           $   182             --        $   182
  Yield                                                   1.46%            --           1.46%
===============================================================================================
</TABLE>

Note: (1) Mortgage-backed securities are not included because expected
maturities will differ from contractual maturities. Borrowers may have the right
to prepay or call obligations with or without call or prepayment penalties. (2)
U.S. Government Agency Securities and U.S. Treasury Securities which are
callable before their stated maturity are included in the table at their stated
maturity. (3) Equity securities.

LOANS

     The following table summarizes the Company's loan portfolio as of December
31, 2002, 2001, 2000, 1999 and 1998.

<TABLE>
<CAPTION>
====================================================================================================
(in thousands)                       2002          2001          2000          1999          1998
====================================================================================================
<S>                              <C>           <C>           <C>           <C>           <C>
Secured by Real Estate:
  Residential Mortgage           $ 73,084      $ 67,598      $ 55,357      $ 41,727      $ 30,577
  Commercial Mortgage             102,623        75,905        57,223        48,349        42,703
  Construction                     25,011        21,438        12,561        11,943         6,256
Commercial & Industrial (1)        24,229        28,105        33,429        32,628        22,308
Loans to Individuals for
  Automobiles                       3,732         6,640         8,583         7,907        10,298
Other Loans to Individuals          8,592         9,249        11,721        10,062         8,864
Other Loans                           914           657           344           535           468
----------------------------------------------------------------------------------------------------
                                 $238,185      $209,592      $179,218      $153,151      $121,474
====================================================================================================
</TABLE>

Note: (1) The Company's commercial loans are not concentrated within a single
industry or group of related industries.


                                       27
<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

     The Company had strong growth in the loan portfolio in 2002. The loan
portfolio increased by $28.6 million or 14% in 2002. Most of the loan growth was
in the form of loans secured by real estate. Commercial mortgages increased
$26.7 million or 35%. The Company also experienced growth in residential
mortgages which increased $5.5 million and construction loans which grew by $3.6
million. Please see "Asset Quality" for a discussion of the Company's practices
with respect to construction lending. Construction loans comprised 10.5% of
total loans at December 31, 2002.

     The Company targets small to medium sized businesses, developers and
professionals in its lending area. With the ever changing composition of the
banking marketplace, the Company has tried to remain competitive in its pricing
of loans, but will not sacrifice loan quality to capture additional volume. It
is important to note that 26% of the loans secured by residential real estate as
of December 31, 2002, were for commercial purposes. It is common for small
business owners to secure commercial loans with their personal residences.

The following table sets forth the Company's total loans by maturity and
interest rate sensitivity as of December 31, 2002:

================================================================================
                              MATURITY       AFTER
                               WITHIN     ONE THROUGH     AFTER
(in thousands)                ONE YEAR     FIVE YEARS   FIVE YEARS       TOTAL
================================================================================
Loans with fixed rates         $26,879      $ 95,796      $ 5,157      $127,832
Loans with floating rates       42,937        17,632       49,784       110,353
--------------------------------------------------------------------------------
Total                          $69,816      $113,428      $54,941      $238,185
================================================================================

ASSET QUALITY

Various degrees of credit risk are associated with substantially all investing
activities. The lending function, however, carries the greatest risk of loss.
Risk elements include loans past due, non-accrual loans, renegotiated loans,
other real estate owned and loan concentrations. The Company closely monitors
its loan portfolio to minimize the risk of delinquency and problem credits. As a
general rule, a loan that is past due for principal or interest in excess of
ninety days is placed on a non-accrual basis unless circumstances exist that
would lead management to find that non-accrual is unnecessary (i.e., liquidation
of collateral or the borrower has the ability to bring the loan current as to
principal and interest).

     The Company's loan portfolio consists of commercial loans, commercial
mortgages, real estate construction loans, residential mortgage loans and
consumer loans.

     The Company's commercial loans are primarily made to small businesses and
professionals in its market area with maturities between one and five years. The
majority of these loans are collateralized by real estate consisting of single
family homes or commercial properties, and/or the assets of the businesses and
further secured by personal guarantees. The Company primarily requires that
there be a loan to value ratio not exceeding 80% on these loans. The Company
also reviews borrower's cash flows in analyzing loan applications. Risks
inherent in these loans include risks that a borrower's cash flow generated from
its business may not be sufficient to repay the loans, either because of general
economic conditions, downturns specific to the borrower's business or interest
rate changes which cause deterioration in a borrower's cash flow as well as
risks associated with the collateral securing the loans, such as possible
deterioration in value of the collateral.

     Commercial mortgages are made to small businesses, developers and
professionals in the market area to purchase commercial real estate for use in
their businesses. The Company will generally not finance in excess of 75% of
appraised value. In reviewing a borrower's qualifications, the Company pays
particular attention to cash flow. In addition, the Company frequently requires
personal guarantees. Risk factors associated with these loans include general
economic performance which will affect vacancy rates for commercial properties
and the ability of businesses to maintain cash flows as well as the resale value
which may be yielded on a particular property.

     The Company originates and retains residential mortgages loans. They are
generally written with a three, five or ten year fixed rate which adjusts
annually thereafter for the life of the loan, which may be up to 30 years. The
Company generally does not lend in excess of 80% of the appraised value. Risks
inherent in these loans include the employment stability and earnings potential
of the borrower as well as potential resale values associated with the
collateral securing these loans.

