<PAGE>


                            SVB ANNUAL REPORT COVER




<PAGE>

                              [GRAPHIC - SVB LOGO]




                      Table of Contents

               2:   Selected Consolidated Financial Information
               3:   Letter to the Shareholders
               4:   Consolidated Balance Sheets
               5:   Consolidated Statements of Income
               6:   Consolidated Statement of Changes in Shareholders' Equity
               7:   Consolidated Statements of Cash Flow
               8:   Notes to Consolidated Financial Statements
               19:  Report of Independent Certified Public Accountants
               20:  Management's Discussion and Analysis of Financial Condition
                    and Results of Operations



<PAGE>

SVB FINANCIAL SERVICES, INC.
Selected Consolidated Financial Information

<TABLE>
<CAPTION>
                                                                         At or For the Years Ended
------------------------------------------------------------------------------------------------------------------------
(in thousands except per share data)              2000            1999            1998            1997            1996
------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>             <C>             <C>             <C>
INCOME STATEMENT DATA:
Interest Income                                $ 17,945        $ 14,412        $ 12,466        $ 10,754        $  8,383
Interest Expense                                  7,972           6,093           5,665           4,880           3,813
------------------------------------------------------------------------------------------------------------------------
Net Interest Income                               9,973           8,319           6,801           5,874           4,570
Provision for Loan Losses                           375             440             300             280             310
------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision
  for Loan Losses                                 9,598           7,879           6,501           5,594           4,260
Non-Interest Income                                 991             787             770             561             372
Non-Interest Expense                              8,182           6,496           5,302           4,303           3,427
------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                        2,407           2,170           1,969           1,852           1,205
Income Tax Expense                                  900             815             766             749             485
------------------------------------------------------------------------------------------------------------------------
Net Income                                     $  1,507        $  1,355        $  1,203        $  1,103        $    720
BALANCE SHEET DATA:
Total Assets                                   $241,630        $206,107        $185,227        $148,550        $124,995
Federal Funds Sold and Other
  Short Term Investments                             78           2,400          11,290             188           7,213
Interest Bearing Time Deposits                    8,075           5,283           4,090              --              --
Securities Available for Sale                    32,464          26,377          21,273          11,266           8,727
Securities Held to Maturity                       6,337           5,122          15,052          22,102          13,989
Equity Securities                                   839             839             250              --              --
Loans, Net                                      177,251         151,425         120,176         105,389          86,992
Deposits                                        222,384         189,562         169,714         133,930         112,521
Shareholders' Equity                             17,366          15,364          14,365          13,096          11,910
------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Return on Average Assets                            .67%            .69%            .75%            .80%            .67%
Return on Average Equity                           9.43%           9.19%           8.82%           8.89%           8.07%
Net Interest Margin                                4.73%           4.53%           4.46%           4.52%           4.51%
------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY:
Loans Past Due Over 90 Days                    $     --        $     --        $      5        $     --        $     21
Non-Accrual Loans                                   482             692              96              63              24
Net Charge Offs                                     102             101              71              81              53
Allowance for Loan Losses to Total Loans           1.02%           1.01%           1.00%            .92%            .89%
------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (1):
Earnings Per Share - Basic                     $    .49        $    .44        $    .40        $    .37        $    .29
Earnings Per Share - Diluted                        .47             .43             .38             .36             .27
Book Value                                         5.59            4.96            4.70            4.32            3.95
------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS:
Total Risked-Based Capital                         9.68%          10.17%          11.14%          12.81%          13.40%
Tier I Risked-Based Capital                        8.71%           9.21%          10.24%          11.89%          12.56%
Leverage Capital                                   7.31%           7.56%           8.54%           8.72%           9.58%
------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       2

<PAGE>

Dear Shareholder,

     As Somerset Valley Bank begins its tenth year of operation,  the successful
openings of our Bernards  Township and Aberdeen  Township offices have served to
strengthen  our resolve in  continuing  our  business  plan of  aggressive,  yet
prudent,  growth of our branch  network.  Focusing on strong  asset  quality and
increased  earnings along with  strategically  increasing the size of the market
area we serve through  branching and the use of electronic  banking channels has
resulted in SVB Financial Services,  Inc. rapidly becoming a regional competitor
in the constantly evolving financial services industry.

     The addition of our office in Aberdeen and our branch  scheduled to open on
Oak  Tree  Road in  Edison  in early  2001  will  further  broaden  our  lending
opportunities  into two significant  commercial markets and allow us to continue
to grow our asset base at a rate  significantly  above the average  growth rates
for banks in the state of New Jersey.

     As of  December  31,  2000,  the Bank has  increased  its  total  assets to
$241,630,000,  an  increase  of $35.5  million  or 17% over the  previous  year.
Similarly our deposits increased by $32.8 million or 17% over the previous year,
and our net loans grew to $177,251,000 from $151,425,000,  an increase of 17% or
$25.8 million. Despite this impressive growth, our asset quality remained strong
with non-performing  loans representing only .27% of our total portfolio.  Asset
quality  will  become a very  important  measure  in view of  predictions  of an
economic  slowdown  in 2001 and the Bank's  lending  policies  will  remain very
sensitive to credit quality and risk management in our lending decisions.

     After absorbing the initial expense  attributed to the grand opening of the
Bernards Township and Aberdeen Township branches,  non-interest expenses trended
downward  throughout  the  year,  allowing  the Bank to end the year  with a net
income of $1,507,000, an increase of 11% over the previous year. By year-end the
two new branches  had  provided the Bank with 1,253 new accounts and  commercial
and retail deposits totaling $11,575,000.

     Customers  have embraced our telephone  and Internet  banking  products and
usage  continues  to grow at a  significant  rate.  As of  year-end,  businesses
represented 25% of our Internet banking accounts and we are averaging over 5,000
transactions per month between telephone and Internet account access.  This type
of activity  substantially  reduces the amount of service  inquiries  handled by
back-office staff and has a very positive effect on employee productivity.

     As we move  forward  in 2001,  we will  feel an early  pressure  on our net
interest margin due to two rapid interest rate reductions by the Federal Reserve
in January,  but through  resourceful  balance sheet  management  and a focus on
increasing non-interest income, we are confident that we can continue to provide
positive  results as the economy adjusts  itself.  Although  declining  interest
rates have an initial negative effect on interest income, our cost of funds will
gradually be reduced and  theoretically  should  result in increased  commercial
lending opportunities and mortgage refinancing. We currently enjoy a significant
pipeline of loans that have been approved but not yet closed and expect that our
market  area should not be  significantly  affected  by the  predicted  economic
slowdown.

     Although  financial stock values have remained somewhat flat, SVB Financial
Services has  consistently  maintained  its stock price  between $8.00 and $9.00
even after issuing its second 5% stock dividend in as many years on November 21,
2000.  Our book  value  continues  to rise  through  increased  earnings  and we
constantly  are  exploring  strategies  to improve  shareholder  value in a very
volatile and difficult market.

     Going  forward,  it is our  intention  to increase our efforts in marketing
non-traditional  bank products  such as those offered  through our insurance and
financial services subsidiary, Somerset Valley Financial, LLC, while at the same
time maximizing the opportunities available to us through our branch network and
electronic  banking  capabilities.  Kiosks  will be added  to all of our  branch
lobbies,  and  in-house,  licensed  professionals  will  be  available  to  meet
privately with commercial and retail clients to provide  financial  planning and
insurance  counseling.  The kiosks will also enable  lobby  customers  to access
their  accounts  via our  Internet  banking  technology  or to utilize  discount
brokerage  services through our link to National Discount  Brokers.  We are also
exploring the  feasibility  of offering  mutual funds and  additional  brokerage
services as the financial services industry continues to evolve.

     Despite the  inevitable  changes  and  challenges  we face in bringing  our
company to the next level,  we will remain true to the business  essentials that
have taken us to this point which include  convenient  locations,  courteous and
efficient  employees,  true appreciation of the business our customers  provide,
and a wide array of traditional and non-traditional  banking products.  We again
thank you for your trust and support.

Very truly yours,


[GRAPHIC-PHOTO OF JOHN KITCHEN]              [GRAPHIC-PHOTO OF ROBERT CORCORAN]


/s/ John K. Kitchen                          /s/ Robert P. Corcoran
-------------------                          -------------------------
John K. Kitchen                              Robert P. Corcoran
CHAIRMAN OF                                  PRESIDENT AND
THE BOARD                                    CHIEF EXECUTIVE OFFICER

                                       3


SVB FINANCIAL SERVICES, INC.
Consolidated Balance Sheets
As of December 31, 2000 and 1999


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
(in thousands)                                               2000                   1999
---------------------------------------------------------------------------------------------
<S>                                                     <C>                 <C>
ASSETS
Cash & Due from Banks                                   $      8,280        $      7,028
Federal Funds Sold                                                --               2,400
Other Short Term Investments                                      78                  --
---------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents                                8,358               9,428
---------------------------------------------------------------------------------------------
Interest Bearing Time Deposits                                 8,075               5,283
Securities
  Available for Sale, at Fair Value                           32,464              26,377
  Held to Maturity, (Fair Value $6,362 in 2000
  and $5,041 in 1999)                                          6,337               5,122
Equity Securities                                                839                 839
---------------------------------------------------------------------------------------------
Total Securities                                              39,640              32,338
---------------------------------------------------------------------------------------------
Loans                                                        179,218             153,151
  Allowance for Loan Losses                                   (1,823)             (1,550)
 Unearned Income                                                (144)               (176)
---------------------------------------------------------------------------------------------
Net Loans                                                    177,251             151,425
---------------------------------------------------------------------------------------------
Premises & Equipment, Net                                      4,844               4,789
Other Assets                                                   3,462               2,844
---------------------------------------------------------------------------------------------
Total Assets                                            $    241,630        $    206,107
=============================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand
  Non-interest Bearing                                  $     34,749        $     32,020
  NOW                                                         35,088              27,025
Savings                                                       16,696              16,618
Money Market                                                  22,826              25,446
Time
  Greater than $100,000                                       17,072              13,486
  Less than $100,000                                          95,953              74,967
---------------------------------------------------------------------------------------------
Total Deposits                                               222,384             189,562
---------------------------------------------------------------------------------------------
Federal Funds Purchased                                          325                  --
Obligation Under Capital Lease                                   426                 432
Other Liabilities                                              1,129                 749
Total Liabilities                                            224,264             190,743
SHAREHOLDERS' EQUITY
Common Stock, $2.09 Par Value: 20,000,000
  Shares Authorized; 3,105,168 Shares in 2000 and
  2,946,556 Shares in 1999 Issued and Outstanding              6,490               6,158
Additional Paid-in Capital                                     7,483               6,496
Retained Earnings                                              3,454               3,215
Accumulated Other Comprehensive Loss                             (61)               (505)
---------------------------------------------------------------------------------------------
Total Shareholders' Equity                                    17,366              15,364
---------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity              $    241,630        $    206,107
---------------------------------------------------------------------------------------------
</TABLE>

