Table of Contents



         1:       Selected Consolidated Financial Information

         2:       Letter to the Shareholders

         3:       Consolidated Balance Sheets

         4:       Consolidated Statements of Income

         5:       Consolidated Statements of Changes in Shareholders' Equity
                  and Comprehensive Income

         6:       Consolidated Statements of Cash Flow

         7:       Notes to Consolidated Financial Statements

         17:      Report of Independent Certified Public Accountants


         18:      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations
<PAGE>
<TABLE>
<CAPTION>
                                                                              SVB FINANCIAL SERVICES, INC.
                                                              Selected Consolidated Financial Information
                                                                                At or For the Years Ended
---------------------------------------------------------------------------------------------------------
(in thousands except per share data)            1999         1998          1997         1996         1995
<S>                                          <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:
Interest Income                              $ 14,412     $ 12,466     $ 10,754     $  8,383     $  6,296
Interest Expense                                6,093        5,665        4,880        3,813        2,871
---------------------------------------------------------------------------------------------------------
Net Interest Income                             8,319        6,801        5,874        4,570        3,425
Provision for Loan Losses                         440          300          280          310          206
---------------------------------------------------------------------------------------------------------
Net Interest Income After Provision
  for Loan Losses                               7,879        6,501        5,594        4,260        3,219
Non-Interest Income                               787          770          561          372          363
Non-Interest Expense                            6,496        5,302        4,303        3,427        2,495
---------------------------------------------------------------------------------------------------------
Income Before Income Taxes                      2,170        1,969        1,852        1,205        1,087
Income Tax Expense                                815          766          749          485          424
---------------------------------------------------------------------------------------------------------
Net Income                                   $  1,355     $  1,203     $  1,103     $    720     $    663
---------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total Assets                                  $206,107    $185,227     $148,550     $124,995     $ 88,744
Federal Funds Sold and Other
  Short Term Investments                        2,400       11,290          188        7,213        5,170
Interest Bearing Time Deposits                  5,283        4,090         --           --           --
Securities Available For Sale                  27,216       21,523       11,266        8,727        4,875
Securities Held To Maturity                     5,122       15,052       22,102       13,989       14,581
Loans, Net                                    151,425      120,176      105,389       86,992       59,528
Deposits                                      189,562      169,714      133,930      112,521       79,680
Shareholders' Equity                           15,364       14,365       13,096       11,910        8,703
---------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Return on Average Assets                          .69%         .75%         .80%         .67%         .83%
Return on Average Equity                         9.19%        8.82%        8.89%        8.07%        8.16%
Net Interest Margin                              4.53%        4.46%        4.52%        4.51%        4.53%
----------------------------------------------------------------------------------------------------------
ASSET QUALITY:
Loans Past Due Over 90 Days                  $   --       $      5     $   --       $     21     $   --
Non-Accrual Loans                                 692           96           63           24         --
Net Charge Offs                                   101           71           81           53           51
Allowance for Loan Losses To Total Loans         1.01%        1.00%         .92%         .89%         .88%
---------------------------------------------------------------------------------------------------------
PER SHARE DATA (1)
Earnings Per Share - Basic $                      .46     $    .42     $    .39     $    .30     $    .28
Earnings Per Share - Diluted                      .45          .40          .38          .29          .28
Book Value                                       5.21         4.93         4.54         4.15         3.53
---------------------------------------------------------------------------------------------------------
CAPITAL RATIOS:
Total Risked-Based Capital                      10.17%       11.14%       12.81%       13.40%       14.11%
Tier I Risked-Based Capital                      9.21%       10.24%       11.89%       12.56%       13.29%
Leverage Capital                                 7.56%        8.54%        8.72%        9.58%        9.89%
---------------------------------------------------------------------------------------------------------
</TABLE>
(1)  All data  has been  retroactively  restated  for  stock  splits  and  stock
     dividends.
<PAGE>
Dear Shareholders,

Last year in our Annual Report,  in addition to providing you with the financial
results of the Company's operations, we also articulated a significant number of
goals we sought to reach and challenges we had to address in keeping the Company
on its path of continued growth and success. We are proud to report that most of
our goals were reached or surpassed and the  challenges  successfully  overcome.
The dire predictions of widespread bank operating system failures because of the
"Y2K" bug never transpired due to the cooperative  efforts of the industry,  its
regulators,  utility and service  providers  and of course the  cooperation  and
loyalty  of our  customers  and  employees.  It is a  chapter  in  our  business
experience that was costly, time consuming and happily placed behind us.

On March 19, 1999,  Somerset  Valley Bank opened its sixth banking  facility,  a
full service branch in the Borough of Manville.  Despite the devastating effects
of the worst flood in at least a half-century, the branch grew to $17 million in
deposits  in only  nine  months  of  operation,  becoming  the  fastest  growing
financial  institution  in the  borough.  We are  proud  to be a  member  of the
Manville  community  and look forward to being a part of the  positive  economic
changes  occurring there.

The construction of our branches in Bernards  Township and Aberdeen Township has
been  completed  and  Grand  Opening  dates  have been set for  January  2000 in
Aberdeen and February 2000 in Bernards Township,  bringing our branch network up
to six  full  service  facilities  and  two  mini  branches  (Gaston  Avenue  in
Somerville and Arbor Glen Retirement Community in Bridgewater). Additionally, we
have  entered  into a  lease  for a ninth  office  on Oak  Tree  Road in a mixed
residential/commercial  area in the Township of Edison,  which we expect to open
in late 2000 or early 2001. Strategically, we have focused on growing our branch
delivery  system  in  demographically   attractive,   convenient   locations  in
economically viable municipalities. Our marketing efforts and banking philosophy
have proven very  successful in our integration  into these  communities and our
short term results and long term prospects are extremely positive.

After  completing  our eighth  year of  operation,  the Bank has  exceeded  $200
million in assets ending the year at $206,107,000, an increase of $20,880,000 or
11.3% over the previous  year.  Our deposits  increased by almost $20 million in
1999,  growing  from  $169,714,000  to  $189,562,000  or 11.7%.  In an excellent
economy  our net  loans  grew by  $31,249,000  to  $151,425,000  or 26.0%  while
non-performing  loans remained well below state and nationwide  averages at .45%
of the total portfolio. Asset quality remains an important element of the Bank's
overall lending  philosophy and a strong hedge against any potential  unexpected
economic  downturns.  We  maintain a  distinct  advantage  in keeping  our asset
quality  strong with our  thorough  knowledge of our client base and by limiting
the number of loans that fall beyond the  communities  within  which we operate.

Despite our aggressive  growth  strategy,  the Bank's earnings in 1999 were at a
record high of $1,355,000 or an increase of 12.6% over the previous year and the
shift toward a broader base of retail accounts  fueled by our additional  branch
locations has provided a sustained increase in non-interest  income. As the Bank
matures  and the new  branches  begin to  support  their  start-up  expenses  by
producing revenues in excess of operating costs,  profitability  should increase
significantly  and provide a much  stronger  revenue base to support  additional
expansion.

Although  the market value of stock has remained  relatively  flat in 1999,  the
stock price remained  constant at between $8.45 and $9.25 per share  following a
5% stock  dividend  that was issued on November  19, 1999.  On an industry  wide
basis,  financial  stocks  in  general  performed  poorly  and many of the major
<PAGE>
financial  institutions  watched  their  stock  values  evaporate  by as much as
30-50%.  At  year-end,  SVB  Financial  Services,  Inc. was selling at $9.00 per
share,  or 19.6 times 1999 earnings and 1.7 times book value of $5.21 per share.
We are extremely  confident that if we continue on our path of aggressive growth
along with conservative  lending policies,  a reputation for quality service and
competitive  financial  product  offerings,  our stock  price  will  perform  in
accordance with our expectations.

As we proceed toward taking the Bank to a more regional level in the Central New
Jersey marketplace, our focus will remain on convenience, a strong commitment to
personal  service  and  increased  technological  capabilities.  In  view of the
rapidly increasing  acceptance and popularity of the Internet, we have begun the
process  of  enhancing  our  existing  web site by adding a more  user  friendly
navigation  system,  along  with  non-traditional  banking  services,  such  as,
discount  brokerage  and  insurance  products to further  serve the needs of our
customers. We welcome our shareholders to join us on our web site and follow our
progress as we explore this  additional  exciting  option in  providing  quality
banking  services.

In accordance with our strategy of offering new financial services,  the Company
has entered  into an  agreement  with  National  Discount  Brokers to provide an
Internet link that will enable our customers to carry out discounted  securities
trading from our web site. This agreement will provide Internet customers with a
value-added  service while enabling the Bank to participate in a revenue sharing
arrangement with National Discount Brokers.

Additionally, the Company has formed a joint venture subsidiary, Somerset Valley
Financial LLC, with  International  Planning  Alliance of Somerset,  New Jersey,
that  will  allow  the  Bank to  share  in  revenues  through  the  sale of life
insurance,  medical  insurance,   financial  planning,  executive  benefits  and
retirement products. A number of Bank officials are licensed insurance providers
and will engage in developing  insurance sales opportunities in conjunction with
our affiliate in this enterprise.

Looking forward, SVB Financial Services, Inc. will remain committed to providing
a  high   level  of  banking   services,   personally   at  our  branch   sites,
technologically through electronic media, and responsively through our community
involvement. We strongly feel that this type of effort will be required in order
to attain the Company's goal of continued  growth and enhanced  stock value.  As
always, we thank you for your continued support.