     The Company makes construction loans to individuals with expertise in the
industry or to owner occupied projects. The loans are generally on projects for
which a sale contract has been executed and for which permanent mortgage
financing is in place. The Company will generally lend up to 75% of the
appraised completed value of the project. Risks inherent with these loans
include performance of the general economy which will affect whether the sale of
the project actually closes despite its contracted status and the


                                       28
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

risk inherent with whether the construction of a project will actually be
completed and completed within budget. Environmental factors may affect whether
a project can be completed. However, the Company does environmental due
diligence prior to closing.

     Normally, commercial real estate loans are insured for loss resulting from
default which is accompanied by environmental problems. Coverage is currently
obtained through an insurance carrier. Based upon the historical data and the
Company's underwriting procedures, the carrier determines whether or not it will
insure the property.

     An environmental risk factor is the risk that a site may be contaminated by
toxic chemicals, oil, gasoline or like substance. In the event that this occurs,
environmental audits must be performed to determine the extent of the problem
and cost of cleanup. Excessive cleanup costs may endanger the completion of the
project.

     The Company makes consumer loans on an unsecured basis as personal loans to
finance various consumer goods. Automobile loans are also made on a direct basis
and through the Company's relationship with area car dealers. Employment,
income, credit rating, as well as the potential resale values of automobiles,
are the risk factors inherent in these loans.

ALLOWANCE FOR LOAN LOSSES

The Company maintains an allowance for loan losses at a level deemed sufficient
to absorb losses, which are inherent in the loan portfolio at each balance sheet
date. Management determines the adequacy of the allowance on a monthly basis to
ensure that the provision for loan losses has been charged against earnings in
an amount necessary to maintain the allowance at a level that is appropriate
based on management's assessment of probable estimated losses. The Company's
methodology for assessing the appropriateness of the allowance for loan losses
consists of several key elements. These elements include a specific allowance
for all commercial loans based upon a risk rating assigned to the loan, an
allowance for homogeneous types of loans such as consumer installment loans,
residential mortgage loans and home equity loans, an additional allowance for
loans deemed to be impaired and an unallocated portion. The Company consistently
applies the following comprehensive methodology.

     All commercial loans are assigned a two digit risk rating at the time of
closing. The first digit of the rating refers to the strength of the borrower
based on their financial condition and past history. Current economic conditions
and the effect on the borrower's business are also taken into account. The
second digit refers to the collateral strength and liquidity with zero being
assigned to unsecured loans. An allowance amount is then assigned to each risk
rating. Since, in its eleven year history, the Company has very little
commercial loan loss history, the amount of the allowance is based on the
experience of management and their judgement with respect to these types of
loans. These allowances assigned to risk ratings may be changed in the future if
the conditions or loan losses experience makes that necessary.

     A risk rating may be changed with the approval of the senior loan officer.
A rating change may be requested if the individual loan officer or the Bank's
credit analyst is aware of a change in the borrower's financial condition. In
addition, approximately 60% of the dollar amount of commercial loans are
reviewed on an annual basis by an outside independent loan review firm at which
time a change to the risk rating may be recommended. The audit Committee of the
Board of Directors reviews the independent loan review firms recommendations on
a quarterly basis.

     The allowance for homogenous loans is established based on a number of
factors, including current economic conditions and the loss experience with
these types of loans as well as management's judgement.

     Loans are deemed to be impaired if they are 60 days or more past due for
principal or interest or are in a non-accrual status. A loan is placed in a
non-accrual status at the time when ultimate collectibility of principal or
interest, wholly or partially, is in doubt. Past due loans are those loans which
were contractually past due 90 days or more as to interest or principal payments
but are well secured and in the process of collection. If there is insufficient
collateral to pay the amount of the loan, an allowance is determined over and
above the amount required by the risk rating by taking the difference between
the carrying amount of the loan and the present value of expected future cash
flows discounted at the loans current rate less any amounts already established
by the risk rating.

     The Company also maintains an unallocated allowance. The unallocated
allowance is used to cover any factors or conditions, which may cause a
potential loan loss but are not specifically identifiable. It is prudent to
maintain an unallocated portion of the allowance because no matter how detailed
an analysis of potential loan losses is performed, these estimates by definition
lack precision.

     Since all identified losses are immediately charged off, no portion of the
allowance for loan losses is restricted to any individual loan or groups of
loans, and the entire allowance is available to absorb any and all loan losses.

     The calculation of the estimated provision for loan losses is presented to
and discussed with the Company's Board of Directors on a quarterly basis.


                                       29
<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

     The following table summarizes the composition of the Company's
non-performing assets as of the dates indicated:

<TABLE>
<CAPTION>
==============================================================================================================================
                                                                                     DECEMBER 31,
                                                     =========================================================================
($ in thousands)                                           2002           2001           2000           1999           1998
==============================================================================================================================
<S>                                                    <C>            <C>            <C>            <C>            <C>
Non-performing assets(1):
Non-accruing loans
  Commercial and Construction                          $    442       $    103       $    316       $    599       $     56
  Real Estate                                               191            209            149             --             --
  Installment                                                25            198             17             93             40
------------------------------------------------------------------------------------------------------------------------------
Total non-accrual loans                                     658            510            482            692             96
Restructured loans                                          257            301             --             --             --
------------------------------------------------------------------------------------------------------------------------------
Total non-performing loans                                  915            811            482            692             96
------------------------------------------------------------------------------------------------------------------------------
Other real estate owned                                      --             --             --             --             --
==============================================================================================================================
Total non-performing assets                            $    915       $    811       $    482       $    692       $     96
==============================================================================================================================
Loans past due 90 days or more(2)                      $     --       $     --       $     --       $     --       $      5
==============================================================================================================================
Non-performing loans to total loans                        0.38%          0.39%          0.27%          0.45%          0.08%
Non-performing assets to total assets                      0.23%          0.25%          0.20%          0.34%          0.05%
Allowance for loan losses to non-performing loans        263.06%        260.30%        378.22%        223.99%       1261.46%
==============================================================================================================================
</TABLE>

(1) Non-performing assets excludes loans past due 90 days or more and still
accruing.