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

                                       4
<PAGE>


                                                    SVB FINANCIAL SERVICES, INC.
                                               Consolidated Statements of Income
                                  For the years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------
(in thousands except per share data)                         2000           1999
---------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>
INTEREST INCOME
Loans                                                     $ 15,049       $ 11,787
Securities Available for Sale                                1,748          1,469
Securities Held to Maturity                                    298            511
Dividends on Equity Securities                                  51             13
Other Short Term Investments                                     3             10
Interest Bearing Time Deposits                                 448            314
Federal Funds Sold                                             348            308
---------------------------------------------------------------------------------------------
Total Interest Income                                       17,945         14,412
---------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                                     7,935          6,048
Other Short Term Borrowings                                      1              8
Obligation Under Capital Lease                                  36             37
---------------------------------------------------------------------------------------------
Total Interest Expense                                       7,972          6,093
---------------------------------------------------------------------------------------------
Net Interest Income                                          9,973          8,319
PROVISION FOR LOAN LOSSES                                      375            440
---------------------------------------------------------------------------------------------
Net Interest Income after Provision for Loan Losses          9,598          7,879
---------------------------------------------------------------------------------------------
OTHER INCOME
Service Charges on Deposit Accounts                            563            393
Losses on the Sale of Securities Available for Sale             --             (8)
Gains on the Sale of Loans                                     188            253
Other Income                                                   240            149
---------------------------------------------------------------------------------------------
Total Other Income                                             991            787
---------------------------------------------------------------------------------------------
OTHER EXPENSE
Salaries and Employee Benefits                               4,051          3,291
Occupancy Expense                                            1,245            872
Equipment Expense                                              488            432
Other Expenses                                               2,398          1,901
---------------------------------------------------------------------------------------------
Total Other Expense                                          8,182          6,496
---------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes                     2,407          2,170
Provision for Income Taxes                                     900            815
---------------------------------------------------------------------------------------------
NET INCOME                                                $  1,507       $  1,355
=============================================================================================
EARNINGS PER SHARE - BASIC (1)                            $    .49       $    .44
=============================================================================================
EARNINGS PER SHARE - DILUTED (1)                          $    .47       $    .43
=============================================================================================
</TABLE>

(1) Amounts have been restated for stock dividends

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

                                       5

<PAGE>


SVB FINANCIAL SERVICES, INC.
Consolidated Statement of Changes in Shareholders' Equity
For the years ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                   ACCUMULATED
                                                      ADDITIONAL                      OTHER                           TOTAL
                                         COMMON        PAID-IN        RETAINED    COMPREHENSIVE    COMPREHENSIVE   SHAREHOLDERS'
(in thousands)                            STOCK        CAPITAL        EARNINGS     INCOME/(LOSS)      INCOME          EQUITY
==================================================================================================================================
<S>                                     <C>            <C>            <C>            <C>             <C>             <C>
BALANCE, JANUARY 1, 1999                $ 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
   (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
----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock, Net                28             46                                                            74
5% Stock Dividend                           309            957         (1,268)                                            (2)

Stock Repurchase and Retirement              (5)           (16)           (21)
Net Income                                1,507        $ 1,507          1,507
Accumulated Other Comprehensive
   Income                                                                                444             444             444
                                                                                                     -------
Total Comprehensive Income                                                                           $ 1,951
==================================================================================================================================
BALANCE, DECEMBER 31, 2000              $ 6,490        $ 7,483        $ 3,454        $   (61)                        $17,366
==================================================================================================================================
</TABLE>


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

                                       6
<PAGE>


                                                    SVB FINANCIAL SERVICES, INC.
                                           Consolidated Statements of Cash Flows
                                  For the years ended December 31, 2000 and 1999
<TABLE>
<CAPTION>

============================================================================================
(in thousands)                                                 2000           1999
============================================================================================
<S>                                                        <C>             <C>
OPERATING ACTIVITIES
Net Income                                                 $  1,507        $  1,355
Adjustments to Reconcile Net Income to Net
  Cash Provided By Operating Activities
Provision for Loan Losses                                       375             440
Depreciation and Amortization                                   578             463
Accretion of Securities Discount                                 (3)            (30
Losses on Sale of Securities
  Available for Sale                                             --               8
Gains on the Sale of Loans                                     (188)           (253)
Increase in Other Assets                                       (860)           (164)
Increase in Other Liabilities                                   380              43
(Decrease)/Increase in Unearned Income                          (32)             89
--------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                     1,757           1,951
============================================================================================
INVESTING ACTIVITIES
Increase in Interest Bearing Time Deposits                   (2,792)         (1,193)
Proceeds from Sales of Securities Available for Sale             --           6,512
Proceeds from Maturities of Securities
Available for Sale                                            4,071           4,906
Held to Maturity                                              1,210          15,296
Purchases of Securities
Available for Sale                                           (9,486)        (17,345)
Held to Maturity                                             (2,422)         (5,296
Equity Securities                                                --            (589)
Increase in Loans, Net                                      (25,981)        (31,525)
Capital Expenditures                                           (619)         (2,935)
--------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities                      (36,019)        (32,169)
============================================================================================
FINANCING ACTIVITIES
Net Increase in Demand Deposits                              10,792           6,646
Net Increase in Savings Deposits                                 78           2,782
Net (Decrease)/Increase in Money Market Deposits             (2,620)          5,220
Net Increase in Time Deposits                                24,572           5,200
Increase in Federal Funds Purchased                             325              --
Decrease in Obligation Under Capital Lease                       (6)             (6
Proceeds from the Issuance of Common Stock, Net                  74             156
Cash in Lieu of Fractional Shares from Cash Dividend             (2)             --
Purchase of Common Stock, Net                                   (21)             --
--------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                    33,192          19,998
Decrease in Cash and Cash Equivalents                        (1,070)        (10,220)
Cash and Cash Equivalents, Beginning of Year                  9,428          19,648
--------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                     $  8,358        $  9,428
============================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for Interest                     $  7,836        $  5,997
============================================================================================
Cash Paid During the Year for Federal Income Taxes         $    900        $    840
============================================================================================
</TABLE>

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

                                       7
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

1: ORGANIZATION AND NATURE OF OPERATIONS
SVB Financial Services,  Inc., (the "Company") is a one bank holding company, of
Somerset Valley Bank (the "Bank"). The Somerset Valley Investment Company,  Inc.
is a wholly owned  subsidiary of the Bank.

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

2: SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION: 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.

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

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

     SECURITIES:   The  Company  accounts  for  securities  in  accordance  with
Statement of Financial  Accounting  Standards  (SFAS) No. 115,  "Accounting  for
Certain  Investments in Debt and Equity  Securities." A portion of the Company's
securities  are  carried at cost  adjusted  for  amortization  of  premiums  and
accretion of discounts using the interest  method.  These securities are carried
at  amortized  cost  because  the Company has the ability and intent to hold the
securities to maturity.  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 fair value with  unrealized  gains and losses  excluded from earnings
and reported as Other  Comprehensive  Income/(Loss)  in a separate  component of
shareholders' equity, net of income taxes. The net effect of unrealized gains or
losses, caused by marking an available for sale portfolio to market, could cause
fluctuations in the level of shareholders'  equity and equity-related  financial
ratios as market  interest 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, 2000 and 1999.

     In June 1998,  SFAS No. 133,  "Accounting  for Derivative  Instruments  and
Hedging  Activity"  as amended  in June 1999 by SFAS No.  137,  "Accounting  for
Derivative  Instruments and Hedging  Activities - Deferral of the Effective Date
of FASB Statement No. 133," and in June 2000, by SFAS No. 138,  "Accounting  for
Certain Derivative  Instruments and Certain Hedging  Activities,"  (collectively
SFAS No. 133). SFAS No. 133 requires that entities  recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those  instruments at fair value.  Depending upon the effectiveness of the hedge
and/or  the  transaction  being  hedged,  any  changes  in the fair value of the
derivative instrument is either recognized in


                                       8
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


earnings in the current year, deferred to future periods, or recognized in other
comprehensive  income.  Changes in the fair value of all derivative  instruments
not recognized as hedge accounting are recognized in current year earnings. SFAS
No. 133 is required for all fiscal quarters or fiscal years beginning after June
15, 2000. The Company adopted SFAS No. 133 effective July 1, 2000. No adjustment
was required as a result of the change in accounting principle.

     SFAS No. 119 "Disclosure  About Derivative  Financial  Instruments and Fair
Value  of  Financial   Instruments"   requires   disclosures   about   financial
instruments,  which are defined as futures,  forwards, swap and option contracts
and other financial instruments with similar  characteristics.  On balance sheet
receivables and payables are excluded from this definition.  The Company did not
hold any derivative financial instruments as defined by SFAS No. 119 at December
31, 2000 or 1999.

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  Transfers  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.

     In September 2000, SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" was adopted, which replaced
SFAS No. 125, " Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishment  of  Liabilities,"  revises the standards for  accounting for the
securitizations and other transfers of financial assets and collateral. This new
standard  also  requires  certain  disclosures,  but  carries  over  most of the
provisions  of SFAS No.  125.  SFAS  No.  140 is  effective  for  transfers  and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. However,  for recognition and reclassification of collateral and
for disclosures  relating to  securitizations  transactions  and collateral this
statement  is effective  for fiscal  years  ending after  December 15, 2000 with
earlier application not allowed and is to be applied prospectively. The adoption
of this  statement  is not expected to have a material  impact on the  Company's
consolidated  financial  statements.  The  Company  periodically  sells  certain
commercial and mortgage loans to other financial  institutions  without recourse
to the  Company.  The  gains  and  losses  are  recognized  in an  amount  which
approximates the present value of the difference  between the effective interest
rate to the Company and the net yield to the purchaser,  excluding normal future
loan servicing fees, when applicable,  over the estimated remaining lives of the
loans sold.

     Interest  on loans is  credited  to  operations  primarily  based  upon the
principal amount outstanding. When management believes there is sufficient doubt
as to the  ultimate  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

                                       9
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


information and fair value  appraisals.  A range of loss allowances is estimated
based upon  consideration  of past experience of originated  loans by loan type,
year of origination,  location of collateral property and loan-to-value  ratios.
Based upon this process,  consideration of the current economic  environment and
other  factors,  management  determines  what it considers to be an  appropriate
allowance for loan losses.  Although the Company's  management believes it has a
sound basis for this estimation,  actual  write-offs  incurred in the future are
highly dependent upon future events,  including the economy of the area in which
the Company lends. In addition, various regulatory agencies, as an integral part
of their examination process,  periodically review the Bank's allowance for loan
losses.  Such  agencies  may  require  the Bank to  recognize  additions  to the
allowance  based on their 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.
INCOME TAXES:  The Company  accounts for income taxes under the liability method
specified by SFAS 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):  The  Company  follows  SFAS No.  130,  "Reporting  Comprehensive
Income." This standard requires entities  presenting a complete set of financial
statements to include  details of  comprehensive  income or loss.  Comprehensive
income  consists  of net  income  or loss for the  current  period  and  income,
expenses,  gains and losses that bypass the income  statement  and are  reported
directly in a separate component of equity.