Very truly yours,



/s/John K. Kitchen               /s/Robert P. Corcoran
------------------               ---------------------
John K. Kitchen                  Robert P. Corcoran

CHAIRMAN OF THE BOARD            PRESIDENT AND CHIEF
                                 EXECUTIVE OFFICER


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                          SVB FINANCIAL SERVICES, INC.
                                                           Consolidated Balance Sheets
                                                      As of December 31, 1999 and 1998
--------------------------------------------------------------------------------------
(in thousands)                                              1999             1998
--------------------------------------------------------------------------------------
<S>                                                   <C>               <C>
 ASSETS

Cash & Due from Banks                                 $      7,028      $      8,358
Federal Funds Sold                                           2,400            10,325
Other Short Term Investments                                  --                 965
--------------------------------------------------------------------------------------
Total Cash and Cash Equivalents                              9,428            19,648
Interest Bearing Time Deposits                               5,283             4,090
Securities
  Available for Sale, at Fair Value                         26,377            21,273
  Held to Maturity, (Fair Value $5,041 in 1999
  and $15,101 in 1998)                                       5,122            15,052
Equity Securities                                              839               250
--------------------------------------------------------------------------------------
Total Securities                                            32,338            36,575
--------------------------------------------------------------------------------------

Loans                                                      153,151           121,474
  Allowance for Loan Losses                                 (1,550)           (1,211)
 Unearned Income                                              (176)              (87)
--------------------------------------------------------------------------------------
Net Loans                                                  151,425           120,176
Premises & Equipment, Net                                    4,789             2,303
Other Assets                                                 2,844             2,435
--------------------------------------------------------------------------------------
Total Assets                                          $    206,107      $    185,227
======================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES

Deposits
Demand

  Non-interest Bearing                                $     32,020      $     27,897
  NOW Accounts                                              27,025            24,502
Savings                                                     16,618            13,836
Money Market Accounts                                       25,446            20,226
Time
  Greater than $100,000                                     13,486            14,088
  Less than $100,000                                        74,967            69,165
--------------------------------------------------------------------------------------
Total Deposits                                             189,562           169,714
--------------------------------------------------------------------------------------
Obligation Under Capital Lease                                 432               438
Other Liabilities                                              749               710
--------------------------------------------------------------------------------------
Total Liabilities                                          190,743           170,862
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                   <C>               <C>
SHAREHOLDERS' EQUITY
Common Stock, $2.09 Par Value:  20,000,000
  Shares Authorized; 2,946,556 Shares in 1999 and
  2,772,224 Shares in 1998 Issued and Outstanding            6,158             5,794
Additional Paid-in Capital                                   6,496             5,502
Retained Earnings                                            3,215             3,062
Accumulated Other Comprehensive (Loss)/Income                 (505)                7
Total Shareholders' Equity                                  15,364            14,365
--------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity            $    206,107      $    185,227
======================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
SVB FINANCIAL SERVICES, INC.
Consolidated Statements of Income
For the years ended December 31, 1999 and 1998
----------------------------------------------------------------------------------------------
(in thousands except per share data)                                        1999       1998
----------------------------------------------------------------------------------------------
<S>                                                                      <C>         <C>
INTEREST INCOME
Loans                                                                    $11,787     $10,210
Securities Available for Sale                                              1,469         763
Securities Held to Maturity                                                  511         966
Dividends on Equity Securities                                                13        --
Other Short Term Investments                                                  10          67
Interest Bearing Time Deposits                                               314          69
Federal Funds Sold                                                           308         391
----------------------------------------------------------------------------------------------
Total Interest Income                                                     14,412      12,466
----------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                                                   6,048       5,628
Other Short Term Borrowings                                                    8        --
Obligation Under Capital Lease                                                37          37
----------------------------------------------------------------------------------------------
Total Interest Expense                                                     6,093       5,665
----------------------------------------------------------------------------------------------
Net Interest Income                                                        8,319       6,801
PROVISION FOR LOAN LOSSES                                                    440         300
Net Interest Income after Provision For Loan Losses                        7,879       6,501
----------------------------------------------------------------------------------------------
OTHER INCOME

Service Charges on Deposit Accounts                                          393         298
(Losses)/Gains on the Sale of Securities Available for Sale                   (8)          4
Gains on the Sale of Loans                                                   253         334
Other Income                                                                 149         134
----------------------------------------------------------------------------------------------
Total Other Income                                                           787         770
----------------------------------------------------------------------------------------------
OTHER EXPENSE

Salaries and Employee Benefits                                             3,291       2,713
Occupancy Expense                                                            872         652
Equipment Expense                                                            432         378
Other Expenses                                                             1,901       1,559
----------------------------------------------------------------------------------------------
Total Other Expense                                                        6,496       5,302
----------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes                                   2,170       1,969
Provision for Income Taxes                                                   815         766
----------------------------------------------------------------------------------------------
NET INCOME                                                               $ 1,355     $ 1,203
==============================================================================================
EARNINGS PER SHARE - BASIC (1)                                           $   .46     $   .42
==============================================================================================
EARNINGS PER SHARE - DILUTED (1)                                         $   .45     $   .40
==============================================================================================
</TABLE>
<PAGE>
(1) Amounts have been restated for stock splits and stock dividends

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

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                                                  SVB FINANCIAL SERVICES, INC.
                                          Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
                                                                               For the years ended December 31, 1999 and 1998
-----------------------------------------------------------------------------------------------------------------------------
                                                                                    ACCUMULATED
                                                          ADDITIONAL                    OTHER        TOTAL
                                               COMMON       PAID-IN     RETAINED    COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE
(in thousands)                                  STOCK       CAPITAL     EARNINGS    INCOME (LOSS)   EQUITY          INCOME
--------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>          <C>          <C>           <C>           <C>
BALANCE, JANUARY 1, 1998                      $  5,726     $  5,473     $  1,859      $     38      $ 13,096
--------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock, Net                       54           43                                       97
Adjustment for Stock Split                          14          (14)
Net Income                                                                 1,203                       1,203     $  1,203
Accumulated Other Comprehensive
   Income/(Loss) Net of

   Reclassification Adjustments and Taxes           --           --           --           (31)          (31)         (31)
                                                                                                                 --------
Total Comprehensive Income                                                                                       $  1,172
==========================================================================================================================
BALANCE, DECEMBER 31, 1998                       5,794        5,502        3,062             7        14,365
--------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock, Net                       71           85                                      156
5% Stock Dividend                                  293          909       (1,202)
Net Income                                                                 1,355                       1,355     $  1,355
Accumulated Other Comprehensive
Income/(Loss) Net of
Reclassification Adjustments and Taxes              --          --            --          (512)         (512)        (512)

Total Comprehensive Income                                                                                       $    843
--------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999                      $6,158    $  6,496     $  3,215       $   (505)     $ 15,364
==========================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>
SVB FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows
For the years ended December 31, 1999 and 1998
--------------------------------------------------------------------------------------
(in thousands)                                                    1999         1998
<S>                                                            <C>           <C>
--------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income                                                     $  1,355      $  1,203
Adjustments to Reconcile Net Income to Net
  Cash Provided By Operating Activities
Provision for Loan Losses                                           440           300
Depreciation and Amortization                                       463           383
Accretion of Securities Discount                                    (30)           (3)
Losses/(Gains) on Sale of Securities
  Available for Sale                                                  8            (4)
Gains on the Sale of Loans                                         (253)         (334)
Increase in Other Assets                                           (164)         (370)
Increase in Other Liabilities                                        43           145
Increase/(Decrease) in Unearned Income                               89           (13)
--------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities                         1,951         1,307
======================================================================================
INVESTING ACTIVITIES
Increase in Interest Bearing Time Deposits                       (1,193)       (4,090)
Proceeds from Sales of Securities Available for Sale              6,512         2,504
Proceeds from Maturities of Securities
Available for Sale                                                4,906         6,633
Held to Maturity                                                 15,296        15,797
Purchases of Securities
Available for Sale                                              (17,345)      (19,214)
Held to Maturity                                                 (5,296)       (8,717)
Equity Securities                                                  (589)         (250)
Increase in Loans, Net                                          (31,525)      (14,741)
Capital Expenditures                                             (2,935)         (939)
--------------------------------------------------------------------------------------
Net Cash Used for Investing Activities                          (32,169)      (23,017)
======================================================================================
FINANCING ACTIVITIES
Net Increase in Demand Deposits                                   6,646        17,419
Net Increase in Savings Deposits                                  2,782         4,793
Net Increase in Money Market Deposits                             5,220         3,999
Net Increase in Time Deposits                                     5,200         9,572
Decrease in Federal Funds Purchased                                   -          (500)
Decrease in Obligation Under Capital Lease                           (6)           (5)
Proceeds from the Issuance of Common Stock, Net                     156            97
--------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                        19,998        35,375
(Decrease)/Increase in Cash and Cash Equivalents                (10,220)       13,665
Cash and Cash Equivalents, Beginning of Year                     19,648         5,983
--------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                         $  9,428      $ 19,648
======================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                            <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest                         $  5,997      $  5,640
======================================================================================
Cash Paid During the Year for Federal Income Taxes             $    840      $    620
======================================================================================
</TABLE>

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

                                       6
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements


1:  ORGANIZATION AND NATURE OF OPERATIONS

SVB Financial  Services,  Inc., (the  "Company"),  a bank holding  company,  was
incorporated  on February 7, 1996 and owns 100 percent of the shares of Somerset
Valley  Bank  (the  "Bank").  The  Bank  owns 100  percent  of  Somerset  Valley
Investment Company, Inc.

The Bank was  granted a charter by the New  Jersey  Department  of  Banking  and
commenced  operations on December 20, 1991. The Bank is a full service community
bank and operates at  locations in  Somerville,  Hillsborough,  Bridgewater  and
Manville, New Jersey. During 1998, approval was received from banking regulatory
authorities  to open  branches in Aberdeen  and Bernards  Township,  New Jersey.
These branches will open in early 2000.  During 1999, the Bank received approval
to open a branch in Edison.  The branch is  expected  to open in late 2000.  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 their primary
market area,  including  financial  institutions  with  resources  substantially
greater  than their 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.

The  consolidated  financial  statements  include the accounts of the Bank.  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.

2: SIGNIFICANT ACCOUNTING POLICIES

BASIS  OF  FINANCIAL  STATEMENT  PRESENTATION:   The  preparation  of  financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of 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.
<PAGE>
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.  The remainder of the Company's  securities are held for
indefinite  periods  of  time  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 market 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 rates 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,  1999 and 1998.