(2) Loans past due 90 days or more and still accruing.

As noted in the previous table, the Company's charge off history shows
relatively small percentages of net charge offs. The following table depicts an
approximate allocation of the allowance for loan losses as of the dates
indicated:

<TABLE>
<CAPTION>
================================================================================================================================
                                                                   DECEMBER 31,
================================================================================================================================
                            2002                  2001                  2000                  1999                  1998
================================================================================================================================
                                % OF                  % OF                  % OF                  % OF                  % OF
                              LOANS TO              LOANS TO              LOANS TO              LOANS TO              LOANS TO
                                TOTAL                 TOTAL                 TOTAL                 TOTAL                 TOTAL
($ in thousands)    AMOUNT      LOANS     AMOUNT      LOANS     AMOUNT      LOANS     AMOUNT      LOANS     AMOUNT      LOANS
================================================================================================================================
<S>                 <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Commercial
  (including
  Construction)     $2,225      64.14%    $1,892      60.17%    $1,612      57.78%    $1,345      60.67%    $  986      58.67%
Residential
  Real Estate           80      30.68%        74      32.25%        53      30.89%        57      27.25%        41      25.17%
Installment            102       5.18%       145       7.58%       158      11.33%       148      12.08%       184      16.16%
--------------------------------------------------------------------------------------------------------------------------------
                    $2,407     100.00%    $2,111     100.00%    $1,823     100.00%    $1,550     100.00%    $1,211     100.00%
================================================================================================================================
</TABLE>


                                       30
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

The following table summarizes the activity in the allowance for possible loan
losses for the period indicated:

<TABLE>
<CAPTION>
========================================================================================================================
                                                                          YEARS ENDED DECEMBER 31,
                                                   =====================================================================
($ in thousands)                                         2002          2001          2000          1999          1998
========================================================================================================================
<S>                                                  <C>           <C>           <C>           <C>           <C>
Balance, January 1                                   $  2,111      $  1,823      $  1,550      $  1,211      $    982
Loans charged off
  Commercial and Construction                              --            (3)          (21)           --            --
  Real Estate                                             (20)           --           (12)           --            --
  Installment                                            (186)         (106)         (104)         (115)          (80)
------------------------------------------------------------------------------------------------------------------------
Total charge offs                                        (206)         (109)         (137)         (115)          (80)
------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off
  Commercial and Construction                              --            --            --            --             8
  Real Estate                                              12            --            --            --            --
  Installment                                              35            32            35            14             1
------------------------------------------------------------------------------------------------------------------------
Total recoveries                                           47            32            35            14             9
------------------------------------------------------------------------------------------------------------------------
Net Loans charged off                                    (159)          (77)         (102)         (101)          (71)
------------------------------------------------------------------------------------------------------------------------
Provision charged to expense                              455           365           375           440           300
------------------------------------------------------------------------------------------------------------------------
Balance, December 31                                 $  2,407      $  2,111      $  1,823      $  1,550      $  1,211
========================================================================================================================
Net charge offs as a percentage of average loans         0.07%         0.04%         0.06%         0.07%         0.06%
Allowance for loan losses to total loans                 1.01%         1.01%         1.02%         1.01%         1.00%
Allowance for loan losses to non-performing loans      263.06%       260.30%       378.22%       223.99%      1261.46%
</TABLE>

DEPOSITS

Following is the average balances and rates paid on deposits for the period
indicated:

<TABLE>
<CAPTION>
============================================================================================
                                          YEARS ENDED DECEMBER 31,
                           2002                      2001                      2000
                 ======================    ======================    =======================
                   AVERAGE     AVERAGE       AVERAGE     AVERAGE       AVERAGE     AVERAGE
($ in thousands)   BALANCE       RATE        BALANCE       RATE        BALANCE       RATE
============================================================================================
<S>               <C>            <C>        <C>            <C>        <C>            <C>
Demand            $ 49,837         --       $ 41,236         --       $ 34,316         --
Savings             41,500       1.72%        22,154       2.81%        17,190       2.86%
Money Market        48,838       1.93%        28,988       3.05%        24,882       3.62%
NOW                 64,007       0.89%        44,400       1.85%        32,489       2.43%
Time               135,171       3.38%       126,184       5.15%       100,028       5.75%
--------------------------------------------------------------------------------------------
                  $339,353       2.00%      $262,962       3.35%      $208,905       3.80%
============================================================================================
</TABLE>

Following is the maturity distribution of time certificates of deposit $100,000
and over:

================================================================================
                                          December 31,
(in thousands)                                2002
================================================================================
Three months or less                        $  9,412
Over three months through six months           4,521
Over six months through twelve months          4,810
Over one year through three years              7,208
Over three years through five years            1,553
                                            $ 27,504
================================================================================

LIQUIDITY

The Company's liquidity needs arise principally to accommodate possible deposit
outflows and meet loan demand. The Company's liquidity is dependent on the
successful management of its assets and liabilities so as to meet these needs of
both its deposit and loan customers.