                                       10
<PAGE>

SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

The income tax effects allocated to comprehensive income/(loss) at December 31,
are as follows:
<TABLE>
<CAPTION>

===============================================================================================================================
                                             2000                               1999
===============================================================================================================================
                                            Before                      Net         Before          Tax           Net
                                             Tax          Tax         of Tax         Tax          Benefit       of Tax
(in thousands)                              Amount     (Expense)      Amount        Amount       (EXPENSE)      Amount
===============================================================================================================================
<S>                                         <C>          <C>           <C>           <C>            <C>         <C>
Unrealized Gains/(Losses) on Securities
  Unrealized Holding Gains/(Losses)
  Arising During the Period                 $672         $(228)        $444          $(774)         $267        $(507)
Less Reclassification
  Adjustment for Losses/(Gains)
  Realized in Net Income                       -                          -              8            (3)           5
-------------------------------------------------------------------------------------------------------------------------------
Other Comprehensive
  Income/(Loss), Net                        $672         $(228)        $444          $(782)         $270        $(512)
===============================================================================================================================
</TABLE>

SEGMENT REPORTING: The Company follows 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 has one reportable segment,
"Community Banking." All of the Company's activities are interrelated,  and each
activity is dependent  and assessed  based on how each of the  activities of the
Company  supports  the others.  For  example,  secured  real  estate  lending is
dependent  upon the ability of the Bank to fund itself with retail  deposits and
other  borrowings and to manage interest rate and credit risk. This situation is
also similar for consumer and residential  mortgage  lending.  Accordingly,  all
significant  operating  decisions  are based upon analysis of the Company as one
operating segment or unit.

<TABLE>
<CAPTION>
===============================================================================================================================
3: SECURITIES
Information relative to the Company's securities portfolio are as follows:
===============================================================================================================================
                                          GROSS                 GROSS
                                        AMORTIZED             UNREALIZED            UNREALIZED             FAIR
(in thousands)                             COST                 GAINS                 LOSSES               VALUE
===============================================================================================================================
<S>                                       <C>                    <C>                  <C>                 <C>
2000
AVAILABLE FOR SALE
U.S. Government Agency Securities         $19,276                $ 60                 $  63               $19,273
Mortgage-Backed Securities                 11,983                  31                    96                11,918
Other Securities                            1,297                  --                    24                 1,273
                                          $32,556                $ 91                 $ 183               $32,464
HELD TO MATURITY
U.S. Government Agency Securities         $ 4,242                $ 16                 $   9               $ 4,249
Mortgage-Backed Securities                  1,549                  19                    --                 1,568
Municipal Securities                          546                  --                     1                   545
                                          $ 6,337                $ 35                 $  10               $ 6,362
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>


                                       11
<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,  2000,  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.

================================================================================
                                                  AMORTIZED            FAIR
(in thousands)                                      COST               VALUE
================================================================================
AVAILABLE FOR SALE
Due in 1 year or less                             $ 6,490             $ 6,485
Due after 1 year through 5 years                   14,083              14,061
Mortgage-Backed Securities                         11,983              11,918
--------------------------------------------------------------------------------
                                                  $32,556             $32,464
================================================================================
HELD TO MATURITY
Due in 1 year or less                             $ 1,038             $ 1,040
Due after 1 year through 5 years                    3,750               3,754
Mortgage-Backed Securities                          1,549               1,568
--------------------------------------------------------------------------------
                                                  $ 6,337             $ 6,362
================================================================================

     At  December  31,  2000,  securities  having a book value of  approximately
$1,770,000  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:
================================================================================
(in thousands)                                      2000          1999
================================================================================
Secured by Real Estate:
  Residential Mortgage                           $ 55,357       $ 41,727
  Commercial Mortgage                              57,223         48,349
  Construction                                     12,561         11,943
Commercial & Industrial                            33,429         32,628
Loans to Individuals
  for Automobiles                                   8,583          7,907
Loans to Individuals                               11,721         10,062
Other Loans                                           344            535
                                                 $179,218       $153,151
================================================================================

     There were no loans  restructured  during 2000 or 1999. There were no loans
past  due 90 days or  more  as to  principal  and  interest  and  $482,000  in a
non-accrual status as of December 31, 2000. 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.
     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, 2000 there were $700,000 of loans deemed to be impaired,
a valuation reserve of $144,000 was recorded for these loans. 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.
     The Company has no concentration  of loans to borrowers  engaged in similar
activities  which exceeded 10% of total loans at December 31, 2000 and 1999. The
Company continues to pursue new lending  opportunities while seeking to maintain
a portfolio  that is diverse as to industry  concentration,  type and geographic
distribution. The Company's geographic lending area is primarily concentrated in
Somerset County,  but also includes  Middlesex,  Hunterdon,  Mercer,  Morris and
Monmouth counties.

5: ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses is as follows:
================================================================================
(in thousands)                                       2000               1999
================================================================================
Balance at January 1,                             $ 1,550)           $ 1,211)
Provision Charged to Operations                       375                440
Charge Offs                                          (137)              (115)
Recoveries                                             35                 14
--------------------------------------------------------------------------------
Balance at December 31,                           ($1,823)           ($1,550)
================================================================================

6: PREMISES AND EQUIPMENT
Premises and equipment consists of the following at December 31, 2000 and 1999:
================================================================================
               ESTIMATED
(in thousands) USEFUL LIVES                             2000           1999
================================================================================
Construction in Progress              -              $  219            1,764
Premises & Improvements      5-30 years               4,284            2,693
Furniture & Equipment        3-10 years               2,215            1,762
--------------------------------------------------------------------------------
                                                      6,718            6,219
Less: Accumulated Depreciation
      and Amortization                               (1,874)          (1,430)
--------------------------------------------------------------------------------
                                                     $4,844           $4,789
================================================================================
Depreciation  and  amortization  charged to operations was $578,000 and $463,000
for the years ended December 31, 2000 and 1999 respectively.

                                       12
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


7: DEPOSITS
At December 31, 2000,  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     $ 12,610         $  3,700        $   762              $   -        $17,072
Less than $100,000     35,101           53,751          6,749                352         95,953
================================================================================================
</TABLE>

8: OTHER EXPENSES
The major components of other expenses are as follows:
===============================================================
(in thousands)                              2000         1999
===============================================================
Data Processing Services                  $  456       $  367
Marketing & Business Development             254          206
Stationery, Forms & Supplies                 257          206
Insurance                                     94           82
Legal, Examination & Accounting              236          167
Postage & Telephone                          224          175
FDIC Insurance Assessment                     70           20
Other, Net                                   807          678
---------------------------------------------------------------
                                          $2,398       $1,901
===============================================================

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 2005, but which contain certain renewal options.
The Somerville facilities are leased from a partnership  consisting of all among
others,  but one of the  Company's  Directors.  As of December 31, 2000,  future
minimum rental  payments,  including the renewal  options under these leases for
the subsequent five years are as follows:

(in thousands)
===============================================================
Lease Year                              Minimum Rental Payments
===============================================================
2001                                                $   763
---------------------------------------------------------------
2002                                                    766
---------------------------------------------------------------
2003                                                    773
---------------------------------------------------------------
2004                                                    786
---------------------------------------------------------------
2005                                                    801
---------------------------------------------------------------
                                                    $ 3,889
===============================================================

     The amounts in the previous table  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
$693,000 and $500,000 for the years ended  December 31, 2000 and 1999.  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 credit.

     The Company had outstanding commitments to extend credit of $31,674,000 and
$33,825,000   at  December  31,  2000  and  December  31,  1999,   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, 2000.

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 2000 and 1999, 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 $76,000 and

                                       13
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


$66,000 to the Plan in 2000 and 1999, 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 eliminates
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  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 $84,000 in 2000
and $25,000 in 1999, in connection with these plans.

11: INCOME TAXES
The components of the provision for income taxes are as follows:
================================================================================
(in thousands)                                  2000                   1999
================================================================================
Current
  Federal                                       $926                  $ 886
  State                                          142                    109
Deferred Benefit                                (168)                  (180)
                                                $900                  $ 815)
================================================================================

     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:

================================================================================
(in thousands)                                  2000                   1999
================================================================================
Start-up and Organization Costs                $ (1)                   $ (1)
Depreciation                                     178                    117
Accretion of Securities Discount                 (24)                   (13)
Allowance for Loan Losses                        754                    636
--------------------------------------------------------------------------------
Net Deferred Tax Asset, Included in
  Other Assets                                  $907                   $739
================================================================================
A reconciliation of income taxes calculated at the
statutory rate of 34% to the actual income tax provision is as follows:


================================================================================
(in thousands)                                  2000                   1999
================================================================================
Statutory Provision                            $ 818                   $ 738
State Taxes on Income,
  Net of Federal Tax Benefit                      48                      72
Non-Deductible Expenses                           36                      --
Other                                             (2)                      5
--------------------------------------------------------------------------------
                                               $ 900                   $ 815
================================================================================

12: EARNINGS PER SHARE
The  following  table  illustrates  the  reconciliation  of the  numerators  and
denominators of the basic and diluted EPS computations:

================================================================================
FOR THE YEAR ENDED                          WEIGHTED      PER
DECEMBER 31, 2000                           AVERAGE       SHARE
(in thousands except per share data)        INCOME        SHARES        AMOUNT
================================================================================
EARNINGS PER SHARE - BASIC
Income available to Common
 Shareholders                              $ 1,507        3,105          $.49
Effect of Dilutive Securities
Stock Options                                  --            70           .02
EARNINGS PER SHARE - DILUTED
Income available to Common
 Shareholders plus assumed
 conversions                               $ 1,507        3,175          $.47
================================================================================

Antidilutive  options  totaling  101,380  ranging in exercise price from $8.57 -
$8.86 have been  excluded  in the  computation  of 2000  diluted EPS because the
options exercise prices were greater than the average market price of the common
shares.
================================================================================
FOR THE YEAR ENDED                                        WEIGHTED       PER
DECEMBER 31, 2000                                         AVERAGE       SHARE
(in thousands except per share data)        INCOME        SHARES        AMOUNT
================================================================================
EARNINGS PER SHARE - BASIC
Income available to Common
 Shareholders                              $ 1,355        3,073          $.44
Effect of Dilutive Securities
Stock Options                                   --           83           .01
--------------------------------------------------------------------------------
EARNINGS PER SHARE - DILUTED
Income available to Common
 Shareholders plus assumed
 conversions                               $ 1,355        3,156          $.43
================================================================================
There were no antidilutive options at December 31, 1999.
Adjusted for the 5% stock dividend.