In June 1998, SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging
Activity"  was issued.  Subsequent to this  statement,  SFAS No. 137 was issued,
which  amended the effective  date of SFAS No. 133 to be all fiscal  quarters of
all fiscal years beginning after June 15, 2000.  Based on the Company's  minimal
use of  derivatives  at the current time,  management  does not  anticipate  the
adoption  of SFAS No.  133 will have a  significant  impact on  earnings  or the
financial  position of the Company.  However,  the impact from adopting SFAS No.
133 will depend on the nature and purpose of the  derivative  instruments in use
by the Company at that time.

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  Company  accounts  for its  transfers  and  servicing  financial  assets in
accordance  with  SFAS No.  125,  "Accounting  for  Transfer  and  Servicing  of
Financial  Assets and  Extinguishments  of  Liabilities," as amended by SFAS No.
127, "Deferral of the Effective Date of Certain Provision of SFAS No. 125." This
standard  provides   accounting  guidance  on  transfers  of  financial  assets,
servicing of financial assets and extinguishments of liabilities.

The Company  periodically  sells certain  commercial and mortgage loans to other
financial institutions without recourse to the Company. The gains and

                                       7
<PAGE>
SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

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  collectability  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 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 judgment of information  available to
them at the time of their examination.

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.

The Company  accounts for  long-lived  assets in  accordance  with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  of." This  statement  provides  guidance  on when assets  should be
reviewed for impairment, how to determine whether an asset or group of assets is
impaired,  how to measure an impairment  loss and the  accounting for long-lived
assets that a company plans to dispose of.
<PAGE>
INCOME TAXES:  The Company  accounts for income taxes under the liability method
specified by Statement of Financial  Accounting  Standards No. 109,  "Accounting
for Income Taxes." Under SFAS No. 109,  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  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.

STOCK  OPTIONS:  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.

ADVERTISING COSTS:  The Company expenses advertising costs as incurred.

STATEMENT 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.

COMPREHENSIVE  INCOME/(LOSS):  On January 1, 1998, the Company  adopted 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.  These  financial  statements  have been  reclassified  to  reflect  the
provisions of SFAS No. 130.


                                       8
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

The income tax effects allocated to comprehensive  income/(loss) at December 31,
is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                        1999                           1998
                                            Before      Tax        Net     Before                 Net
                                             Tax      Benefit    of Tax      Tax       TAX       of Tax
(in thousands)                              Amount   (Expense)   Amount     Amount   Benefit     Amount
--------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>        <C>        <C>        <C>       <C>
Unrealized Gains/(Losses) on Securities
  Unrealized Holding Gains/(Losses)
  Arising During Period                     $(774)     $ 267      $(507)     $ (52)     $  18     $ (34)
Less Reclassification
  Adjustment for Losses/(Gains)
  Realized in Net Income                        8         (3)         5         (4)         1        (3)
--------------------------------------------------------------------------------------------------------
Other Comprehensive
  Income/(Loss), Net                        $(782)     $ 270      $(512)     $ (48)     $  17     $ (31)
========================================================================================================
</TABLE>

SEGMENT  REPORTING:  On January 1,  1998,  the  Company  adopted  SFAS No.  131,
"Disclosures about Segments of an Enterprise and Related  Information." SFAS No.
131 redefines how operating  segments are determined and requires  disclosure of
certain  financial  and  descriptive  information  about a  Company's  operating
segments.  Management has concluded that under current  conditions,  the Company
will report one business segment, community banking.

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>
1999
AVAILABLE FOR SALE
U.S. Government Agency Securities     $14,249     $  --       $   358     $13,891
Mortgage-Backed Securities             11,596          11         359      11,248
Other Securities                        1,296        --            58       1,238
---------------------------------------------------------------------------------
                                      $27,141     $    11     $   775     $26,377
HELD TO MATURITY
U.S. Treasury Securities              $   501     $  --       $     1     $   500
U.S. Government Agency Securities       3,750        --            69       3,681
Mortgage-Backed Securities                871           1          12         860
---------------------------------------------------------------------------------
                                      $ 5,122     $     1     $    82     $ 5,041
=================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>         <C>
1998
AVAILABLE FOR SALE
U.S. Treasury Securities              $ 3,511     $     4     $  --       $ 3,515
U.S. Government Agency Securities       9,261          13          31       9,243
Mortgage-Backed Securities              8,491          38          14       8,515
---------------------------------------------------------------------------------
                                      $21,263     $    55     $    45     $21,273
---------------------------------------------------------------------------------
HELD TO MATURITY
U.S. Treasury Securities              $ 2,001     $     7     $  --       $ 2,008
U.S. Government Agency Securities      10,235          40           1      10,274
Other Securities                        2,002        --          --         2,002
Mortgage-Backed Securities                814           4           1         817
---------------------------------------------------------------------------------
                                      $15,052     $    51     $     2     $15,101
=================================================================================

</TABLE>
                                        9
<PAGE>
SVB FINANCIAL SERVICES, INC
Notes to Consolidated Financial Statements

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

The  amortized  cost and fair value of  securities  at  December  31,  1999,  by
contractual maturity, are shown in the following table 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.
<TABLE>
<CAPTION>
                                                        AMORTIZED          FAIR
(in thousands)                                             COST            VALUE
---------------------------------------------------------------------------------
<S>                                                     <C>              <C>
AVAILABLE FOR SALE
Due in 1 year or less                                    $ 2,499          $ 2,491
Due after 1 year through 5 years                          13,046           12,638
Mortgage-Backed Securities                                11,596           11,248
---------------------------------------------------------------------------------
                                                         $27,141          $26,377
=================================================================================
HELD TO MATURITY
Due in 1 year or less                                    $ 1,001          $   999
Due after 1 year through 5 years                           3,250            3,182
Mortgage-Backed Securities                                   871              860
---------------------------------------------------------------------------------
                                                         $ 5,122          $ 5,041
=================================================================================
</TABLE>

At December 31, 1999, securities having a book value of approximately $1,008,000
were pledged to secure  public  deposits  and for other  purposes as required by
law.

4: LOANS

The composition of outstanding loans is summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
(in thousands)                                             1999            1998
---------------------------------------------------------------------------------
<S>                                                      <C>             <C>
Secured by Real Estate:
  Residential Mortgage                                   $41,727         $30,577
  Commercial Mortgage                                     48,349          42,703
  Construction                                            11,943           6,256
Commercial & Industrial                                   32,628          22,308
Loans to Individuals
  for Automobiles                                          7,907          10,298
Loans to Individuals                                      10,062           8,864
Other Loans                                                  535             468
---------------------------------------------------------------------------------
                                                        $153,151        $121,474
=================================================================================
</TABLE>
<PAGE>
There were no loans  restructured  during 1999 or 1998. There were no loans past
due 90 days or more as to principal  and interest and $692,000 in a  non-accrual
status as of December 31,  1999.  There were $5,000 in loans past due 90 days or
more as to  principal  and interest  and $96,000 in a  non-accrual  status as of
December 31, 1998.

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, 1999 there were  $776,000 of loans  deemed to be impaired,  a
valuation  reserve of $66,000 was recorded  for these loans.  As of December 31,
1998, there were $583,000 of loans deemed to be impaired, a valuation reserve of
$25,000 was recorded for these loans.

The  Company  has no  concentration  of loans to  borrowers  engaged  in similar
activities  which exceeded 10% of total loans at December 31, 1999 and 1998. 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:
<TABLE>
<CAPTION>
(in thousands)                                            1999              1998
---------------------------------------------------------------------------------
<S>                                                    <C>               <C>
Balance at January 1,                                  $ 1,211           $   982
Provision Charged to Operations                            440               300
Charge Offs                                               (115)              (80)
Recoveries                                                  14                 9
---------------------------------------------------------------------------------
Balance at December 31,                                $ 1,550           $ 1,211
=================================================================================
</TABLE>
<PAGE>
6: PREMISES AND EQUIPMENT

Premises and equipment consists of the following at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                         ESTIMATED
(in thousands)                          USEFUL LIVES      1999           1998
--------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>
Construction in Progress                    --          $ 1,764        $   695
Premises & Improvements                  5-30 years       2,693          1,205
Furniture & Equipment                    3-10 years       1,762          1,441
--------------------------------------------------------------------------------
                                                          6,219          3,341
Less: Accumulated Depreciation
      and Amortization                                   (1,430)        (1,038)
--------------------------------------------------------------------------------
                                                        $ 4,789        $ 2,303
=================================================================================
</TABLE>
Depreciation  and  amortization  charged to operations was $463,000 and $383,000
for the years ended December 31, 1999 and 1998 respectively.


                                       10
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

7: DEPOSITS

At December 31, 1999,  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          $ 8,063           $ 4,023          $ 1,300           $   100       $13,486
Less than $100,000         22,896            42,332            9,063               676        74,967
====================================================================================================
</TABLE>

8: OTHER EXPENSES

The major components of other expenses are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(in thousands)                                              1999           1998
<S>                                                       <C>             <C>
--------------------------------------------------------------------------------
Data Processing Services                                  $  367          $  285
Marketing & Business Development                             206             147
Stationery, Forms & Supplies                                 206             175
Insurance                                                     82              85
Legal, Examination & Accounting                              167             129
Postage & Telephone                                          175             131
FDIC Insurance Assessment                                     20              16
Other, Net                                                   678             591
--------------------------------------------------------------------------------
                                                          $1,901          $1,559
================================================================================
</TABLE>

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 2004,  but which contain
certain renewal options. The Somerville facilities are leased from a partnership
consisting of all but one of the Company's  Directors.  As of December 31, 1999,
future minimum rental payments, including the renewal options under these leases
for the subsequent five years are as follows:  (in thousands)
<PAGE>
--------------------------------------------------------------------------------
            Lease Year                         Minimum Rental Payments
--------------------------------------------------------------------------------

               2000                                $   792
               2001                                    801
               2002                                    804
               2003                                    806
               2004                                    809
--------------------------------------------------------------------------------

                                                   $ 4,012
================================================================================

The above amounts  represent  minimum  rentals not adjusted for possible  future
increases due to escalation  provisions and assumes that all option periods will
be exercised by the Company.  Rent expenses aggregated $500,000 and $391,000 for
the years ended December 31, 1999 and 1998.