     Liquidity, as represented by cash and cash equivalents, is a product of its
operating, investing and financing activities.

     During 2002, the Company generated $3.5 million cash flow from operations.

     Net cash used in investing activities was $69.3 million. Purchases of
securities, both held to maturity and available for sale, accounted for $88.0
million of cash for


                                       31
<PAGE>

SVB FINANCIAL SERVICES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations

investing purposes. These purchases were partially funded by $48.0 million of
maturities of both held to maturity and available for sale securities and
proceeds from the sales of securities of $7.6 million. An increase in loan
growth accounted for $28.5 million in cash invested.

     Net cash provided by financing activities of $73.9 million supplied funding
for the above investing activities. Most of these funds, 66% or $48.6 million,
were generated by an increase in the Bank's core deposit accounts consisting of
demand deposits, savings deposits and money market accounts. Time deposits or
certificates of deposits also increased $18.3 million.

     Overall, cash and cash equivalents increased $8.1 million during 2002.
Additionally, the Company can borrow up to $17.8 million as a member of the
Federal Home Loan Bank and $3.5 million is available through lines of credit at
correspondent banks. As of December 31, 2002, the Company had $9.2 million in
total advances with the Federal Home Loan Bank, thereby reducing the available
line to $8.6 million.

     The Company believes its liquidity position is sufficient to provide funds
to meet future loan demand or possible outflow of deposits.

ASSET AND LIABILITY MANAGEMENT

Interest rate risk is defined as the sensitivity of the Company's current and
future earnings as well as its capital to changes in the level of market
interest rates. The Company's exposure to interest rate risk results from, among
other things, the difference in maturities on interest earning assets and
interest bearing liabilities. The relationship between the interest rate
sensitivity of the Bank's assets and liabilities is continually monitored by the
Bank's Asset/Liability Management Committee (the "ALCO"). The purpose of the
ALCO is to review and monitor the volume, mix and pricing of the interest
earning assets and interest bearing liabilities consistent with the Bank's
overall liquidity, capital, growth, profitability and interest rate risk goals.

     Loans make up the largest portion of the Bank's assets. In making
commercial loans, the emphasis is placed on either floating rate loans tied to
the prime lending rate or fixed rate loans with prepayment penalties depending
upon the Bank's overall rate sensitivity position. Fixed rate commercial loans
are generally written so that the rates can be adjusted within 3-7 years with
payouts up to 25 years. Mortgage loans are currently written to be adjusted
annually after the first 3, 5 or 10 year term with payouts up to 30 years. Home
equity lines of credit are tied to the prime lending rate although special
promotions may offer a fixed rate for periods of not greater than one year.
Fixed rate home equity loans are offered with a maturity of 5 or 10 years,
amortizing over a 15 year period. These loans also contain interest rate floors.
Installment loans are written at fixed rates amortizing over 1 to 5 years.

     The Bank also takes into consideration any off-balance sheet items when
evaluating and managing its liquidity. At December 31, 2002 off-balance sheet
items consisted of unfunded loan commitments and financial standby letters of
credit.

     Generally, when evaluating the Bank's liquidity all unused loan commitments
and letters of credit are included in the analysis as estimated drawdowns of 25%
of the total commitment. Although economic conditions interest rates and
numerous other factors can effect the amount of loans to be drawndown,
management feels, through experience, that this is a reasonable estimate to use
when evaluating liquidity needs.

     The Bank utilizes its securities to manage its liquidity and rate
sensitivity. Fixed rate agency and corporate securities are purchased for terms
of less than 5 years. Adjustable rate securities require an estimated average
life at time of purchase of 10 years or less. Callable securities can be
purchased for terms of 5 years or less with call period of three months to 2
years. Fixed rate mortgage-backed securities are purchased with estimated
average lives at the time of purchase of not more than 5 years. These securities
are reviewed for changes in yield and average life resulting from changes in
interest rates. The Bank also invests in FDIC insured CDs of other financial
institutions with a maturity of three months to three years for amounts up to
$100,000.

     Short term liquidity is also managed through the investment into high
quality short term Money Market securities, US Government securities and/or US
Treasury securities made available through Money Market funds which can be
liquidated at anytime. In general, the day to day liquidity is

The following table sets forth the Company's commitments sheet items by maturity
date as of December 31, 2002:

<TABLE>
<CAPTION>
============================================================================================
                                    TOTAL        LESS
COMMITMENTS                        AMOUNTS       THAN        1=3         4=5        OVER 5
(in thousands)                    COMMITTED     1 YEAR      YEARS       YEARS        YEARS
============================================================================================
<S>                                <C>         <C>         <C>         <C>         <C>
Lines of Credit                    $34,178     $18,933     $ 1,181     $    30     $14,034
Standby Letters of Credit            3,942       3,924          18          --          --
Guarantees                              --          --          --          --          --
Standby Repurchase Obligations          --          --          --          --          --
Loan Commitments                     2,044       2,044          --          --          --
FHLB Advances                        7,500       3,000       3,000       1,500          --
Leases                              11,523       1,040       2,093       1,845       6,545
--------------------------------------------------------------------------------------------
Total Commitments                  $59,187     $28,941     $ 6,292     $ 3,375     $20,579
============================================================================================
</TABLE>


                                       32
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations

managed through the sale or purchase of Federal Funds from approved
correspondent banks.