13: SHAREHOLDERS'S EQUITY
On October  29,  1999 and  October  26,  2000,  the  Company  declared  5% stock
dividends to shareholders of record as of November 4, 1999 and November 7, 2000,
respectively.  Accordingly,  earnings  per share,  options and  weighted-average
shares of common  stock have been  restated to reflect the stock  dividends.

     On August 31, 2000,  the Board of Directors  adopted a Stock Buy Back Plan.
The  purpose  of the Plan is to  systematically  purchase  the  amount of shares
necessary to fund a compensation  plan for Bank Advisory  Board  members.  Up to
18,000 shares may be purchased  over a period ending on August 31, 2001.  During
2000,  shares totaling 2,420 were purchased on the open market at prices ranging
from $8.375 to $8.625, as adjusted for the 5% stock dividend.

                                       14
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


14: STOCK OPTION PLANS
At December 31, 2000, the Company had four stock option plans.
The 1997  Restated  Incentive  Stock Option Plan, a  non-qualified  stock option
plan.  Under this Plan,  the Board of Directors may grant options to officers to
purchase the  Company's  stock.  Stock options are issued at prices equal to the
fair market value at the date of grant.  The stock options have a vesting period
of one year from the date of issuance.  Shares totaling 181,700 are reserved for
issuance  under this Plan including  105,116 shares  outstanding at December 31,
2000.
     The 1997 Directors  Stock Option Plan, a  non-qualified  stock option plan.
Under this Plan, stock options are granted to Directors at the fair market value
at the date of grant.  The stock options have a vesting  period of one year from
the date of issuance.  Shares  totaling  120,400 are reserved for issuance under
this Plan, of which 103,200 were outstanding at December 31, 2000.
     The 2000 Incentive  Stock Option Plan, a  non-qualified  stock option plan.
Stock options are issued at prices equal to the fair market value at the date of
grant.  Shares  totaling  157,500  are  reserved  for  issuance  under this plan
including  34,400 shares  outstanding  at December 31, 2000.  The 2000 Directors
Stock Option Plan, a  non-qualified  stock option plan.  Under this plan,  stock
options  are  issued at  prices  equal to the fair  market  value at the date of
grant.  Shares  totaling  63,000  are  reserved  for  issuance  under this plan,
including 58,152 outstanding at December 31, 2000.
     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:

=========================================================
                                  2000            1999
=========================================================
Net Income
  As reported                    $1,507         $1,355
  Pro forma                       1,142          1,011
Earnings per share - Basic
  As reported                    $  .49         $  .44
  Pro forma                         .37            .33
Earnings per share - Diluted
  As reported                    $  .47         $  .43
  Pro forma                         .36            .32
=========================================================

The fair value of each option  granted in 2000 is estimated on the date of grant
using  the Black  Scholes  pricing  model  with the  following  weighted-average
assumptions,  no  dividend  yield;  expected  volatility  of  21.58%,  risk free
interest rate of 5.33% and an expected life of five years.

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

<TABLE>
<CAPTION>

========================================================================================================
                                             2000                             1999 (1)
========================================================================================================
                                                   WEIGHTED-AVERAGE                    WEIGHTED-AVERAGE
                                      SHARES        EXERCISE PRICE        SHARES        EXERCISE PRICE
========================================================================================================
<S>                                  <C>            <C>                   <C>            <C>
Outstanding at beginning of year     221,959        $    5.42             261,736        $    5.25
Options granted                      101,380             8.69                  --               --
Options exercised                    (13,871)           95.28             (37,572)           94.15
Options expired or canceled           (8,600)           95.90              (2,205)            5.90
Outstanding at end of year           300,868        $    6.52             221,959        $    5.42
Options exercisable at year end      300,868        $    6.52             221,959        $    5.42
========================================================================================================
</TABLE>

(1) Amounts have been restated to show effects of a 5% stock dividend

================================================================================
The following table summarizes information about non-qualified stock options at
December 31, 2000:
================================================================================

                       OPTIONS OUTSTANDING AND EXERCISABLE
                       -----------------------------------
  RANGE OF             OUTSTANDING AND      WEIGHTED-AVERAGE   WEIGHTED-AVERAGE
  EXERCISE             EXERCISABLE AT         REMAINING           EXERCISE
  PRICES              DECEMBER 31, 2000    CONTRACTUAL LIFE         PRICE
================================================================================
  $3.780 - $5.670          45,776             .33 years           $ 3.780
  $5.900 - $8.500         153,712            1.64 years           $ 5.900
  $8.570 - $8.750          58,152            4.33 years           $ 8.570
  $8.800 - $8.875          43,228            4.83 years           $ 8.860
                          300,868
================================================================================

                                       15
<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements


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

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

     Changes in the  assumptions or  methodologies  used to estimate fair values
may materially affect the estimated amounts.  Also, management is concerned that
there may not be reasonable  comparability  between institutions due to the wide
range of  permitted  assumptions  and  methodologies  in the  absence  of active
markets.  This lack of uniformity gives rise to a high degree of subjectivity in
estimating  financial  instrument  fair values.  Estimated fair values have been
determined  by the  Company  using  the best  available  data and an  estimation
methodology suitable for each category of financial instruments.  The estimation
methodology  used,  the estimated  fair values and the recorded book balances at
December 31, 2000 and 1999 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>
===========================================================================================
                                       2000                            1999
===========================================================================================
(in thousands)               FAIR VALUE    CARRYING VALUE     FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                          <C>             <C>              <C>              <C>
Cash and Cash Equivalents    $  8,358        $  8,358         $  9,428         $  9,428
===========================================================================================
</TABLE>

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

<TABLE>
<CAPTION>

===========================================================================================
                                       2000                            1999
===========================================================================================
(in thousands)               FAIR VALUE    CARRYING VALUE    FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                            <C>            <C>             <C>            <C>
Available for Sale Securities  $32,464        $32,464         $26,377        $26,377
Held to Maturity Securities      6,362          6,337           5,041          5,122
Equity Securities                  839            839             839            839
===========================================================================================
</TABLE>

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 present
value of future cash flows expected to be received. Loan rates currently offered
by the Company were used in determining the appropriate  discount rate. Deposits
with stated  maturities  have been valued using a present value  discounted cash
flow with a discount rate approximating  current market for similar  maturities.
Deposits  with no stated  maturities  have an estimated  fair value equal to the
amount payable on demand.

<TABLE>
<CAPTION>

===========================================================================================
                                       2000                            1999
===========================================================================================
(in thousands)               FAIR VALUE    CARRYING VALUE    FAIR VALUE    CARRYING VALUE
===========================================================================================
<S>                            <C>            <C>             <C>            <C>
Loans                          $179,583       $179,218        $152,450       $153,151
Deposits                        218,512        222,384         189,879       189,562
===========================================================================================
</TABLE>

     There was no  material  difference  between the  notational  amount and the
estimated fair value of  off-balance  sheet items,  which totaled  approximately
$31,674,000 and $33,825,000,  at December 31, 2000 and 1999,  respectively,  and
primarily  comprise  unfunded loan  commitments,  which are generally  priced at
market at the time of funding.

16: 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


                                       16
<PAGE>

                                                    SVB FINANCIAL SERVICES, INC.
                                      Notes to Consolidated Financial Statements

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, 2000,  that the
Company and its subsidiary Bank meet all capital adequacy  requirements to which
they are subject.
     As of  December  31,  2000 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. 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
                                                    ACTUAL                                CAPITALIZED
                                             --------------------         ------------------------------------------
($ in thousands)                             AMOUNT         RATIO                 AMOUNT               RATIO
============================================================================================================================
SVB FINANCIAL SERVICES, INC.
As of December 31, 2000
<S>                                         <C>             <C>            <C>                    <C>
Total Capital to Risk Weighted Assets       $18,295         9.68%          greater than $15,126   greater than 8.00%
Tier I Capital to Risk Weighted Assets      $16,472         8.71%          greater than  $7,563   greater than 4.00%
Tier I Leverage                             $16,472         7.31%          greater than  $9,015   greater than 4.00%
As of December 31, 1999
Total Capital to Risk Weighted Assets       $16,386        10.17%          greater than $12,885   greater than 8.00%
Tier I Capital to Risk Weighted Assets      $14,836         9.21%          greater than  $6,442   greater than 4.00%
Tier I Leverage                             $14,836         7.56%          greater than  $7,847   greater than 4.00%
SOMERSET VALLEY BANK
As of December 31, 2000
Total Capital to Risk Weighted Assets       $17,444         9.24%          greater than $15,110   greater than 8.00%
Tier I Capital to Risk Weighted Assets      $15,621         8.27%          greater than  $7,555   greater than 4.00%
Tier I Leverage                             $15,621         6.94%          greater than  $9,003   greater than 4.00%
As of December 31, 1999
Total Capital to Risk Weighted Assets       $15,525         9.61%          greater than $12,293   greater than 8.00%
Tier I Capital to Risk Weighted Assets      $13,975         8.65%          greater than  $6,461   greater than 4.00%
Tier I Leverage                             $13,975         7.13%          greater than  $7,835   greater than 4.00%
============================================================================================================================
</TABLE>


<TABLE>
<CAPTION>

============================================================================================================================
SVB FINANCIAL SERVICES, INC. AND SOMERSET VALLEY BANK
                                                                  TO BE WELL
                                                                  CAPITALIZED
                                                  -----------------------------------------
($ in thousands)                                         AMOUNT                 RATIO
============================================================================================================================
<S>                                               <C>                   <C>
SVB FINANCIAL SERVICES, INC.
As of December 31, 2000
Total Capital to Risk Weighted Assets                      --                    --
Tier I Capital to Risk Weighted Assets                     --                    --
Tier I Leverage                                            --                    --
As of December 31, 1999
Total Capital to Risk Weighted Assets                      --                    --
Tier I Capital to Risk Weighted Assets                     --                    --
Tier I Leverage                                            --                    --
SOMERSET VALLEY BANK
As of December 31, 2000
Total Capital to Risk Weighted Assets             greater than $18,880  greater than 10.00%
Tier I Capital to Risk Weighted Assets            greater than $11,333  greater than 6.00
Tier I Leverage                                   greater than $11,253  greater than 5.00
As of December 31, 1999
Total Capital to Risk Weighted Assets             greater than $16,153  greater than 10.00%
Tier I Capital to Risk Weighted Assets            greater than $9,692   greater than 6.00
Tier I Leverage                                   greater than $8,069   greater than 5.00
============================================================================================================================
</TABLE>