The Bank and  Investment  Company 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 credits.

The Company had  outstanding  commitments  to extend credit of  $33,825,000  and
$27,177,000   at  December  31,  1999  and  December  31,  1998,   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, 1999.

10: BENEFIT PLAN

The Company has a 401(k)  Savings Plan  covering  substantially  all  employees.
Under  the  terms  of  the  Plan,  the  Company  matched  67%  of an  employee's
contribution  in 1999 and 1998, up to 6.0% of the employee's  salary.  Employees
become fully vested in the Company's  contribution  after five years of service.
The  Company  contributed  $66,000  and  $57,000  to the Plan in 1999 and  1998,
respectively.

On January 1, 1999, the Bank adopted SFAS No. 132,  "Employer  Disclosures about
Pensions and Other Postretirement Benefits," which revised employers disclosures
about pension and other  postretirement  benefit  plans.  It eliminated  certain
current  disclosures and requires  additional  information  about changes in the
benefit  obligation and the fair value of plan assets.  It also standardizes the
requirements for pensions and other  postretirement  benefit plans to the extent
<PAGE>
possible,  and illustrates combined formats for the presentation of pension plan
and other  postretirement  benefit plan  disclosures.

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  $25,000 in
connection with these plans in 1999.

                                       11
<PAGE>
SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

11: INCOME TAXES

The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
(in thousands)                                          1999               1998
--------------------------------------------------------------------------------
<S>                                                   <C>                 <C>
Current
  Federal                                             $ 886               $ 744
  State                                                 109                 178
Deferred Benefit                                       (180)               (156)
--------------------------------------------------------------------------------
                                                      $ 815               $ 766
================================================================================
</TABLE>

Deferred  income taxes are provided for the  differences  between the  financial
reporting  basis  and the tax  basis of the  Company's  asset  and  liabilities.
Cumulative temporary differences at December 31, are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(in thousands)                                              1999           1998
--------------------------------------------------------------------------------
<S>                                                        <C>            <C>
Start-up and Organization Costs                            $  (1)         $  (1)
Depreciation                                                 117             74
Accretion of Securities Discount                             (13)           (12)
Allowance for Loan Losses                                    636            498
Net Deferred Tax Asset, Included in
--------------------------------------------------------------------------------
  Other Assets                                             $ 739          $ 559
================================================================================
</TABLE>

A reconciliation  of income taxes calculated at the statutory rate of 34% to the
actual income tax provision is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(in thousands)                                            1999             1998
--------------------------------------------------------------------------------
<S>                                                       <C>             <C>
Statutory Provision                                       $ 738           $ 669
State Taxes on Income,
  Net of Federal Tax Benefit                                 72             117
Other                                                         5             (20)
--------------------------------------------------------------------------------
                                                          $ 815           $ 766
================================================================================
</TABLE>
<PAGE>
12: SHAREHOLDERS' EQUITY

On March 27, 1998, the Company declared a two-for-one  split on its common stock
to shareholders of record as of April 16, 1998. On October 29, 1999, the Company
declared a 5% stock dividend to  shareholders  of record as of November 4, 1999.
Accordingly,  earnings per share, options and weighted-average  shares of common
stock  outstanding  have been  restated  to  reflect  the stock  split and stock
dividend.

13: STOCK OPTION PLANS

At December 31, 1999, the Company had two stock option plans.

In 1997, the Company's  shareholders  approved the 1997 Restated Incentive Stock
Option Plan,  a  non-qualified  stock  option plan.  This Plan had the effect of
restating the previously  existing 1994 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 market price at the date
of grant.  The stock options have a vesting  period of one year from the date of
issuance.  Shares  totaling  173,048 are reserved  for issuance  under this Plan
including 96,727 shares outstanding at December 31, 1999.

In 1997,  the  Company's  shareholders  also approved the 1997  Directors  Stock
Option Plan, a non-qualified  stock option plan.  Under this Plan, stock options
are  granted  to  Directors  at the fair  value at the date of grant.  The stock
options  have a vesting  period of one year  from the date of  issuance.  Shares
totaling  114,660 are reserved for issuance  under this Plan,  all of which were
outstanding at December 31, 1999.

Had compensation  cost for the plan year been determined based on the fair value
of  options  at the grant  dates  consistent  with the  method of SFAS No.  123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share,  basic and diluted,  would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                           1999           1998
--------------------------------------------------------------------------------
<S>                                                    <C>              <C>
Net Income
  As reported                                          $1,355           $  1,203
  Pro forma                                             1,011                798
Earnings per share - Basic
  As reported                                          $  .46           $    .42
  Pro forma                                            $  .35           $    .28
Earnings per share - Diluted
  As reported                                          $  .45           $    .40
  Pro forma                                            $  .34           $    .27
================================================================================
</TABLE>
                                       12
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

A summary of the status of the  Company's  option plans as of December 31 are as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                    1999                          1998 (1)
-------------------------------------------------------------------------------------------------------
                                                        WEIGHTED-AVERAGE               WEIGHTED-AVERAGE
                                               SHARES    EXERCISE PRICE      SHARES     EXERCISE PRICE
-------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>             <C>            <C>
Outstanding at beginning of year              249,270        $  5.51         275,730        $  5.41
Options granted                                    --             --              --              -
Options exercised                              35,783           4.36          23,310           4.27
Options expired or canceled                     2,100           6.19           3,150           6.19
Outstanding at end of year                    211,387        $  5.69         249,270        $  5.51
=======================================================================================================
Options exercisable at year end               211,387        $  5.69         249,270        $  5.51
=======================================================================================================
</TABLE>

(1) Amounts have been restated to show effects of a stock dividend
The following table summarizes  information about non-qualified stock options at
December 31, 1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                 OPTIONS OUTSTANDING AND EXERCISABLE
                             ------------------------------------------
   RANGE OF                    OUTSTANDING AND         WEIGHTED-AVERAGE    WEIGHTED-AVERAGE
   EXERCISE                    EXERCISABLE AT               REMAINING          EXERCISE
    PRICES                   DECEMBER 31, 1999          CONTRACTUAL LIFE         PRICE
-------------------------------------------------------------------------------------------
<S>      <C>                        <C>                     <C>               <C>
$3.967 - $ 5.950                    47,377                  1.30 years        $ 3.967
$6.190 - $10.000                   164,010                  2.62 years        $ 6.190
                                   -------
                                   211,387
============================================================================================
</TABLE>

14: 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.
<PAGE>
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, 1999 and 1998 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>
--------------------------------------------------------------------------------------------------
                                          1999                                 1998
--------------------------------------------------------------------------------------------------
(in thousands)               FAIR VALUE        CARRYING VALUE       FAIR VALUE      CARRYING VALUE
--------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>              <C>             <C>
Cash and Cash Equivalents     $ 9,428               $ 9,428          $ 19,648        $   19,648
--------------------------------------------------------------------------------------------------
</TABLE>

For  securities  held in the  Company's  investment  portfolio  fair  value  was
determined by reference to quoted market prices as of December 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                          1999                                 1998
--------------------------------------------------------------------------------------------------
(in thousands)               FAIR VALUE        CARRYING VALUE       FAIR VALUE      CARRYING VALUE
--------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>              <C>             <C>
Available for Sale Securities  $ 26,377            $ 26,377         $ 21,273         $ 21,273
Held to Maturity Securities       5,041               5,122           15,101           15,052
--------------------------------------------------------------------------------------------------
</TABLE>


                                       13
<PAGE>
SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

For long term assets and liabilities,  such as loans and deposits, the Company's
policy is to hedge its interest rate  exposure on deposits  with earning  assets
with matching maturities.  Fair values of loans were estimated using the percent
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  fair value equal to the
amount payable on demand.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                          1999                                 1998
--------------------------------------------------------------------------------------------------
(in thousands)               FAIR VALUE        CARRYING VALUE       FAIR VALUE      CARRYING VALUE
--------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>              <C>               <C>
Loans                          $152,450             $153,151        $126,830          $121,474
Deposits                        189,879              189,562         170,871           169,714
--------------------------------------------------------------------------------------------------
</TABLE>

There was no material difference between the notational amount and the estimated
fair value of off-balance-sheet  items, which totaled approximately  $33,825,000
and  $27,177,000,  at December 31, 1999 and 1998,  respectively,  and  primarily
comprise unfunded loan commitments,  which are generally priced at market at the
time of funding.

15: 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 I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as  defined).  Management  believes,  as of December 31, 1999,  that the
Company and its subsidiary Bank meets all capital adequacy requirements to which
they are subject.