     A significant portion of the Bank's assets have been funded with CDs
including jumbo CDs. Unlike other deposit products, such as checking and savings
accounts, CDs carry a high degree of interest rate sensitivity and therefore,
their renewal will vary based on the competitiveness of the Bank's interest
rates. The Bank has attempted to price its CDs competitively.

     Interest rates on savings accounts, NOW and Money Market accounts are
variable and can be changed at the discretion of the Company. These accounts are
not tied to any particular index.

     As members of the Federal Home Loan Bank, the Company can borrow advances
at a fixed or floating rate and on a non-amortizing or amortizing basis. These
advances can be for terms ranging from overnight to up to 30 years. The advances


INTEREST RATE SENSITIVITY AT DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                                    MATURITY OR REPRICING IN (1)
                                             DUE IN          BETWEEN                            NON-
                                             90 DAYS        91 DAYS -          AFTER          INTEREST
(in thousands)                               OR LESS         ONE YEAR         ONE YEAR         BEARING            TOTAL
=========================================================================================================================
<S>                                         <C>              <C>              <C>             <C>              <C>
ASSETS:
Securities                                  $ 19,982         $ 34,044         $ 48,752        $     --         $102,778
Federal Funds Sold                            20,778               --               --              --           20,778
Other Short Term Investments                   7,293               --               --              --            7,293
Interest Bearing Time Deposits                 1,784            5,580            6,475              --           13,839
Loans                                         89,063           28,599          119,345             799          237,806
Valuation Reserve                                 --               --               --          (2,407)          (2,407)
Non-interest Earning Assets                       --               --               --          24,897           24,897
-------------------------------------------------------------------------------------------------------------------------
Total Assets                                $138,900         $ 68,223         $174,572        $ 23,289         $404,984
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest Bearing Liabilities
Money Market                                $  6,495         $ 26,973         $ 16,483        $     --         $ 49,951
NOW                                            3,672           17,622           52,132              --           73,426
Savings Deposits                               6,198           18,591           16,525              --           41,314
CDs over $100,000                              9,325            9,497            8,682              --           27,504
Other Time Deposits                           34,431           55,475           28,100              --          118,006
Other Borrowings                                  --            3,000            6,214              --            9,214
Obligation Under Capital Lease                     5               15              391              --              411
Guaranteed Preferred Beneficial
  Interest in the Corporation
  Subordinated Debentures                      6,500               --               --              --            6,500
-------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities            66,626          131,173          128,527              --          326,326
-------------------------------------------------------------------------------------------------------------------------
Non-interest Bearing Demand Deposits           9,219            8,676           36,326              --           54,221
Other Liabilities                                 --               --               --           1,259            1,259
Stockholders' Equity                              --               --               --          23,178           23,178
-------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                        $ 75,845         $139,849         $164,853        $ 24,437         $404,984
-------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity Gap               $ 63,055         $(71,626)        $  9,719        $ (1,148)
-------------------------------------------------------------------------------------------------------------------------
Cumulative Gap                              $ 63,055         $ (8,571)        $  1,148
-------------------------------------------------------------------------------------------------------------------------
Cumulative Gap to Total Assets                 15.57%           (2.12)%           0.28%
=========================================================================================================================
</TABLE>

(1)  The following are the assumptions that were used to prepare the Interest
     Rate Sensitivity analysis:

     (A)  Interest rates remain flat during the period covered by the table,
          i.e. a prime rate of 4.25% and a Federal Funds rate of 1.25%.

     (B)  Callable agency securities are spread at their call dates or maturity
          date depending upon the relationship of the rate of the securities to
          the treasury yield curve as dictated by the rates listed in (A)

     (C)  Prepayments on mortgage-backed securities as well as various types of
          loans are based on estimates in relationship to the rates listed in
          (A)

     (D)  Loans are spread based on the earlier of their actual maturity date or
          the date of their first potential rate adjustment.

     (E)  The maturity or decay rate of non-maturity deposits, i.e. Money
          Market, NOW, savings and non-interest bearing demand deposits is
          estimated based on historical data.

     (F)  Time deposits are spread based on their actual maturity dates.


                                       33
<PAGE>



SVB FINANCIAL SERVICES, INC.

Management's Discussion and Analysis of Financial Condition and
Results of Operations

can be matched against various earning assets. At December 31, 2002 and December
31, 2001, the Company had outstanding advances of $9.2 million and $5.8 million
respectively, all of which had fixed rates of interest.

     During 2002, the Company participated in a pooled institutional placement
of trust preferred securities of $2.5 million which combined with a similar
placement of $4.0 million in 2001, resulted in a total of $6.5 million in trust
preferred securities as of December 31, 2002. Both of these subordinated
debentures can be redeemed in 30 years from issuance and carry a floating rate
of interest based on the 3-month LIBOR plus 345 basis points for the 2002
placement and 358 basis points for the 2001 placement. Both of these rates are
adjusted on 3 month intervals.

     The nature of the Bank's current operations is such that it is not subject
to foreign currency exchange or commodity price risk. Additionally, neither the
Company nor the Bank owns any trading assets. At December 31, 2002, the Bank did
not have any hedging transactions in place.