                                       17

<PAGE>


SVB FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements

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

<TABLE>
<CAPTION>

BALANCE SHEET (in thousands)                              DECEMBER 31, 2000         DECEMBER 31, 1999
=======================================================================================================
ASSETS
<S>                                                          <C>                      <C>
Cash and Due from Banks                                      $    566                 $    563
Other Assets                                                       46                       73
Investment in Subsidiary                                       16,504                   14,478
Equity Securities                                                 250                      250
Total Assets                                                 $ 17,366                 $ 15,364
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Common Stock                                                 $  6,490                 $  6,158
Additional Paid-in Capital                                      7,483                    6,496
Retained Earnings                                               3,454                    3,215
Accumulated Other Comprehensive Loss                              (61)                    (505)
Total Shareholders' Equity                                     17,366                   15,364
-------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity                   $ 17,366                 $ 15,364
=======================================================================================================

<CAPTION>

               YEARS ENDED
STATEMENT OF INCOME (in thousands)                        DECEMBER 31, 2000         DECEMBER 31, 1999
=======================================================================================================
<S>                                                          <C>                      <C>
OPERATING INCOME
Interest Income                                              $     20                  $     13
Total Income                                                       20                        13
OPERATING EXPENSE
Other Expense                                                      95                        68
Total Expense                                                      95                        68
Loss Before Equity in Undistributed Income of Subsidiary          (75)                      (55)
Equity in Undistributed Income of Subsidiary                    1,582                     1,410
NET INCOME                                                    $ 1,507                  $  1,355
=======================================================================================================
<CAPTION>

              YEARS ENDED
STATEMENT OF CASH FLOWS (in thousands)                    DECEMBER 31, 2000          DECEMBER 31, 1999
=======================================================================================================
<S>                                                          <C>                      <C>
OPERATING ACTIVITIES
Net Income                                                    $ 1,507                  $  1,355
Adjustments to Reconcile Net Income to Net Cash
Used In Operating Activities:
Equity in Undistributed Income of Subsidiary                   (1,582)                   (1,410)
Amortization of Organization Costs                                 13                        13
Decrease in Other Assets                                           14                        13
-------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities                             (48)                      (29)
=======================================================================================================
FINANCING ACTIVITIES
Proceeds from the Issuance of Common Stock, Net                    74                       156
Purchases of Common Stock, Net                                    (21)                       --
Cash in Lieu of Fractional Shares from Stock Dividend              (2)                       --
-------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                          51                       156
Increase in Cash and Cash Equivalents                               3                       127
Cash and Cash Equivalents, Beginning of Year                      563                       436
-------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                        $   566                    $  563
=======================================================================================================
</TABLE>

                                       18
<PAGE>


                                                    SVB FINANCIAL SERVICES, INC.
                              Report of Independent Certified Public Accountants
Accountants and
Management Consultants                        [LETTERHEAD - GRANT THORNTON]
Grant Thornton LLP
The US Member Firm of
Grant Thornton International



               Report of Independent Certified Public Accountants
               --------------------------------------------------


Board of Directors and Shareholders
SVB Financial Services, Inc.

We have audited the  accompanying  consolidated  balance sheets of SVB Financial
Services,  Inc.  and  subsidiaries  as of December  31,  2000 and 1999,  and the
related consolidated  statements of income,  changes in shareholders' equity 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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of SVB Financial
Services,  Inc.  and  subsidiaries  as of December  31,  2000 and 1999,  and the
consolidated  results of their operations and their  consolidated cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.

/s/ Grant Thornton LLP
-----------------------
Grant Thornton LLP
Philadelphia, Pennsylvania
January 19, 2001


Suite 3100
Two Commerce Square
2001 Market Street
Philadelphia, PA 19103-7080
Tel: 215 561-4200
Fax: 215 561-1066

                                       19


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  results  of
operations are not intended to be indicative of future performance.

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

RESULTS OF OPERATIONS
Net income for the year ended  December 31, 2000 was  $1,507,000  an increase of
$152,000 or 11% from the  previous  year and  represents a record for net income
during the Company's nine year history.

     The major  reason for the increase in net income was a result of the growth
in net interest income.  Net interest income increased  $1,654,000 or 20% on the
strength of loan growth in a strong  Central New Jersey  economy and an increase
in the net  interest  margin of 20 basis  points to 4.73%.  Non-interest  income
increased  $204,000 or 26% in 2000. A large  portion of this increase was due to
an increase in service  charges on deposit  accounts of $170,000 and an increase
in other  income  of  $91,000.  A  decline  in the gains on the sale of loans of
$65,000  partially  offset  these  increases.

     Non-interest  expenses increased  $1,686,000 or 26%. The Company opened two
full service branches, in the first quarter of 2000. Additionally,  the Manville
branch and the new Operations Center both opened during 1999 and incurred a full
year of expenses in 2000. 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.

                                       20
<PAGE>


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


<TABLE>
<CAPTION>

Summary of Net Interest Income
=============================================================================================================================
                                                                        Years Ended December 31,
                                                              2000                                       1999
                                              ----------------------------------      ---------------------------------------
                                                Average    AVERAGE                      AVERAGE    AVERAGE
($ in thousands)                                Balance     Rate       Interest         Balance      Rate       Interest
=============================================================================================================================
<S>                                           <C>          <C>        <C>              <C>           <C>       <C>
ASSETS:
Federal Funds Sold                            $   5,478    6.35%      $     348        $   6,159     5.00%     $     308
Other Short Term Investments                         54    5.56%              3              216     4.63%            10
Interest Bearing Time Deposits                    6,918    6.48%            448            5,719     5.49%           314

Securities
Available for Sale                               27,979    6.25%          1,748           25,155     5.84%         1,469
Held to Maturity                                  4,747    6.28%            298            8,931     5.72%           511
Equity Securities                                   839    6.08%             51              444     2.93%            13
-----------------------------------------------------------------------------------------------------------------------------
Total Securities                                 33,565    6.25%          2,097           34,530     5.77%         1,993
Loans (1)                                       164,875    9.13%         15,049          137,150     8.59%        11,787
-----------------------------------------------------------------------------------------------------------------------------
Total Interest Earning Assets                   210,890    8.51%         17,945          183,774     7.84%        14,412
Cash and Due from Banks                           9,295                                                            9,064
Allowance for Possible Loan Losses               (1,672)                                                          (1,337)
Premises and Equipment, Net                       4,824                                                            3,380
Other Assets                                      2,983                                                            2,337
-----------------------------------------------------------------------------------------------------------------------------
Total Assets                                  $ 226,320                                                        $ 197,218
=============================================================================================================================
Liabilities and Shareholders' Equity:
Deposits
Savings                                       $  17,190    2.86%      $     492        $   14,998    2.91%     $     437
Money Market                                     24,882    3.62%            900            22,695    3.31%           751
NOW                                              32,489    2.43%            788            24,656    2.35%           579
Time                                            100,028    5.75%          5,755            85,044    5.03%         4,281
-----------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits                 174,589    4.54%          7,935           147,393    4.10%         6,048
Other Short Term Borrowings                          12    8.33%              1               142    5.63%             8
Obligation Under Capital Lease                      429    8.39%             36               435    8.51%
-----------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities              175,030    4.55%          7,972           147,970    4.12%         6,093
Demand Deposits                                  34,316                                    33,765
Other Liabilities                                   987                                       733
Cost to Fund Earning Assets                                3.78%                                     3.31%
Shareholders' Equity                             15,987                                    14,750
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity    $ 226,320                                 $ 197,218
=============================================================================================================================
Net Interest Income                                                   $   9,973                                $   8,319
=============================================================================================================================
Net Interest Margin (2)                                    4.73%                                     4.53%
=============================================================================================================================
</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.

                                       21
<PAGE>


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

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

==============================================================================
                                              Years Ended December 31,
                                                    2000 vs 1999
                                       --------------------------------------
                                       Increase (Decrease) Due to Changes in:
($ in thousands)                       Volume          Rate            Total
==============================================================================
Increase (Decrease) in
Interest Income:
Federal Funds Sold                   $   (28)        $    68         $    40
Other Short Term Investments              (7)             --              (7)
Interest Bearing Time Deposits            72              62             134
Securities
Available for Sale                       172             107             279
Held to Maturity                        (268)             55            (213)
Equity Securities                         18              20)             38
------------------------------------------------------------------------------
Total Securities                         (78)            182             104
Loans                                  2,496             766           3,262
------------------------------------------------------------------------------
Total Interest Income                  2,455           1,078           3,533
------------------------------------------------------------------------------
Interest Expense:
Deposits
Savings                                   63              (8)             55
Money Market                              76              73             149
NOW                                      189              20             209
Time                                     814             660           1,474
------------------------------------------------------------------------------
Total Interest Bearing Deposits        1,142             745           1,887
Other Short Term Borrowings               (7)             --              (7)
Obligation Under Capital Lease            (1)             --              (1)
------------------------------------------------------------------------------
Total Interest Expense                 1,134             745           1,879
------------------------------------------------------------------------------
Change in Net Interest Income        $ 1,321         $   333         $ 1,654
==============================================================================

                                       22

<PAGE>


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

Net  interest  income  increased  $1,654,000  or 20% in 2000 as a  result  of an
increase in loan  balances and an  improvement  in the net interest  margin from
4.53% in 1999 to 4.73% in 2000.  Average loans of $164.9 million increased $27.7
million over 1999. Loan volume generated  $2,496,000 of the increase in interest
income.
     Average deposits grew $27.7 million which provided funding for the increase
in loans. All deposit  categories  experienced  growth in 2000, with the largest
increases  occurring in time  deposits  ($15.0  million) and NOW accounts  ($7.8
million).  Time  deposits grew as a result of the Company  offering  competitive
interest rates during the opening of its new branches as well as during times of
significant  loan demand.  NOW accounts  increased as a result of growth in both
consumer and municipal accounts.
     Interest rates during 2000 also had an impact on net interest income. There
were three  increases in the Prime Lending Rate totaling 100 basis points in the
first half of the year.  Consequently,  the average Prime Rate for 2000 of 9.23%
was 123 basis  points over  1999's  average of 8.00%.  As a result,  the average
yield on loans was 9.13% in 2000 compared to 8.59% in 1999.  Overall,  the yield
on  earning  assets  increased  67 basis  points  to 8.51% in 2000,  which had a
positive  impact  on  interest  income  of  $1,078,000.  Total  interest  income
increased $3,533,000 from a combination of volume and rate increases.
     The cost of interest bearing liabilities increased 43 basis points to 4.55%
and the cost of funding earning assets increased 47 basis points to 3.78% also a
result of general  interest rate  increase.  Total  interest  expense  increased
$1,879,000.
     The year 2000 net  interest  margin of 4.73%  represents  the  highest  net
interest margin in the Company's nine year history.