As of December 31, 1999 the most recent  notification from the Bank's regulatory
authority  categorized the Bank as adequately  capitalized  under the regulatory
framework  for  prompt  corrective  action.  To  be  categorized  as  adequately
capitalized the Bank must maintain minimum total risk-based;  Tier I risk-based,
and Tier I 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.
<PAGE>
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
($ in thousands)                                    ACTUAL                   CAPITALIZED               CAPITALIZED
                                            AMOUNT        RATIO         AMOUNT         RATIO       AMOUNT       RATIO
------------------------------------------------------------------------------------------------------------------------
SVB FINANCIAL SERVICES, INC.
As of December 31, 1999
<S>                                        <C>            <C>           <C>             <C>
Total Capital to Risk Weighted Assets      $16,386        10.17%       >$12,885        >8.00%          --           --
Tier I Capital to Risk Weighted Assets     $14,836         9.21%       >$ 6,442        >4.00%          --           --
Tier I Capital to Average Assets           $14,836         7.56%       >$ 7,847        >4.00%          --           --
As of December 31, 1998
Total Capital to Risk Weighted Assets      $14,935        11.14%       >$10,726        >8.00%          --           --
Tier I Capital to Risk Weighted Assets     $13,724        10.24%       >$ 5,363        >4.00%          --           --
Tier I Capital to Average Assets           $13,724         8.54%       >$ 6,455        >4.00%          --           --
SOMERSET VALLEY BANK
------------------------------------------------------------------------------------------------------------------------
As of December 31, 1999
Total Capital to Risk Weighted Assets      $15,525         9.61%       >$12,293        >8.00%     >$16,153      >10.00%
Tier I Capital to Risk Weighted Assets     $13,975         8.65%       >$ 6,461        >4.00%     >$ 9,692      > 6.00%
Tier I Capital to Average Assets           $13,975         7.13%       >$ 7,835        >4.00%     >$ 8,069      > 5.00%
------------------------------------------------------------------------------------------------------------------------
As of December 31, 1998
Total Capital to Risk Weighted Assets      $14,189        10.61%       >$10,698        >8.00%     >$13,374      >10.00%
Tier I Capital to Risk Weighted Assets     $12,978         9.70%       >$ 5,349        >4.00%     >$ 8,024      > 6.00%
Tier I Capital to Average Assets           $12,978         8.04%       >$ 6,455        >4.00%     >$ 8,069      > 5.00%

</TABLE>
                                       14

<PAGE>
                                                     SVB FINANCIAL SERVICES, INC
                                      Notes to Consolidated Financial Statements

16: CONDENSED FINANCIAL INFORMATION FOR
SVB FINANCIAL SERVICES, INC. (PARENT COMPANY) IS AS FOLLOWS:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
BALANCE SHEET (in thousands)                           DECEMBER 31, 1999         DECEMBER 31, 1998
--------------------------------------------------------------------------------------------------
<S>                                                      <C>                        <C>
ASSETS
Cash and Due From Banks                                  $    563                   $    436
Other Assets                                                   73                         99
Investment in Subsidiary                                   14,478                     13,580
Equity Securities                                             250                        250
Total Assets                                             $ 15,364                   $ 14,365
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Common Stock                                             $  6,158                   $  5,794
Additional Paid-in Capital                                  6,496                      5,502
Retained Earnings                                           3,215                      3,062
Accumulated Other Comprehensive (Loss)/Income                (505)                         7
--------------------------------------------------------------------------------------------------
 Total Shareholders' Equity                                15,364                     14,365
--------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity               $ 15,364                   $ 14,365
--------------------------------------------------------------------------------------------------
<CAPTION>
                                                                      YEARS ENDED
STATEMENT OF INCOME (in thousands)                     DECEMBER 31, 1999         DECEMBER 31, 1998
--------------------------------------------------------------------------------------------------
<S>                                                          <C>                      <C>
OPERATING INCOME
Interest Income                                              $   13                   $   18
--------------------------------------------------------------------------------------------------
Total Income                                                     13                       18
--------------------------------------------------------------------------------------------------
OPERATING EXPENSE
Other Expense                                                    68                       41
--------------------------------------------------------------------------------------------------
Total Expense                                                    68                       41
--------------------------------------------------------------------------------------------------
Loss Before Equity in Undistributed Income of Subsidiary        (55)                     (23)
Equity in Undistributed Income of Subsidiary                  1,410                    1,226
--------------------------------------------------------------------------------------------------
NET INCOME                                                   $1,355                   $1,203
==================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                       YEARS ENDED
STATEMENT OF CASH FLOWS (in thousands)               DECEMBER 31, 1999           DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------
<S>                                                          <C>                      <C>
OPERATING ACTIVITIES
Net Income                                                   $ 1,355                  $ 1,203
Adjustments to Reconcile Net Income to Net Cash
Used In Operating Activities:
Equity in Undistributed Income of Subsidiary                  (1,410)                  (1,226)
Amortization of Organization Costs                                13                       14
Decrease/(Increase) in Other Assets                               13                      (43)
---------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities                            (29)                     (52)
---------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of Equity Securities                                   --                       (250)
---------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities                          --                       (250)
---------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from Stock Issuance, Net                                156                       97
---------------------------------------------------------------------------------------------------
Increase/(Decrease) in Cash and Cash Equivalents                 127                     (205)
Cash and Cash Equivalents, Beginning of Year                     436                      641
---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                       $   563                  $   436
===================================================================================================
</TABLE>
                                       15
<PAGE>
SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

17: EARNINGS PER SHARE

The following  table  illustrates  of the  reconciliation  of the numerators and
denominators of the basic and diluted EPS computations:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999                                                                    PER SHARE
(in thousands except per share data)                 INCOME            WEIGHTED-AVERAGE SHARES             AMOUNT
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                        <C>                       <C>
EARNINGS PER SHARE - BASIC
Income available to Common Shareholders              $1,355                     2,927                     $   .46

Effect of Dilutive Securities

Stock Options                                          --                          79                        (.01)
-------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE - DILUTED
Income available to Common Shareholders plus
assumed conversions                                  $1,355                     3,006                     $   .45
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998                                                                    PER SHARE
(in thousands except per share data)                 INCOME            WEIGHTED-AVERAGE SHARES             AMOUNT
EARNINGS PER SHARE - BASIC
<S>                                                  <C>                        <C>                       <C>
Income available to Common Shareholders              $1,203                     2,900                     $   .42

Effect of Dilutive Securities

Stock Options                                             -                        86                        (.02)
-------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE - DILUTED
Income available to Common Shareholders plus
assumed conversions                                  $1,203                     2,986                     $   .40
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       16
(1) Adjusted for the stock dividend.
<PAGE>
                                                     SVB FINANCIAL SERVICES, INC
                                      Notes to Consolidated Financial Statements


                     [GRAPHIC-LETTERHEAD GRANT THORNTON LLP]

               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 subisidiaries as of December 31, 1999 and 1998, and
the related consolidated  statements of income,  changes in shareholders' equity
and  comprehensive  income  and cash  flows  for the  years  then  ended.  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  generally  accepted  auditing
standards.  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,  1998 and 1997,  and the
consolidated  results of their operations and their  consolidated cash flows for
the  years  then  ended  in a  conformity  with  generally  accepted  accounting
principles.



/s/Grant Thornton LLP
---------------------
Grant Thornton LLP

Philadelphia, Pennsylvania
January 18, 2000


                                       17
<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.  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 result 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.

RESULTS OF OPERATIONS

Net income for the year ended  December 31, 1999 was  $1,355,000  an increase of
$152,000 or 13% from the previous year and  represents the largest net income in
the Company's  eight year history.

Growth in net interest income was the major reason for the net income  increase.
Net interest income increased $1,518,000 or 22% as a result of the growth in the
Company's  earning assets,  especially its loan portfolio.

Non-interest income increased $17,000 or 2% in 1999. Service charges on deposits
were significantly higher than 1998. With the addition of the Manville branch in
March of 1999, the Company now has six banking  locations  providing the Company
with a larger customer base from which to derive service charge income.  Much of
the increase, however, was offset by a decline in gains on the sale of loans.

Non-interest expenses increased $1,194,000 or 23%. Additional personnel, banking
facilities,  back-office space,  equipment and general expenses  associated with
the  continued  growth of the Company  contributed  to these  increases.

A more detailed discussion of the major components of net income follows.

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 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.

                                       18
<PAGE>
<TABLE>
<CAPTION>
Summary of Net Interest Income
                                                                       Years Ended December 31,
--------------------------------------------------------------------------------------------------------------------------
                                                               1999                                    1998
                                                 AVERAGE      AVERAGE                  AVERAGE       AVERAGE
($ in thousands)                                 BALANCE       Rate      Interest      Balance         Rate      Interest
--------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>        <C>         <C>              <C>       <C>
ASSETS:
--------------------------------------------------------------------------------------------------------------------------
Federal Funds Sold                             $   6,159       5.00%      $  308      $  7,286         5.37%     $     391
Other Short Term Investments                         216       4.63%          10         1,393         4.81%            67
Interest Bearing Time Deposits                     5,719       5.49%         314         1,227         5.62%            69
Securities
Available for Sale                                25,155       5.84%       1,469        13,185         5.79%           763
Held to Maturity                                   8,931       5.72%         511        15,786         6.12%           966
Other Securities                                     444       2.93%          13            21           --             --
--------------------------------------------------------------------------------------------------------------------------
Total Securities                                  34,530       5.77%       1,993        28,992         5.96%         1,729
Loans (1)                                        137,150       8.59%      11,787       113,482         9.00%        10,210
--------------------------------------------------------------------------------------------------------------------------
Total Interest Earning Assets                    183,774       7.84%      14,412       152,380         8.18%        12,466
Cash and Due from Banks                            9,064                                 6,022
Allowance for Loan Losses                         (1,337)                               (1,074)
Premises and Equipment                             3,380                                 1,854
Other Assets                                       2,337                                 2,198
--------------------------------------------------------------------------------------------------------------------------
Total Assets                                   $ 197,218                              $161,380
==========================================================================================================================
Liabilities and Shareholders' Equity:
Deposits

Savings Deposits                               $  14,998       2.91%     $   437     $  10,992         3.17%     $     348
Money Market Deposit Accounts                     22,695       3.31%         751        18,288         3.38%           618
NOW Accounts                                      24,656       2.35%         579        14,684         2.61%           383
Time Deposits                                     85,044       5.03%       4,281        78,296         5.47%         4,279
--------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits                  147,393       4.10%       6,048       122,260         4.60%         5,628
Other Short Term Borrowings                          142       5.63%           8             3           --             --
Obligations Under Capital Lease                      435       8.51%          37           441         8.39%            37
--------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities               147,970       4.12%       6,093       122,704         4.62%         5,665
Demand Deposits                                   33,765                                24,416
Accrued Expenses and Other Liabilities               733                                   632
Cost to Fund Earning Assets                                    3.31%                                   3.72%
Shareholders' Equity                              14,750                                13,628
--------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity     $ 197,218                             $ 161,380
==========================================================================================================================
Net Interest Income                                                      $ 8,319                                 $   6,801
==========================================================================================================================
Net Interest Margin (2)                                        4.53%                                   4.46%
==========================================================================================================================
</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.