INTEREST RATE SENSITIVITY ANALYSIS

One measure of the Bank's interest rate sensitivity is through the use of a
sensitivity gap analysis. The interest rate sensitivity gap is defined as the
difference between the amount of interest earning assets maturing or repricing
within a specific time period and the amount of interest bearing liabilities
maturing or repricing within that same time period. A gap is positive when the
amount of interest earning assets maturing or repricing exceeds the amount of
interest bearing liabilities maturing or repricing within that same period and
is negative when the amount of interest bearing liabilities maturing or
repricing exceeds the amount of interest earning assets maturing or repricing
within the same period. Accordingly, during a period of rising interest rates,
an institution with a negative gap position would not be in as favorable a
position, compared to an institution with a positive gap, to invest in higher
yielding assets. A negative gap may result in the yield on an institution's
interest earning assets increasing at a slower rate than the increase in an
institution's cost of interest bearing liabilities than if it had a positive
gap. During a period of falling interest rates, an institution with a negative
gap would experience a repricing of its interest earning assets at a slower rate
than its interest bearing liabilities which, consequently, may result in its net
interest income growing at a faster rate than an institution with a positive gap
position.

     The ALCO attempts to maintain the Company's cumulative gap ratios at +/-15%
for 90 days or less, +/-20% for four to six months and +/-25% for between six
months and one year.

     While gap analysis is a general indicator of the potential effect that
changing interest rates may have on net interest income, the gap itself does not
present a complete picture of interest rate sensitivity. First, changes in the
general level of interest rates do not affect all categories of assets and
liabilities equally or simultaneously. Second, assumptions must be made to
construct a gap analysis. Management can influence the actual repricing of the
deposits independent of the gap assumption. Third, certain securities are
callable and therefore repriceable prior to their maturity dates depending on
the level of interest rates. The cash flows of certain loans and mortgage-backed
securities and the repricing of those cash flows will vary under different
interest rates. Fourth, the gap analysis represents a one-day position and
cannot incorporate a changing mix of assets and liabilities over time as
interest rates change. Volatility in interest rates can also result in
disintermediation, which is the flow of funds away from financial institutions
into direct investments, such as U.S. Government and corporate securities and
other investment vehicles, including mutual funds, which, because of the absence
of federal insurance premiums and reserve requirements, generally pay higher
rates of return than financial institutions. The decline in the market for
equity securities has been a source of new deposits over the past few years.

     As indicated in the previous table, the Bank has had a positive gap
position in the period of 1 to 90 days. During periods of continual increases in
short-term rates the Company will generally experience expansion of its net
interest margin.

     Beginning in January 2001 and continuing throughout the year, the Federal
Funds rate and Prime lending rates were reduced eleven times for a total of 475
basis points. The Company's net interest margin declined to 4.02%.

     During 2002, the Federal Funds rate and the Prime lending rate remained
flat for 10 months, until they were reduced 50 basis points in November. The net
interest margin declined to 3.81% for the year. For further discussion of the
net interest margin see "Net Interest Income."

     Past performance is no indication of future results. The net interest
margin can be affected by more than the change in the level of interest rates.
Such items as the changes in the mix of assets and liabilities and a change in
the competitive factors governing the pricing of assets and liabilities can also
greatly impact the net interest margin.

     An additional analysis of the Bank's interest rate risk is a forecast of
changes in the Bank's Market Value of Portfolio Equity (MVPE) under alternative
interest rate environments. The MVPE is defined as the net present value of the
Bank's existing assets, liabilities and off-balance sheet instruments. The
calculated estimated change in MVPE for the Bank at December 31, 2002 is as
follows:

                                                               MVPE         $
CHANGE IN INTEREST (in thousands)                             Amount     Change
================================================================================
+200 Basis Points                                            $22,806    $(2,901)
Base Amount Rate                                              25,707         --
-200 Basis Points                                             26,506        799
================================================================================

The policy of the Company requires that a parallel shock of +/- 200 basis points
may not change the MVPE by more than 1% of total assets. For 2002, this amount
would be $4.0 million.

     It is important to note that as of December 31, 2002, a downward parallel
shock of 200 basis points could not be


                                       34
<PAGE>



                                                    SVB FINANCIAL SERVICES, INC.
                 Management's Discussion and Analysis of Financial Condition and
                                                           Results of Operations


applied to all assets and liabilities. For example, the Federal Funds rate at
that time was 1.25%. Certain loans rates, such as home equity loans, have
contractual floors which at year end 2002 were above the current market rates.
In addition, certain deposit rates could not realistically be reduced by 200
basis points. Assumptions were made as to implied floors for these rates.

RETURN ON ASSETS AND RETURN ON EQUITY

The following table depicts returns on average assets and returns on average
equity for the periods indicated:

================================================================================
                                                        Years Ended December 31,
                                                       =========================
                                                          2002           2001
================================================================================
Return on Average Assets                                  0.65%          0.61%
Return on Average Equity                                 11.46%          9.49%
Average Equity to
  Average Assets                                          5.65%          6.42%
================================================================================

CAPITAL RESOURCES

Under risk-based capital guidelines, assets and credit equivalent amounts of
derivatives and off-balance sheet items are assigned to one of several risk
categories according to the obligor, the guarantor or the nature of the
collateral. The aggregate dollar amount in each risk category is then multiplied
by the risk weight associated with that category. The resulting weighted values
are added together to determine the total of risk weighted assets. This total
comprises the denominator of the risk-based capital ratios.

     The Company did not have any derivatives as of December 31, 2002 or 2001.
Off-balance sheet items totalled $40.2 million for December 31, 2002 and $ 40.1
million for December 31, 2001 and were made up of unused loan commitments and
letters of credit.