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)                             2000         1999
=================================================================
<S>                                       <C>          <C>
Service Charges on Deposit
  Accounts                                $ 563        $ 393
(Losses) on the Sale of Securities            .           (8)
Gain on the Sale of Loans                   188          253
Other Income                                240          149
-----------------------------------------------------------------
                                          $ 991        $ 787
=================================================================
</TABLE>


     Other income  increased  $204,000 or 26% during 2000 in comparison to 1999.
Service  charges on deposit  accounts  increased  $170,000 or 43%.  The Manville
Branch had their first full year of operation and two new branches, Aberdeen and
Bernards, were added in January and February of 2000, respectively.  Even though
fees were not raised in 2000, service charges on both personal checking accounts
and  overdrafts  increased 60% and 34%  respectively.  Furthermore,  the Company
received a higher volume of non-bank customers using its ATM machines, therefore
increasing  our ATM service  charges by $38,000 or 62%.  Additionally,  the Bank
generated $22,000 in fees from our commercial sweep account.
     Gains on sale of loans were  $188,000 in 2000 compared to $253,000 in 1999,
a decrease of $65,000 or 26%. The Company is a preferred SBA lender and as such,
originates  SBA loans and sells the guaranteed  portion in the secondary  market
while  retaining  the  servicing.  SBA  loans are not the  primary  focus of the
Company  and  consequently,  sales of these loans can vary from period to period
depending upon the volume of SBA loans generated.
     Other  income  increased  $91,000 or 61% in 2000.  A major  portion of this
increase was related to the  servicing of SBA loans as  described  above.  Also,
insurance  products were offered to customers  through Somerset Valley Financial
LLC resulting in $12,000 of  additional  income.  Finally,  income from merchant
credit card  processing  doubled due to contracting a new processor at favorable
rates.

OTHER EXPENSE
A  comparison  of the major  components  of other  expense  is  included  in the
following table:
===============================================================
YEARS ENDED DECEMBER 31,
(in thousands)                      2000              1999
===============================================================
Salaries and Employee
  Benefits                        $ 4,051            $ 3,291
Occupancy Expense                   1,245                872
Equipment Expense                     488                432
Other Expenses                      2,398              1,901
---------------------------------------------------------------
                                  $ 8,182            $ 6,496
===============================================================

Total other expense increased  $1,686,000 or 26% in comparison to 1999. Expenses
were  impacted  by  additional  personnel,  occupancy  costs and other  expenses
related to the opening of new branches.  Two new offices opened during the first
quarter of 2000,  Aberdeen  Township in January  2000 and  Bernards  Township in
February  2000.  In addition,  the Manville  office,  which opened in March 1999
experienced a full year of expenses in 2000.
Salaries  and  Benefits  expense  increased  $760,000  or 23% from 1999  levels.
Additional personnel were hired to staff the new branches as well as back-office
operations. Full time equivalent employees were 84 at December 31, 2000 compared
to 79 at December 31, 1999. The increase in employees combined with

                                       23

<PAGE>


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

annual salary increases,  and an increase in the number of employees  qualifying
for various benefits,  such as, medical, bonus and 401(k) matching accounted for
the variance from 1999.  Occupancy expense increased  $373,000 or 43% from 1999.
Most of the increase  resulted from rent,  taxes and maintenance for the two new
branches and the expanded  back-office  facility.  Equipment  expense  increased
$56,000 or 13% during  2000.  In  addition,  to  equipping  the new branches and
employees,  the Company  incurred expense to remain current with technology with
respect to its various local area networks.
Other  expenses  increased  $497,000 or 26% from 1999.  Much of the increase was
related to the growth in assets experienced by the Company,  which affected many
areas, especially data processing and outside services, which increased $247,000
or 31% from 1999.  Included in this  increase  are  expenses  for the  Company's
website of $48,000.  Advertising  and  business  development  expense  increased
$48,000  from 1999 due to the  promotion  of the two  branches.  Stationery  and
supplies  additional  costs are also  attributed  to the two new  offices and an
overall  increase  in the  number of  accounts  throughout  the  branches.  FDIC
insurance  increased  $50,000  compared to 1999 due to an  additional  BIF (Bank
Insurance Fund) assessment.

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

The following table sets forth the amortized cost and estimated market values of
securities in the investment portfolios as of December 31, 2000 and 1999.

<TABLE>
<CAPTION>

==============================================================================================
                                                 2000                          1999
                                       -----------------------      --------------------------
                                       Amortized        FAIR          AMORTIZED       FAIR
(in thousands)                           Cost           Value            Cost         Value
==============================================================================================
<S>                                     <C>            <C>            <C>            <C>
AVAILABLE FOR SALE:
U.S. Government Agency Securities       $19,276        $19,273        $14,249        $13,891
Mortgage-Backed Securities (1)           11,983         11,918         11,596         11,248
Other Securities                          1,297          1,273          1,296          1,238
----------------------------------------------------------------------------------------------
                                        $32,556        $32,464        $27,141        $26,377
==============================================================================================
HELD TO MATURITY:
U.S. Treasury Securities                $    --        $    --        $   501        $   500
U.S. Government Agency Securities         4,242          4,249          3,750          3,681
Mortgage-Backed Securities (1)            1,549          1,568            871            860
Municipal Securities                        546            545             --             --
----------------------------------------------------------------------------------------------
                                        $ 6,337        $ 6,362        $ 5,122        $ 5,041
==============================================================================================
</TABLE>


Note: (1) With regard to mortgage-backed  securities,  the Company does not hold
any private issue CMOs. As of December 31, 2000,  there was not one issuer where
the  aggregate  book value or  aggregate  market  value  exceeds  ten percent of
shareholders' equity.

                                       24
<PAGE>


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

The maturity distribution and weighted average yield of the Company's investment
portfolio as of December 31, 2000 is as follows:

<TABLE>
<CAPTION>
=============================================================================================
                                                    Due In       DUE AFTER ONE
                                                   One Year      Year THROUGH
(in thousands)                                     OR LESS         FIVE YEARS         TOTAL
=============================================================================================
<S>                                   <C>          <C>              <C>            <C>
Available for Sale:
U.S. Government Agency Securities (2)
  Fair Value                                       $  6,485         $ 12,788       $ 19,273
  Yield                                                6.01%            6.20%          6.14%
Mortgage-Backed Securities (1)
  Fair Value                          $11,918            --               --       $ 11,918
  Yield                                  6.60%           --               --           6.60%
Other Securities
  Fair Value                                                        $  1,273       $  1,273
  Yield                                                                 5.82%          5.82%
=============================================================================================
Held to Maturity:
U.S. Government Agency Securities (2)
  Book Value                                       $    492         $  3,750       $  4,242
  Yield                                                6.46%            6.25%          6.29%
Mortgage-Backed Securities (1)
  Book Value                          $ 1,549            --               --       $  1,549
  Yield                                  6.88%           --               --           6.88%
Municipal Securities
  Book Value                                       $    546               --       $    546
  Yield                                                4.56%              --           4.56%
=============================================================================================
</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.

LOANS
The following  table  summarizes the Company's loan portfolio as of December 31,
2000 and 1999.
================================================================================
(in thousands)                              2000                 1999
================================================================================
Secured by Real Estate:
  Residential Mortgage                   $ 55,357              $ 41,727
  Commercial Mortgage                      57,223                48,349
  Construction                             12,561                11,943
Commercial & Industrial (1)                33,429                32,628
Loans to Individuals for
  Automobiles                               8,583                 7,907
Other Loans to Individuals                 11,721                10,062
Other Loans                                   344                   535
--------------------------------------------------------------------------------
                                         $179,218              $153,151
================================================================================

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 2000.  The loan
portfolio  increased by $26.1 million or 17% in 2000.  Most, or 89%, of the loan
growth was in the form of loans  secured by real estate.  Residential  mortgages
increased $13.6 million and commercial mortgages increased $8.9 million. Both of
these  increases  were due to a favorable  economy  and a expanding  real estate
market in Central New Jersey.

     The Company targets small to medium sized  businesses and  professionals in
its lending area. With the ever changing composition of the banking marketplace,
the Company has tried to remain  competitive  in its pricing of loans,  but will
not sacrifice loan quality to capture business. It is important to note that 34%
of the loans secured by  residential  real estate as of December 31, 2000,  were
for  commercial  purposes.  It is  common  for small  business  owners to secure
commercial loans with their personal residences.

                                       25
<PAGE>


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

The  following  table sets  forth the  Company's  total  loans by  maturity  and
interest rate sensitivity as of December 31, 2000:
================================================================================
                              Maturity       After
                               Within     ONE Through      AFTER
(in thousands)                ONE YEAR    FIVE Years     FIVE Years    Total
================================================================================
Loans with fixed rates       $ 15,909     $ 79,153       $  3,468     $  98,530
Loans with floating rates      32,191       10,706         37,791        80,688
Total                        $ 48,100     $ 89,859       $ 41,259     $ 179,218
================================================================================
ASSET QUALITY
Various degrees of credit risk are associated with  substantially  all investing
activities.  The lending function,  however,  carries the greatest risk of loss.
Risk elements include loans past due,  non-accrual  loans,  renegotiated  loans,
other real estate owned and loan  concentrations.  The Company closely  monitors
its loan portfolio to minimize the risk of delinquency and problem credits. As a
general  rule,  a loan that is past due for  principal  or interest in excess of
ninety days is placed on a  non-accrual  basis unless  circumstances  exist that
would lead management to find that non-accrual is unnecessary (i.e., liquidation
of  collateral  or the  borrower has the ability to bring the loan current as to
principal and interest).