                                       19
<PAGE>
SVB FINANCIAL SERVICES, INC.

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

The following table presents the changes in net interest income  attributable to
either a change in volume or a change in rate.
<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                                       1999 vs 1998
                                           Increase (Decrease) Due to Changes in:
(in thousands)                               Volume         Rate         Total
--------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
Interest Income:
Federal Funds Sold                          $   (57)      $   (26)      $   (83)
Other Short Term Investments                    (53)           (4)          (57)
Interest Bearing Time Deposits                  247            (2)          245
Securities
Securities Available for Sale                   712            (6)          706
Securities Held to Maturity                    (396)          (59)         (455)
Equity Securities                              --              13            13
Total Securities                                316           (52)          264
--------------------------------------------------------------------------------
Loans                                         2,008          (431)        1,577
Total Interest Income                         2,461          (515)        1,946
--------------------------------------------------------------------------------
Interest Expense:
Deposits
Savings Deposits                                114           (25)           89
Money Market Deposit Accounts                   146           (13)          133
NOW Accounts                                    230           (34)          196
Time Deposits                                    25           (23)            2
--------------------------------------------------------------------------------
Total Interest Bearing Deposits                 515           (95)          420
Other Short Term Borrowings                       8          --               8
Obligation Under Capital Lease                 --            --            --
--------------------------------------------------------------------------------
Total Interest Expense                          523           (95)          428
--------------------------------------------------------------------------------
Change  in Net  Interest  Income            $ 1,938       $  (420)      $ 1,518
================================================================================
</TABLE>

Net interest income  increased  $1,518,000 or 22% in 1999 as a result of a $31.4
million  increase in average earning assets.  Loan growth  continued to remained
strong  in 1999 as  average  loans  accounted  for 75% or $23.7  million  of the
earning assets growth. Loan volume generated $2,008,000 in interest income.

Deposit  growth  was the  primary  funding  source for the  increase  in earning
assets.  Growth  occurred  in all  major  categories  of  deposits.  Transaction
accounts  experienced  most of the growth in 1999 with over half of the increase
taking place in NOW accounts and demand deposits. Average NOW accounts increased
$10.0 million or 68% in 1999 and average demand deposits  increased $9.3 million
or 38% in 1999.  In addition to the Manville  office  which opened in 1999,  the
Company also experienced growth at its Hillsborough,  Bridgewater and Arbor Glen
offices.
<PAGE>
Interest rates also have an impact on net interest income.  Although, there were
several  increases  in market  rates in the  second  half of 1999,  the  average
interest rates for the year were lower  compared to 1998.  For example,  the New
York Prime Lending Rate upon which many of the Company's  commercial  loans base
their pricing,  averaged 8.00% in 1999 compared to 8.35%


                                       20
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.

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

in 1998.  As a result,  the average yield on loans was 8.59% in 1999 compared to
9.00% in 1998. In addition to the lower  average  rates,  increased  competition
from other banks also  contributed to the lower yield earned on loans.  Overall,
the yield  earned on  earning  assets was 7.84% for 1999  compared  to 8.18% for
1998, which had a negative impact on interest income of $515,000. Total interest
income increased $1,946,000.

On the  funding  side  of the  balance  sheet,  the  cost  of  interest  bearing
liabilities dropped 50 basis points to 4.12% and the cost to fund earning assets
dropped 41 basis  points to 3.31%.  This  resulted  from the overall  decline in
average interest rates and a change in the mix of deposits  towards  transaction
accounts which carry a lower cost than time deposits.

The overall  change in net  interest  margin  resulted in an increase of 7 basis
points from 4.46% to 4.53%.

OTHER INCOME

A  comparison  of the  major  components  of other  income  is  included  in the
following table:
<TABLE>
<CAPTION>

                                                        YEARS ENDED DECEMBER 31,
                                                        ------------------------
(in thousands)                                              1999       1998
--------------------------------------------------------------------------------
<S>                                                        <C>        <C>
Service Charges on
  Deposit Accounts                                         $ 393      $ 298
(Losses)/Gains on the Sale
  of Securities                                               (8)         4
Gains on the Sale of Loans                                   253        334
Other Income                                                 149        134
--------------------------------------------------------------------------------
                                                           $ 787      $ 770
================================================================================
</TABLE>

Other income increased $17,000 or 2% during 1999 in comparison to 1998.  Service
charges on deposit accounts  increased  $95,000 or 32% . Growth in the number of
both commercial and consumer  checking  accounts  continued as the sixth banking
office located in Manville was added in March of 1999.

The Company has  experienced  a change in the deposit mix resulting in growth in
transaction accounts, which include NOW accounts, money market accounts, savings
and demand deposits.  These types of deposits caused services charges on deposit
accounts to increase. Fees were also raised during the fourth quarter of 1999 to
remain in line with  competition.

Gains on the sale of loans were $253,000 in 1999 compared to $334,000 in 1998, a
decrease of $81,000 or 24%.  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.  The Company also originates and sells 1-4 family
mortgage  loans.  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.  Sales of mortgage  loans can also vary with
changes in  interest  rates and  economic  conditions.

Other  income  increased  $15,000 or 11% during  1999.  A major  portion of this
increase was related to the  servicing  of SBA and  mortgage  loans as described
above.

                                       21
<PAGE>
SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

OTHER EXPENSE

A  comparison  of the major  components  of other  expense  is  included  in the
following table:
<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                      --------------------------
(in thousands)                                           1999              1998
--------------------------------------------------------------------------------
<S>                                                    <C>                <C>
Salaries and Employee
  Benefits                                             $3,291             $2,713
Occupancy Expense                                         872                652
Equipment Expense                                         432                378
Other Expenses                                          1,901              1,559
--------------------------------------------------------------------------------
                                                       $6,496             $5,302
================================================================================
</TABLE>

Total other expense increased  $1,194,000 or 23% in comparison to 1998. Expenses
were  impacted  by  additional  personnel,  occupancy  costs and other  expenses
related to the opening of new branches and expanded back-office  facilities.  In
addition to the Manville office,  which opened in the first quarter of 1999, two
additional  offices will open early in 2000,  Aberdeen  Township in January 2000
and  Bernards  Township in February  2000.  The  Company  moved its  back-office
operations  to a larger  facility  in  Somerville  which  will  accommodate  the
continuing growth of the Company.

Salaries  and  Benefits  expense  increased  $578,000  or 21% from 1998  levels.
Because  of the 11% growth in assets and the  opening  of the new  offices,  the
Company has had to hire  additional  personnel  to better  service its  customer
base,  especially  in the area of lending as loan  growth  continued  to receive
major emphasis from management in 1999. Additional personnel were also needed to
staff the new branches.  Full time equivalent  employees were 79 at December 31,
1999  compared to 60 at December  31, 1998.  The increase in employees  combined
with annual salary  increases,  accounted for the variance from 1998.

Occupancy  expense  increased  $220,000 or 34% from 1998.  Most of the  increase
resulted from rent for the new locations.

Equipment  expenses  increased  $54,000  or 14%  during  1999.  In  addition  to
equipping the new branches and employees, the Company incurred expense to remain
current with  technology  and ensure  upgrades  were in place for the Year 2000.

Other  expenses  increased  $342,000 or 22%. Much of the increase was related to
the growth in assets  experienced  by the Company,  which  affected  many areas,
especially  data  processing  costs and  other  outsourced  services,  which are
sensitive  to asset  growth.  These  expenses  increased  $82,000  and  $32,000,
respectively.   Advertising  and  business   development  expenses  as  well  as
stationery and supplies  included costs associated with the promotion of the new
branches as well as the  introduction of the Company's web site, and new banking
products, such as, "Business Advantage Checking."
<PAGE>
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.

                                       22
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
                                                                      Operations

The following table sets forth the amortized cost and estimated market values of
securities in the investment portofolios as of December 31, 1999 and 1998.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                      1999                     1998
                                             ---------------------    --------------------
                                             AMORTIZED     FAIR       AMORTIZED     FAIR
(in thousands)                                  COST       VALUE        COST        VALUE
------------------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>
AVAILABLE FOR SALE:
U.S. Treasury Securities                       $  --       $  --        $3,511     $ 3,515
U.S. Government Agency Securities               14,249      13,891       9,261       9,243
Mortgage-Backed Securities (1)                  11,596      11,248       8,491       8,515
Other Securities                                 1,296       1,238        --          --
------------------------------------------------------------------------------------------
                                               $27,141     $26,377     $21,263     $21,273
==========================================================================================
HELD TO MATURITY:
U.S. Treasury Securities                       $   501     $   500     $ 2,001     $ 2,008
U.S. Government Agency Securities                3,750       3,681      10,235      10,274
Mortgage-Backed Securities (1)                     871         860         814         817
Other Securities                                  --          --         2,002       2,002
------------------------------------------------------------------------------------------
                                               $ 5,122     $ 5,041     $15,052     $15,101
==========================================================================================
</TABLE>

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

As of December 31, 1999, there was not one issuer where the aggregate book value
or aggregate market value exceeds ten percent of shareholders' equity.

The maturity distribution and weighted average yield of the Company's securities
portfolio as of December 31, 1999 is as follows:
<PAGE>
<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. Government Agency Securities (2)
  Market Value                                             $  2,491         $11,400      $   13,891
  Yield                                                       5.39%           5.72%           5.66%
Mortgage-Backed Securities
  Market Value                            $11,248               --              --       $   11,248
  Yield                                      5.45%              --              --            5.45%
Other Securities

  Market Value                                                             $ 1,238       $    1,238
  Yield                                                                       5.82%           5.82%
=====================================================================================================
Held to Maturity:
U.S. Treasury Securities
  Book Value                                               $   501              --       $      501
  Yield                                                       4.97%             --             4.97%
U.S. Government Agency Securities (2)
  Book Value                                               $   500         $ 3,250       $    3,750
  Yield                                                       5.03%           6.26%            6.02%
Mortgage-Backed Securities (1)
  Book Value                              $   871               --              --       $      871
  Yield                                      6.66%              --              --             6.66%
=====================================================================================================
</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  which are callable before their
       stated maturity are included in the table at their stated maturity.