     Subordinated debentures in the amount of $6.5 million in 2002 and $4.0
million in 2001 were included in the numerator of the risk-based capital ratios.
Consistent with the U.S. bank holding company capital regulations, these
securities may be treated as components of Tier 1 capital as long as they do not
exceed 25% of all Tier 1 elements at any time. At December 31, 2002 and 2001 the
inclusion of these securities represented 23% and 18% respectively of tier 1
capital.

     Under the FDIC Improvement Act of 1991, banks are required to maintain a
minimum ratio of total capital to risk based assets of 8% of which at least 4%
must be in the form of Tier 1 capital (primarily shareholders' equity). The
following are the Company's capital ratios at the end of the periods indicated.
The Bank's Capital Ratios are not materially different than those of the
Company.

================================================================================
                                                       Years Ended December 31,
                                                      ==========================
                                                          2002           2001
================================================================================
Total Capital to
  Risk Weighted Assets                                   11.09%         10.39%
Tier 1 Capital to
  Risk Weighted Assets                                   10.22%          9.50%
Leverage Ratio                                            7.53%          7.86%
================================================================================

     It is the Company's intention to retain its earnings in order to provide
adequate capital to continue to support its growth. The Company has never paid a
cash dividend. A 5% stock dividend was paid in 2002 and in 2001.

SUMMARY OF QUARTERLY RESULTS

The following summarizes the results of operations during 2002 on a quarterly
basis:

<TABLE>
<CAPTION>
=================================================================================================
                                                        For the Quarters Ended
                                     ============================================================
(in thousands)                         March 31         June 30    September 30     December 31
=================================================================================================
<S>                                      <C>             <C>             <C>             <C>
Interest Income                          $4,938          $5,215          $5,372          $5,323
Interest Expense                          1,951           1,876           1,861           1,783
-------------------------------------------------------------------------------------------------
Net Interest Income                       2,987           3,339           3,511           3,540
Provision for Loan Losses                   100             135             125              95
-------------------------------------------------------------------------------------------------
Net Interest Income After
  Provision for Loan Losses               2,887           3,204           3,386           3,445
-------------------------------------------------------------------------------------------------
Gains on the Sale of Loans                   40              83              26              56
Gains on the Sale of Securities               8              15              50              72
Other Income                                321             361             300             400
Other Expense                             2,482           2,635           2,726           2,921
-------------------------------------------------------------------------------------------------
Income Before Tax Expense                   774           1,028           1,036           1,052
Income Taxes                                296             379             386             374
-------------------------------------------------------------------------------------------------
Net Income                               $  478          $  649          $  650          $  678
=================================================================================================
</TABLE>


                                       35
<PAGE>

SVB Financial Services, Inc. and Somerset Valley Bank

BOARD OF DIRECTORS

John K. Kitchen
Chairman of the Board

G. Robert Santye
Vice Chairman of the Board

Bernard Bernstein
Robert P. Corcoran
Raymond L. Hughes
Willem Kooyker
Frank Orlando
Gilbert E. Pittenger
Frederick D. Quick
Anthony J. Santye, Jr.
Donald Sciaretta
Herman C. Simonse
Donald R. Tourville

SOMERSET VALLEY INVESTMENT COMPANY, INC.
BOARD OF DIRECTORS:

Vincent C. Canterelli
Raymond L. Hughes, II
Daniel Soriano, Jr. Esq.

WEST END ONE CORP.
BOARD OF DIRECTORS:

Herman C. Simonse
Robert P. Corcoran
Keith B. McCarthy

SOMERSET VALLEY BANK
FOUNDERS ADVISORY COUNCIL:

Richard Bradley
Albert DiFiore
Maureen T. Kruse
Matthew Madlinger
John Majcher
Thomas C. Miller, Esq.
Harold T. Moscatiello
Edward Rego
Sandra L. Runyon
Janak Sakaria, MD
Helga Schwartz, MD
Michael A. Sena
Donald Sweeney, MD
Frank Tourville

SOMERSET VALLEY BANK
HILLSBOROUGH ADVISORY COUNCIL:

George Christiansen, Jr.
Elaine DeMilia
Walter J. Dietz, III
Vincent P. Lipani
Daniel G. Marulli, DDS
John Mondoro
Dan Pullen, DDS
Harry Smith
Kevin Sweeney
Frank N. Yurasko, Esq.

SOMERSET VALLEY BANK
MANVILLE ADVISORY COUNCIL:

Fred DeCicco
Bruce Hartzog
John Gluch
Oscar Gonzalez
Ed Komoroski
Steve Selody
Thomas Trojanowski
Michael Vernoia, Jr.

SOMERSET VALLEY BANK
ABERDEEN ADVISORY COUNCIL:

Michael Cohen, DO
James Ferrano
Robert Kee, Jr.
William Mirkin
Joseph Rettagliata
Martha Suhayda-Vogt


                                       36
<PAGE>

                           SVB Financial Services, Inc. and Somerset Valley Bank
                                                                   Banking Staff

OFFICERS:

Robert P. Corcoran
President and C.E.O.