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


                                       26
<PAGE>


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

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  maintains  an  allowance  for loan  losses at a level  deemed
sufficient to absorb  losses,  which are inherent in the loan  portfolio at each
balance  sheet date.  Management  determines  the adequacy of the allowance on a
monthly  basis to ensure that the  provision  for loan  losses has been  charged
against  earnings in an amount  necessary to maintain  the  allowance at a level
that is  appropriate  based on  management's  assessment  of probable  estimated
losses.
     The  Company's   methodology  for  assessing  the  appropriateness  of  the
allowance  for loan  losses  consists of several key  elements.  These  elements
include a specific  allowance for all commercial  loans based upon a risk rating
assigned  to the loan,  an  allowance  for  homogeneous  types of loans  such as
consumer installment loans, residential mortgage loans and home equity loans, an
additional allowance for loans deemed to be impaired and an unallocated portion.
The Company consistently applies the following comprehensive methodology.
     All  commercial  loans are  assigned a two digit risk rating at the time of
closing.  The first digit of the rating  refers to the  strength of the borrower
based on their financial condition and past history. Current economic conditions
and the effect on the  borrower's  business  are also taken  into  account.  The
second digit refers to the  collateral  strength and  liquidity  with zero being
assigned to unsecured  loans. An allowance  amount is then assigned to each risk
rating.  Since, in its nine year history, the Company has very little commercial
loan loss  history,  the amount of the  allowance is based on the  experience of
management and their judgement with respect to these types of loans.
     A risk rating may be changed with the approval of the senior loan  officer.
A rating  change may be requested if the  individual  loan officer or the Bank's
credit analyst is aware of a change in the borrower's  financial  condition.  In
addition,  approximately  60% of the  dollar  amount  of  commercial  loans  are
reviewed on an annual basis by an outside  independent loan review firm at which
time a change to the risk rating may be recommended.
     The  allowance for  homogenous  loans is  established  based on a number of
factors,  including  current  economic  conditions and the loss  experience with
these types of loans as well as management's  judgement.  Loans are deemed to be
impaired if they are 60 days or more past due for  principal  or interest or are
in a non-accrual  status. If there is insufficient  collateral to pay the amount
of the loan,  an allowance is determined  over and above the amount  required by
the risk rating by taking the difference between the carrying amount of the loan
and the present  value of expected  future  cash flows  discounted  at the loans
current rate less any amounts already established by the risk rating.
     The Company  also  maintains  an  unallocated  allowance.  The  unallocated
allowance  is used to  cover  any  factors  or  conditions,  which  may  cause a
potential  loan loss but are not  specifically  identifiable.  It is  prudent to
maintain an unallocated  portion of the allowance because no matter how detailed
an analysis of potential loan losses is performed, these estimates by definition
lack precision.
     Since all identified losses are immediately  charged off, no portion of the
allowance  for loan losses is  restricted  to any  individual  loan or groups of
loans,  and the entire allowance is available to absorb any and all loan losses.
A  loan  is  placed  in  a   non-accrual   status  at  the  time  when  ultimate
collectibility of principal or interest,  wholly or partially, is in doubt. Past
due loans are those loans which were  contractually  past due 90 days or more as
to interest or  principal  payments  but are well  secured and in the process of
collection.

                                       27

<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:
================================================================================
                                                            December 31,
                                                      ------------------------
($ in thousands)                                        2000           1999
================================================================================
Non-performing assets (1):
Non-accruing loans
  Commercial and Construction                            $316         $599
  Real Estate                                             149           --
  Installment                                              17           93
--------------------------------------------------------------------------------
    Total non-accrual loans                               482          692
Restructured loans                                         --           --
--------------------------------------------------------------------------------
    Total non-performing loans                            482          692
--------------------------------------------------------------------------------
Other real estate owned                                    --           --
--------------------------------------------------------------------------------
    Total non-performing assets                          $482         $692
--------------------------------------------------------------------------------
Loans past due 90 days or more (2)                       $ --         $ --
--------------------------------------------------------------------------------
Non-performing loans to total loans                      0.27         0.45
Non-performing assets to total assets                    0.20         0.34
Allowance for loan losses to non-performing loans      378.22       223.99
================================================================================

(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,
                                   ==========================================================
                                           2000                            1999
                                   ==========================================================
                                                PERCENT OF                      PERCENT OF
($ in thousands)                   AMOUNT     LOANS TO TOTAL         AMOUNT    LOANS TO TOTAL
=============================================================================================
<S>                                <C>              <C>              <C>           <C>
Commercial and Construction        $1,612           57.78%           $1,345        60.67%
Real Estate                            53           30.89%               57        27.25%
Installment                           158           11.33%              148        12.08%
---------------------------------------------------------------------------------------------
                                   $1,823          100.00%           $1,550       100.00%
=============================================================================================
</TABLE>

                                       28
<PAGE>


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


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

                                                        Years Ended December 31,
                                                        ------------------------
($ in thousands)                                         2000             1999
================================================================================
Balance, January 1                                    $ 1,550)         $ 1,211
Loans charged off
  Commercial and Construction                             (21)              --
  Real Estate                                             (12)              --
  Installment                                            (104)            (115)
--------------------------------------------------------------------------------
Total charge offs                                        (137)            (115)
--------------------------------------------------------------------------------
Recoveries of loans previously charged off
  Commercial and Construction                              --               --
  Real Estate                                              --               --
  Installment                                              35               14
--------------------------------------------------------------------------------
Total recoveries                                           35               14)
--------------------------------------------------------------------------------
Net Loans charged off                                    (102)            (101)
--------------------------------------------------------------------------------
Provision charged to expense                              375              440
--------------------------------------------------------------------------------
Balance, December 31                                  $ 1,823)         $ 1,550)
================================================================================
Net charge offs as a percentage of average loans         0.06%            0.07%
Allowance for loan losses to total loans                 1.02%            1.01%
Allowance for loan losses to non-performing loans      378.22%          223.99%


DEPOSITS
Following is the average balances and rates paid on deposits for the periods
indicated:
================================================================================
                                    Years Ended December 31,
                             2000                             1999
                     ---------------------           ----------------------
                     AVERAGE       AVERAGE           AVERAGE       AVERAGE
($ in thousands)     BALANCE        RATE             BALANCE         RATE
================================================================================
Demand              $ 34,316         --             $ 33,765           --
Savings               17,190       2.86%              14,998         2.91%
Money Market          24,882       3.62%              22,695         3.31%
NOW                   32,489       2.43%              24,656         2.35%
Time                 100,028       5.75%              85,044         5.03%
--------------------------------------------------------------------------------
                    $208,905       3.80%            $181,158         3.34%
================================================================================
Following is the maturity distribution of time certificates of deposit $100,000
and over:
================================================================================
                                              December 31,
(in thousands)                                   2000
================================================================================
Three months or less                           $ 12,610
Over three months through six months              1,397
Over six months through twelve months             2,303
Over one through three years                        762
Over three through five years                        --
--------------------------------------------------------------------------------
                                                $17,072
================================================================================

                                       29
<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  2000,  the  Company
generated $1,757,000 cash flow from operations.
     Net cash used in investing activities was $36,019,000,  of which 72% of the
total  cash  invested  or  $25,981,000  was in the form of loans.  Purchases  of
securities totaled $11,908,000 of which $9,486,000 was for securities  available
for  sale and  $2,422,000  was for  securities  held  for  investment  purposes.
Partially  funding these  purchases were $5,281,000 of maturities of securities.
Additionally, the Company invested $2,792,000 in insured time deposits held with
other banks.
     To provide  funding  for  investment  activities  $33,192,000  net cash was
provided  by  financing  activities.  Most of these funds were  generated  by an
increase  in time  deposits  of  $24,572,000.  Demand  deposits  also  increased
$10,792,000.  Overall,  cash and cash equivalents  decreased  $1,070,000  during
2000. Additionally,  the Company can borrow up to $11,700,000 as a member of the
Federal Home Loan Bank and  $3,500,000  is available  through lines of credit at
correspondent banks.
The Company  believes its  liquidity  position is sufficient to provide funds to
meet future loan demand or possible outflow of deposits.

ASSET AND LIABILITY MANAGEMENT
Interest rate risk is defined as the  sensitivity  of the Company's  current and
future  earnings  as well as its  capital  to  changes  in the  level of  market
interest rates. The Company's exposure to interest rate risk results from, among
other  things,  the  difference in  maturities  on interest  earning  assets and
interest  bearing  liabilities.  The  relationship  between  the  interest  rate
sensitivity of the Bank's assets and liabilities is continually monitored by the
Bank's  Asset/Liability  Management  Committee (the "ALCO").  The purpose of the
ALCO is to review and  monitor  the  volume,  mix and  pricing  of the  interest
earning  assets and  interest  bearing  liabilities  consistent  with the Bank's
overall liquidity, capital, growth, profitability and interest rate risk goals.
Loans make up the largest  portion of the Bank's  assets.  In making  commercial
loans,  the emphasis is placed on either  floating  rate loans tied to the prime
lending rate or fixed rate loans with  prepayment  penalties  depending upon the
Bank's  overall  rate  sensitivity  position.  Fixed rate  commercial  loans are
generally  written  so that the  rates can be  adjusted  within  3-7 years  with
payouts up to 25 years.  Mortgage  loans are  currently  written to be  adjusted
annually after the first 3, 5 or 10 year term with payouts up to 30 years.  Home
equity 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.  These  securities  are also  reviewed  for
changes in yield and average life resulting from changes in interest rates.  The
Bank also invests in FDIC  insured CDs of other  financial  institutions  with a
maturity of three months to three years for amounts up to $100,000.
     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,  2000.  The  Company  can  also  borrow  Federal  Funds  overnight  from its
correspondent bank.
     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, 2000, 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


                                       30



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

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.

INTEREST RATE SENSITIVITY AT DECEMBER 31, 2000
<TABLE>
<CAPTION>
                                                               Maturity or Repricing (1)
                                              DUE IN           BETWEEN                              NON-
                                              90 DAYS          91 DAYS -         AFTER            INTEREST
(in thousands)                                OR LESS          ONE YEAR         ONE YEAR           BEARING            TOTAL
=============================================================================================================================
<S>                                         <C>               <C>               <C>               <C>               <C>
ASSETS:
Securities                                  $  11,743         $  13,166         $  13,892         $      --         $  38,801
Equity Securities                                 839                --                --                --               839
Other Short Term Investments                       78                --                --                --                78
Interest Bearing Time Deposits                  1,395             3,186             3,494                --             8,075
Loans                                          64,716            15,310            98,556               492           179,074
Valuation Reserve                                  --                --                --            (1,823            (1,823
Non-interest Earning Assets                        --                --                --            16,586            16,586
-----------------------------------------------------------------------------------------------------------------------------
Total Assets                                $  78,771         $  31,662         $ 115,942         $  15,255         $ 241,630
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Bearing Liabilities:
Money Market                                $   3,880         $  11,413         $   7,533         $      --         $  22,826
NOW                                             2,808             8,772            23,508                --            35,088
Savings Deposits                                1,335             4,174            11,187                --            16,696
CDs over $100,000                              12,864             3,824               384                --            17,072
Other Time Deposits                            35,563            55,749             4,641                --            95,953
Federal Funds Purchased                           325                --                --                --               325
Obligation Under Capital Lease                      3                 9               414                --               426
-----------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities             56,778            83,941            47,667                --           188,386
-----------------------------------------------------------------------------------------------------------------------------
Non-interest Bearing Demand Deposits            5,907             5,907            22,935                --            34,749
Other Liabilities                                  --                --                --             1,129             1,129
Stockholders' Equity                               --                --                --            17,366            17,366
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                        $  62,685         $  89,848         $  70,602         $  18,495         $ 241,630
-----------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity Gap               $  16,086         $ (58,186)        $  45,340         $   3,240
-----------------------------------------------------------------------------------------------------------------------------
Cumulative Gap                              $  16,086         $ (42,100)        $   3,240
-----------------------------------------------------------------------------------------------------------------------------
Cumulative Gap to Total Assets                   6.66%           (17.42)%            1.34%
=============================================================================================================================
</TABLE>

(1)  The  following  are the  assumptions  that  were  used to  prepare  the Gap
     analysis:
     (A) Interest rates remain flat during the period covered by the table, i.e.
         a prime rate of 9.50% and a Federal Funds rate of 6.50%.
     (B) Callable  agency  securities are spread at their call dates or maturity
         date depending upon the  relationship  of the rate of the securities to
         the treasury yield curve as dictated by the rates listed in (A)
     (C) Prepayments on  mortgage-backed  securities as well as various types of
         loans are based on estimates in relationship to the rates listed in (A)
     (D) Loans are spread based on the earlier of their actual  maturity date or
         the date of their first potential rate adjustment.
     (E) The maturity or decay rate of non maturity deposits, i.e. Money Market,
         NOW,  Savings  deposits and  non-interest  bearing  demand  deposits is
         estimated.  (F) Time deposits are spread based on their actual maturity
         dates.