                                       23
<PAGE>
SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

LOANS

The following  table  summarizes the Company's loan portfolio as of December 31,
1999 and 1998.
<TABLE>
<CAPTION>
(in thousands)                                              1999          1998
--------------------------------------------------------------------------------
<S>                                                     <C>             <C>
Secured by Real Estate:
  Residential Mortgage                                  $ 41,727        $ 30,577
  Commercial Mortgage                                     48,349          42,703
  Construction                                            11,943           6,256
Commercial & Industrial (1)                               32,628          22,308
Loans to Individuals for
  Automobiles                                              7,907          10,298
Other Loans to Individuals                                10,062           8,864
Other Loans                                                  535             468
--------------------------------------------------------------------------------
                                                        $153,151        $121,474
================================================================================
</TABLE>

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

The Company had strong growth in the loan  portfolio in 1999. The loan portfolio
increased by $31.7 million or 26% in 1999.

The Company targets small to medium sized  businesses and  professionals  in its
lending  market.  With the ever changing  composition  of the  marketplace,  the
Company has tried to remain  competitive  in its pricing of loans,  but will not
sacrifice loan quality to capture business.  It is important to note that 29% of
the loans secured by residential  real estate as of December 31, 1999,  were for
commercial purposes. It is common for small business owners to secure commercial
loans with their personal residences.

The  Central  New  Jersey  market has  experienced  significant  commercial  and
residential  construction.  The  Company had a $5.7  million or 91%  increase in
construction loans. Please see "Asset Quality" for a discussion of the Company's
practices with respect to construction lending.

The  following  table sets  forth the  Company's  total  loans by  maturity  and
interest rate sensitivity as of December 31, 1999:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                 MATURITY       AFTER
                                  WITHIN    ONE THROUGH     AFTER
(in thousands)                   ONE YEAR    FIVE YEARS   FIVE YEARS    TOTAL
--------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>         <C>
Loans with fixed rates           $ 13,497    $ 63,063     $ 2,702     $ 79,262
Loans with floating rates          36,188       8,425      29,276       73,889
--------------------------------------------------------------------------------
Total                            $ 49,685    $ 71,488     $ 31,978   $ 153,151
================================================================================
</TABLE>

                                       24
<PAGE>
SVB FINANCIAL SERVICES, INC.

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

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  borrowers'  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  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 risk inherent
<PAGE>
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.  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.

The Company  attempts to maintain an  allowance  for loan losses at a sufficient
level to provide for potential losses in the portfolio.  Loan losses are charged
directly to the allowance as they occur and any  recoveries  are credited to the
allowance.  The  allowance  for loan losses is  increased  periodically  through
charges to earnings in the form of a provision  for loan  losses.

Factors that influence  management's  judgment in determining  the amount of the
provision for loan losses  include an ongoing  review of the overall  quality of
the  loan  portfolio  by the  Company's  credit  analysts  who  have no  lending
authority,  management's  continuing evaluation of loans and the assignment of a
specific risk rating to all non-consumer  borrowing, an evaluation of prevailing
and  anticipated  economic  conditions and their related effects on the existing
portfolio,  loan  classifications  and  evaluations  as  a  result  of  periodic
examinations  by Federal and State  supervisory  authorities  and  comments  and
recommendations  of the Company's  independent public accountants as a result of
their annual audit of the financial  statements.  It is management's practice to
review the  allowance on a monthly  basis to determine the provision to be made.

                                       25
<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)                                                 1999     1998
--------------------------------------------------------------------------------
<S>                                                        <C>         <C>
Non-performing assets (1):
Non-accruing loans
  Commercial and Construction                              $   599     $     56
  Real Estate                                                  --           --
  Installment                                                   93           40
    Total non-accrual loans                                    692           96
Restructured loans                                             --           --
    Total non-performing loans                                 692           96
Other real estate owned                                        --           --
    Total non-performing assets                               $692%        $ 96
--------------------------------------------------------------------------------
Loans past due 90 days or more (2)                         $    --         $  5
--------------------------------------------------------------------------------
Non-performing loans to total loans                           0.45%        0.08%
Non-performing assets to total assets                         0.34%        0.05%
Allowance for loan losses to non-performing loans           223.99%    1,261.46%
================================================================================
</TABLE>
(1)  Non-performing  assets  excludes  loans  past due 90 days or more and still
accruing, of which there are none.
(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,
                                   ------------------------------------------------------------------
                                             1999                                  1998
                                   ----------------------------          ----------------------------
                                                    PERCENT OF                           PERCENT OF
($ in thousands)                    AMOUNT       LOANS TO TOTAL           AMOUNT       LOANS TO TOTAL
<S>                                <C>                <C>                <C>                <C>
Commercial and Construction        $1,345             60.67%             $  986             58.67%
Real Estate                            57             27.25%                 41             25.17%
Installment                           148             12.08%                184             16.16%
-----------------------------------------------------------------------------------------------------
                                   $1,550            100.00%             $1,211            100.00%
=====================================================================================================
</TABLE>

                                       26
<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 loan
losses for the period indicated:
<TABLE>
<CAPTION>
                                                        Years Ended December 31,
(in thousands)                                              1999          1998
<S>                                                      <C>           <C>
Balance, beginning of period                             $ 1,211       $   982
Loans charged off

  Commercial and Construction                               --            --
  Real Estate                                               --            --
  Installment                                               (115)          (80)
Total charge offs                                           (115)          (80)
Recoveries of loans previously charged off
  Commercial and Construction                               --               8
  Real Estate                                               --            --
  Installment                                                 14             1
Total recoveries                                              14             9
Net Loans charged off                                       (101)          (71)
Provision charged to expense                                 440           300
Balance, end of period                                   $ 1,550       $ 1,211
Net charge offs as a percentage of average loans            0.07%         0.06%
Allowance for loan losses to total loans                    1.01%         1.00%
Allowance for loan losses to non-performing loans         223.99%      1,261.46%

</TABLE>

DEPOSITS

Following  is the average  balances  and rates paid on deposits  for the periods
indicated:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                  Years Ended December 31,
                                  ------------------------------------------------------
                                            1999                            1998
                                  ----------------------          ----------------------
                                   AVERAGE       AVERAGE           AVERAGE       AVERAGE
($ in thousands)                   BALANCE         RATE            BALANCE         RATE
<S>                               <C>              <C>            <C>              <C>
Demand                            $ 33,765           --           $ 24,416           --
Savings                             14,998         2.91%            10,992         3.17%
Money Market                        22,695         3.31%            18,288         3.38%
NOW                                 24,656         2.35%            14,684         2.61%
Time                                85,044         5.03%            78,296         5.47%
----------------------------------------------------------------------------------------
                                  $181,158         3.34%          $146,676         3.84%
========================================================================================
</TABLE>
<PAGE>
Following is the maturity  distribution of time certificates of deposit $100,000
and over at December 31, 1999:
<TABLE>
<CAPTION>

---------------------------------------------------
<S>                                        <C>
(in thousands)
Three months or less                       $ 8,063
Over three months through six months         1,910
Over six months through twelve months        2,113
Over one through three years                 1,300
Over three through five years                  100
--------------------------------------------------
                                           $13,486
==================================================
</TABLE>

                                       27
<PAGE>
SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

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 1999, the Company  generated  $1,951,000 cash flow from  operations.

Net cash used in investing activities was $32,169,000,  of which $31,525,000 was
in the form of  loans.  Purchases  of  securities  available  for  sale  totaled
$17,345,000,  while purchases of securities held to maturity totaled $5,296,000.
These were funded mostly by maturities available for sale and securities held to
maturity of $4,906,000 and $15,296,000,  respectively. Funds were also generated
by the sale of  available  for sale  securities  which  totaled  $6,512,000.  In
addition to loans and investments,  the Company also invested $1,193,000 in time
deposits due from banks.

Funding  for  investment  activities  resulted  from an  increase  in  financing
activities  of  $19,998,000.  Demand  deposits  showed the  largest  increase of
$6,646,000 with comparable  increases in money market deposits and time deposits
of $5,220,000 and $5,200,000 respectively.

Cash and cash  equivalents  decreased  $10,220,000 in 1999. The Company also has
additional  sources of  liquidity.  First as a member of the  Federal  Home Loan
Bank, the Company can borrow up to $11,700,000  million at December 31, 1999 and
has lines of credit at correspondent banks of $3,500,000 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
sensitive assets and liabilities  consistent with the Bank's overall  liquidity,
capital,  growth and profitability  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  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

<PAGE>
year term with  payouts up to 30 years.  Home equity loans are tied to the prime
lending rate although  special  promotions may offer a fixed rate for periods of
not greater than one year.  Installment  loans are written at fixed rates from 3
to 5 years.

The Bank utilizes its  securities to manage its liquidity and rate  sensitivity.
Fixed rate  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  are also purchased for terms of 5 years or
less with call  period of three  months to 2 years.  Fixed rate  mortgage-backed
securities  are  also  purchased  with  estimated  average  lives at the time of
purchase  of not  more  than 5  years.  The Bank  also  invests  in CDs of other
financial  institutions with maturities of six months to three years for amounts
up to $100,000.

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.

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
can  be  matched  against  various  earning  assets.   There  were  no  advances
outstanding at December 31, 1999.

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, 1999, 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.