Keith B. McCarthy
Chief Operating Officer and Treasurer

Arthur E. Brattlof
Executive Vice President
Senior Loan Officer

Michael A. Novak
Senior Vice President
Commercial Loans

Douglas Robb, Jr.
Senior Vice President
Retail Investments

Kathy E. Ruggiero
Senior Vice President
Branch Administration

Karen L. Zaliwski
Senior Vice President
Operations

Paul J. Bowen
Vice President
Commercial Loans

Dianne Durland
Vice President
Branch Administration

Christopher Fenimore
Vice President
Consumer Loans

Michele Gara
Vice President and Manager

Suzanne Lennard
Vice President and Manager

Stephen Miller
Vice President
Commercial Loans

Margaret O'Keeffe
Vice President
Retail Sales and Marketing

John P. Oliver
Vice President
Commercial Loans

Mary E. Rowe
Vice President
Accounting and Finance

Roger W. Russell
Vice President
Loan Administration

Mary Ann Soriano
Vice President
Operations

Elizabeth J. Balunis
Corporate Secretary

Jeannette A. Capra
Assistant Vice President
Loan Operations

Jeanne G. Hagen
Assistant Vice President and Human Resources Director

Joanne Jack
Assistant Vice President

Cary Johnson
Assistant Vice President and Manager

Christopher Seaman
Assistant Vice President
Branch Administration

Vimala Vimalavong
Assistant Vice President and Manager

Michelle Callahan
Assistant Treasurer

Susan Christman
Assistant Treasurer and Manager

Jennifer Corcoran
Assistant Treasurer

Paige Johnstone
Assistant Treasurer and Manager

Scott Ronca
Assistant Treasurer

Diana S. Valko
Assistant Treasurer

Kenneth S.B. Wade II
Assistant Treasurer

Dawn Bonomo
Assistant Secretary

Sharon Eckel
Assistant Secretary

Samuel Evans, Jr.
Assistant Secretary and Manager

Marguerite Eppler
Assistant Secretary

Lisa A. Giacommara
Assistant Secretary

Anne Hardgrove
Assistant Secretary

Yvonne Johnson
Assistant Secretary

Connie Kirchoff
Assistant Secretary

James Law
Assistant Secretary

Kristin Madison
Assistant Secretary

Nancy McLaughlin
Assistant Secretary

Nicole M. Moschak
Assistant Secretary and Manager

Wendy Wheat
Assistant Secretary


                                       37
<PAGE>

SVB Financial Services, Inc. and Somerset Valley Bank


[PHOTO OMITTED]     Keith B. McCarthy
                    CHIEF OPERATING OFFICER AND TREASURER


Aberdeen Office

1147 State Highway 34
Aberdeen, NJ 07747

Telephone:     (732) 583-7300
Fax:           (732) 583-7800

Arbor Glen Office

100 Monroe Street
Bridgewater, NJ 08807

Telephone:     (908) 595-9700
Fax:           (908) 526-3418

Bernards Office

578 Allen Road
Basking Ridge, NJ 07920

Telephone:     (908) 781-5800
Fax:           (908) 781-5959

Bridgewater Office

481 North Bridge Street
Bridgewater, NJ 08807

Telephone:     (908) 725-0033
Fax:           (908) 725-0110

Edison Office

1943 Oak Tree Road
Edison, NJ 08820

Telephone:     (732) 494-8444
Fax:           (732) 494-7377

Gaston Avenue Office

91 North Gaston Avenue
Somerville, NJ 08876

Telephone:     (908) 575-7300
Fax:           (908) 575-9395

Hillsborough Office

601 U.S. Highway 206, Unit 46
Hillsborough, NJ 08844

Telephone:     (908) 281-4009
Fax:           (908) 281-3042

Manville Office

40 North Main Street
Manville, NJ 08835

Telephone:     (908) 541-0404
Fax:           (908) 541-0434

Warren Office

34 Mountain Boulevard
Building C
Warren, NJ 07060

Telephone:     (908) 757-9444
Fax:           (908) 757-2992

Corporate Office

70 East Main Street
Somerville, NJ 08876

Telephone:     (908) 541-9500
Fax:           (908) 541-6464

Main Office

103 West End Avenue
Somerville, NJ 08876

Telephone:     (908) 704-1188
Fax:           (908) 704-0273

Coming Soon

Metuchen Office

700 Middlesex Ave.
Metuchen, NJ 08840

[PHOTO OMITTED]     Arthur E. Brattlof
                    EXECUTIVE VICE PRESIDENT AND SENIOR LOAN OFFICER


                                       38
<PAGE>

                           SVB Financial Services, Inc. and Somerset Valley Bank


GENERAL COUNSEL:

Thomas C. Miller, Esq.
Miller, Robertson and Rodgers, P.C.
21 North Bridge Street
Somerville, NJ 08876

SECURITIES COUNSEL:

Peter D. Hutcheon, Esq.
Norris, McLaughlin & Marcus
721 Route 202-206
Bridgewater, NJ 08807

INDEPENDENT PUBLIC ACCOUNTANTS:

Grant Thornton LLP
2001 Market Street
Philadelphia, PA 19103

TRANSFER AGENT:

Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016

FORM 10-KSB:

The annual report filed with the Securities and Exchange Commission on Form
10-KSB is available without charge upon written request to:

Mr. Keith McCarthy
SVB Financial Services, Inc.
70 East Main Street
Somerville, NJ 08876

WEB SITE:

www.somersetvalleybank.com

STOCK SYMBOL:

The Company's stock is traded on the NASDAQ National Market under the trading
symbol SVBF

MARKET MAKERS:

Advest, Inc.
P.O. Box 733
49 Route 202
Far Hills, NJ 07931
(908) 719-0900

Spear Leeds Kellogg
10 Exchange Place
Jersey City, NJ 07302
(212) 425-6670

First Tennessee Securities Corporation
845 Crossover Lane, Suite 150
Memphis, TN 38117
(901) 435-8783


                                       39