                                       28
<PAGE>
                                                    SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
                                                                      Operations


INTEREST  RATE  SENSITIVITY  AT  DECEMBER  31,  1999 (in  thousands)
Maturity or Repricing in (2)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
         DUE IN   BETWEEN           NON-
         90 DAYS  91 DAYS -         AFTER   INTEREST
                                        OR LESS        ONE YEAR         ONE YEAR BEARING TOTAL
--------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>           <C>            <C>
ASSETS:
Securities                             $  26,877       $     670       $   3,952     $    --        $  31,499
Equity Securities                            839            --              --            --              839
Federal Funds Sold                         2,400            --              --            --            2,400
Interest Bearing Time Deposits               400           3,586           1,297          --            5,283
Loans                                     57,257          20,098          75,104           692        153,151
Valuation Reserve(1)                        --              --              --          (1,726)        (1,726)
Non-interest Earning Assets                 --              --              --          14,661         14,661
--------------------------------------------------------------------------------------------------------------
Total Assets                           $  87,773       $  24,354       $  80,353     $  13,627      $ 206,107
==============================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Money Market Accounts                  $  25,446       $    --         $    --       $    --        $  25,446
NOW Accounts                              27,025            --              --            --           27,025
Savings Accounts                          16,618            --              --            --           16,618
CDs over $100,000                          8,063           4,023           1,400          --           13,486
Other Time Deposits                       22,896          42,332           9,739          --           74,967
Obligation Under Capital Lease              --              --               432          --              432
--------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities       100,048          46,355          11,571          --          157,974
--------------------------------------------------------------------------------------------------------------
Non-interest Bearing Liabilities            --              --              --          32,020         32,020
Other Liabilities                           --              --              --             749            749
Stockholders' Equity                        --              --              --          15,364         15,364
--------------------------------------------------------------------------------------------------------------
Total Liabilities and
  Stockholders' Equity                 $ 100,048       $  46,355       $  11,571     $  48,133      $ 206,107
--------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity Gap          $ (12,275)       $(22,001)      $  68,782     $ (34,506)
--------------------------------------------------------------------------------------------------------------
Cumulative Gap                         $ (12,275)      $ (34,376)      $  34,506
--------------------------------------------------------------------------------------------------------------
Cumulative Gap to Total Assets             (5.96)%        (16.63)%         16.74%
==============================================================================================================
</TABLE>
<PAGE>
(1) Valuation Reserves include allowance for loan losses and deferred loan fees.
(2) The  following  are the  assumptions  that  were  used  to  prepare  the Gap
     analysis:
     (A) Securities "available for sale" are placed in the first maturity bucket
     since they can be sold at any time.
     (B) Callable  securities are spread based on their actual  maturity date as
     opposed to their call date.
     (C) Loans are spread based on the earlier of their actual  maturity date or
     the date of their first potential rate adjustment.
     (D) Money Market Accounts,  NOW Accounts,  and Savings Accounts are subject
     to immediate withdrawal.
     (E) Time deposits are spread based on their actual maturity date.


                                       29
<PAGE>
SVB FINANCIAL SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

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.  Money  Market  deposits,  for  example,  which  have  no  contractual
maturity, are assigned a repricing interval of 90 days. 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.
Equity  securities  have also been a source of  disintermediation  from deposits
over the past few years.

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 of change in MVPE for the Bank at December 31, 1999 is as follows:


CHANGE IN INTERESTS (in thousands)
                                  MVPE        Percent
                                 Amount        Change
                                 ------        ------

        +200 Basis Points       $19,207        (4.06)%
        Base Amount              20,019            -
        -200 Basis Points        19,902         (.59)%



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 1999 this  amount
would be $2,061,000.
<PAGE>
RETURN ON ASSETS AND RETURN ON EQUITY

The  following  table depicts  returns on average  assets and returns on average
equity for the periods indicated:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                          Years Ended December 31,
                          ------------------------
                                1999     1998
--------------------------------------------------------------------------------
<S>                             <C>       <C>
Return on Average Assets        0.69%     0.75%
Return on Average Equity        9.19%     8.82%
Average Equity to
  Average Assets                7.48%     8.44%
--------------------------------------------------------------------------------
</TABLE>

CAPITAL RESOURCES


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 I capital (primarily  shareholders'  equity).  The following
are the Company's capital ratios at the end of the periods indicated.

                                                  Years Ended December 31,
                                                  ------------------------
                                                  1999               1998
                                                  ----               ----
Total Capital to
  Risk Weighted Assets                           10.17%             11.14%
Tier 1 Capital to
  Risk Weighted Assets                            9.21%             10.24%
Leverage Ratio                                    7.56%              8.54%



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 1999.


                                       30
<PAGE>
                                                   SVB FINANCIAL  SERVICES, INC.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
                                                                      Operations

SUMMARY OF QUARTERLY RESULTS

The following  summarizes  the results of operations  during 1999 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                             $3,293     $3,447        $3,768             $3,904
Interest Expense                             1,478      1,472         1,559              1,584
-----------------------------------------------------------------------------------------------
Net Interest Income                          1,815      1,975         2,209              2,320
Provision for Loan Losses                       80        100           150                110
-----------------------------------------------------------------------------------------------
Net Interest Income After
  Provision for Loan Losses                  1,735      1,875         2,059              2,210
-----------------------------------------------------------------------------------------------
Gains on the Sale of Loans                      33         51           100                 69
Gains/(Losses) on the Sale of Securites          1         (6)           (3)                --
Other Income                                   131        131           133                147
Other Expense                                1,484      1,602         1,614              1,796
-----------------------------------------------------------------------------------------------
Income Before Income Taxes                     416        449           675                630
Income Taxes                                   148        168           259                240
-----------------------------------------------------------------------------------------------
Net Income                                  $  268     $  281        $  416             $  390
==============================================================================================
</TABLE>
                                       31
<PAGE>
                                     NOTES






















                                       32
<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
S. Tucker S. Johnson
Willem Kooyker
Frank Orlando
Gilbert E. Pittenger
Frederick D. Quick
Anthony J. Santye, Jr.
Donald Sciaretta
Herman C. Simonse
Donald R. Tourville

SOMERSET VALLEY BANK FOUNDERS ADVISORY COUNCIL:

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

SOMERSET VALLEY BANK
HILLSBOROUGH ADVISORY COUNCIL:

Michael Avolio
George Christiansen, Jr.
Elaine DeMilia
Walter J. Dietz, III
Vincent P. Lipani
Peter McGavisk
Daniel G. Marulli, DDS
John Mondoro
Dan Pullen, DDS
Harry Smith
Kevin Sweeney
Frank N. Yurasko, Esq.
<PAGE>
Somerset Valley Bank Banking Staff

BANKING STAFF OFFICERS:

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

Keith B. McCarthy
Chief Operating Officer

Arthur E. Brattlof
Executive Vice President
Senior Loan Officer

Robert F. Cramer
Senior Vice President
Consumer Loans

Michael A. Novak
Senior Vice President
Commercial Loans

James T. Condo
Vice President
Commercial Loans

Jeffrey D. Mattison
Vice President
Commercial Loans

Kathy Ruggiero
Vice President
Branch Administration

Roger W. Russell
Vice President
Loan Administration

Karen L. Zaliwski
Vice President
Operations

Jeannette Capra
Assistant Vice President
Operations

Christopher Fenimore
Assistant Vice President
Consumer Loans

Michele Gara
Assistant Vice President and
Manager

Margaret O'Keeffe
Assistant Vice President
Retail Sales and Marketing
<PAGE>
John P. Oliver
Assistant Vice President
Commercial Loans

Mary E. Rowe
Assistant Vice President
Accounting and Finance

Mary Ann Soriano
Assistant  Vice President
Operations

Sandra Stephens
Assistant Vice President
Residential Mortgages

Susan Christman
Assistant Treasurer and Manager

Jennifer Latsko
Assistant Treasurer and Manager

Suzanne B. Lennard
Assistant Treasurer and Manager

Christopher Seaman
Assistant Treasurer
Operations

Diana S. Valko
Assistant Treasurer
Accounting and Finance

Vimala Vimalavong
Assistant Treasurer and Manager

Kenneth S.B. Wade II
Assistant Treasurer
Loan Administration

Rose Watson
Assistant Treasurer and Manager

Jeanne G. Hagen
Human Resources  Director

Nicole  Hunt
Assistant  Secretary  and  Assistant  Manager

Bedzaida  Rodriguez
Assistant  Secretary  and  Assistant  Manager

Bryan Zunski
Assistant Secretary and Assistant Manager
<PAGE>
GENERAL COUNSEL:

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

INDEPENDENT PUBLIC
ACCOUNTANTS:

Grant Thornton LLP
2001 Market Street
Philadelphia, PA 19103

TRANSFER AGENT:
Registrar and Transfer Company
10 Commerce Drive

Cranford, NJ 07016

Somerset Valley Bank

Main Office
103 West End Avenue
Somerville, NJ 08876

Telephone: (908) 704-1188
Fax:       (908) 685-2180

Hillsborough Office
649 Route 206
Hillsborough Centre
Belle Mead, NJ 08502

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

Bridgewater Office
481 North Bridge Street
Bridgewater, NJ 08807

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

Gaston Avenue Office
91 North Gaston Avenue
Somerville, NJ 08876

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

Arbor Glen Office
100 Monroe Street
Bridgewater, NJ 08807

Telephone: (908) 595-9700
Fax:       (908) 526-3418
<PAGE>
MANVILLE Office
40 North Main Street
Manville, NJ 08835

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

ABERDEEN Office
1147 State Highway 34
Aberdeen, NJ 07747
Telephone: (732) 583-7300
Fax:       (732) 583-7800

BERNARDS TOWNSHIP Office
578 Allen Road
Basking Ridge, NJ 07920

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

COMING SOON IN 2000
In late  2000,  a new branch  will be opening in Edison,  New Jersey on Oak Tree
Road

WEBSITE
www.somersetvalleybank.com

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
Somerset Valley Bank
103 West End Avenue
Somerville, NJ 08876

Member of the Federal Home Loan Bank

STOCK LISTING:
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

McConnell, Budd & Downes, Inc.
365 South Street
Morristown, NJ 07960  (973) 538-1680

Sandler O'Neill & Partners, L.P.
Two World Trade Center, 104th Floor
New York, NY 10048    (212) 466-7743


                                       33