                                       31

<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.  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, 2000 is as
follows:

================================================================================
                                             MVPE                 $
CHANGE IN INTEREST (in thousands)           Amount              Change
================================================================================
+200 Basis Points                          $22,865              $(201)
Base Amount Rate                            23,066                 --
-200 Basis Points                           23,700                634
================================================================================
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 2000,  this amount
would be $2,416,000.  RETURN ON ASSETS AND RETURN ON EQUITY The following  table
depicts  returns on average assets and returns on average equity for the periods
indicated:

================================================================================
                                                    Years Ended December 31,
                                                    ------------------------
                                                       2000          1999
================================================================================
Return on Average Assets                               0.67%          0.69%
Return on Average Equity                               9.43%          9.19%
Average Equity to
  Average Assets                                       7.06%          7.48%
================================================================================

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,
                                                     ------------------------
                                                         2000          1999
================================================================================
Total Capital to
  Risk Weighted Assets                                  9.68%          10.17%
Tier 1 Capital to
  Risk Weighted Assets                                  8.71%           9.21%
Leverage Ratio                                          7.31%           7.56%
================================================================================

It is the  Company's  intentions  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 2000 and in 1999.

                                       32


<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 2000 on a quarterly
basis:

================================================================================
                                          For the Quarters Ended
                             ===================================================
(in thousands)                March 31    June 30   September 30    December 31
================================================================================
Interest Income               $4,049      $4,388      $4,608          $4,900
Interest Expense               1,744       1,884       2,051           2,293
Net Interest Income            2,305       2,504       2,557           2,607
Provision for Loan Losses         95          85          80             115
Net Interest Income After
  Provision for Loan Losses    2,210       2,419       2,477           2,492
Gains on the Sale of Loans        66           6          33              83
Other Income                     177         193         210             223
Other Expense                  2,025       2,075       2,042           2,040
Income Before Income Taxes       428         543         678             758
Income Taxes                     154         206         255             285
--------------------------------------------------------------------------------
Net Income                    $  274      $  337      $  423          $  473
================================================================================

                                       33


<PAGE>


SVB Financial Services, Inc. and Somerset Valley Bank


BOARD OF DIRECTORS                           SOMERSET VALLEY BANK
                                             MANVILLE ADVISORY COUNCIL:
John K. Kitchen
Chairman of the Board                        Fred DeCicco
                                             Bruce Hartzog
G. Robert Santye                             John Gluch
Vice Chairman of the Board                   Oscar Gonzalez
                                             Ed Komoroski
Bernard Bernstein                            Steve Selody
Robert P. Corcoran                           Thomas Trojanowski
Raymond L. Hughes                            Michael Vernoia, Jr.
Willem Kooyker
Frank Orlando                                SOMERSET VALLEY BANK
Gilbert E. Pittenger                         ABERDEEN ADVISORY COUNCIL:
Frederick D. Quick
Anthony J. Santye, Jr.                       Michael Cohen, DO
Donald Sciaretta                             James Ferrano
Herman C. Simonse                            Robert Kee, Jr.
Donald R. Tourville                          Walter Newman
                                             Joseph Rettagliata
SOMERSET VALLEY BANK                         Martha Suhayda-Vogt
FOUNDERS ADVISORY COUNCIL:

Richard Bradley
Albert DiFiore
Maureen T. Kruse
Matthew Madlinger
John Majcher
Thomas C. Miller, Esq.                  [GRAPHIC - PHOTO OF MR. MCCARTHY]
Harold T. Moscatiello
Edward Rego
Sandra L. Runyon                             Keith B. McCarthy
Janak Sakaria, MD                            CHIEF OPERATING OFFICER
Helga Schwartz, MD                           AND SECRETARY/TREASURER
Michael A. Sena
Donald Sweeney, MD
Frank Tourville

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                  [GRAPHIC - PHOTO OF MR. BRATTLOF]
John Mondoro
Dan Pullen, DDS
Harry Smith
Kevin Sweeney
Frank N. Yurasko, Esq.                       Arthur E. Brattlof
                                             EXECUTIVE VICE PRESIDENT
                                             AND SENIOR LOAN OFFICER





                                       34


<PAGE>


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

<TABLE>
<CAPTION>

<S>                                     <C>                                 <C>
OFFICERS:                              Cary Johnson                         GENERAL COUNSEL:
Robert P. Corcoran                     Assistant Vice President and         Thomas C. Miller, Esq.
President and C.E.O.                   Manager                              Miller, Robertson and Rodgers, P.C.
                                                                            21 North Bridge Street
Keith B. McCarthy                      Suzanne B. Lennard                   Somerville, NJ 08876
Chief Operating Officer                Assistant Vice President and
and Secretary/Treasurer                Manager                              INDEPENDENT PUBLIC ACCOUNTANTS:
                                                                            Grant Thornton LLP
Arthur E. Brattlof                     Margaret O'Keeffe                    2001 Market Street
Executive Vice President,              Assistant Vice President             Philadelphia, PA 19103
Senior Loan Officer                    Retail Sales and Marketing           (215) 561-4200

Robert F. Cramer                       Mary E. Rowe                         TRANSFER AGENT:
Senior Vice President                  Assistant Vice President             Registrar and Transfer Company
Consumer Loans                         Accounting and Finance               10 Commerce Drive
                                                                            Cranford, NJ 07016
Michael A. Novak                       Christopher Seaman
Senior Vice President                  Assistant Vice President             FORM 10-KSB:
Commercial Loans                       Operations                           The annual report filed with the
                                                                            Securities and Exchange Commission
Paul J. Bowen                          Mary Ann Soriano                     on Form 10-KSB is available without
Vice President                         Assistant Vice President             charge upon written request to:
Commercial Loans                       Operations                           Mr. Keith McCarthy
                                                                            SVB Financial Services, Inc.
James T. Condo                         Susan Christman                      70 East Main Street
Vice President                         Assistant Treasurer and Manager      Somerville, NJ 08876
Commercial Loans
                                       Diana S. Valko                       WEB SITE:
Jeffrey D. Mattison                    Assistant Treasurer                  www.somersetvalleybank.com
Vice President                         Accounting and Finance
Commercial Loans                                                            Member of the
                                       Vimala Vimalavong                    Federal Home Loan Bank
John P. Oliver                         Assistant Treasurer and Manager
Vice President                                                              STOCK SYMBOL:
Commercial Loans                       Kenneth S.B. Wade II                 The Company's stock is traded
                                       Assistant Treasurer                  on the NASDAQ National Market
Kathy Ruggiero                         Loan Administration                  under the trading symbol SVBF
Vice President
Branch Administration                  Rose Watson                          MARKET MAKERS:
                                       Assistant Treasurer and Manager      Advest, Inc.
Roger W. Russell                                                            P.O. Box 733
Vice President                         Michelle Callahan                    49 Route 202
Loan Administration                    Assistant Secretary                  Far Hills, NJ 07931
                                       Operations                           (908) 719-0900
Karen L. Zaliwski
Vice President                         Sharon Eckel                         McConnell, Budd & Downes, Inc.
Operations                             Assistant Secretary and              365 South Street
                                       Assistant Manager                    Morristown, NJ 07960
Jeannette Capra                                                             (973) 538-1680
Assistant Vice President               Samuel Evans, Jr.
Operations                             Assistant Secretary and              Sandler O'Neill & Partners, L.P.
                                       Assistant Manager                    Two World Trade Center
Christopher Fenimore                                                        104th Floor
Assistant Vice President               Nicole Hunt                          New York, NY 10048
Consumer Loans                         Assistant Secretary and              (212) 466-7743
                                       Assistant Manager
Michele Gara
Assistant Vice President and
Manager

Jeanne G. Hagen
Assistant Vice President and
Human Resources Director
</TABLE>


                                       35

<PAGE>



SVB Financial Services, Inc. and Somerset Valley Bank


Main Office                                  GENERAL COUNSEL:
103 West End Avenue                          Thomas C. Miller, Esq.
Somerville, NJ 08876                         Miller, Robertson and Rodgers, P.C.
                                             21 North Bridge Street
Telephone:     (908) 704-1188                Somerville, NJ 08876
Fax:           (908) 685-2180
                                             INDEPENDENT PUBLIC ACCOUNTANTS:
Hillsborough Office                          Grant Thornton LLP
649 Route 206                                2001 Market Street
Hillsborough Centre                          Philadelphia, PA 19103
Hillsborough, NJ 08844                       (215) 561-4200

Telephone:     (908) 281-4009                TRANSFER AGENT:
Fax:           (908) 281-3042                Registrar and Transfer Company
                                             10 Commerce Drive
Bridgewater Office                           Cranford, NJ 07016
481 North Bridge Street
Bridgewater, NJ 08807                        FORM 10-KSB:
                                             The annual report filed with the
Telephone:     (908) 725-0033                Securities and Exchange Commission
Fax:           (908) 725-0110                on Form 10-KSB is available without
                                             charge upon written request to:
Gaston Avenue Office                         Mr. Keith McCarthy
91 North Gaston Avenue                       SVB Financial Services, Inc.
Somerville, NJ 08876                         70 East Main Street
                                             Somerville, NJ 08876
Telephone:     (908) 575-7300
Fax:           (908) 575-9395                WEB SITE:
                                             www.somersetvalleybank.com
Arbor Glen Office
100 Monroe Street                            Member of the
Bridgewater, NJ 08807                        Federal Home Loan Bank

Telephone:     (908) 595-9700                STOCK SYMBOL:
Fax:           (908) 526-3418                The Company's stock is traded
                                             on the NASDAQ National Market
Manville Office                              under the trading symbol SVBF
40 North Main Street
Manville, NJ 08835                           MARKET MAKERS:
                                             Advest, Inc.
Telephone:     (908) 541-0404                P.O. Box 733
Fax:           (908) 541-0434                49 Route 202
                                             Far Hills, NJ 07931
Aberdeen Office                              (908) 719-0900
1147 State Highway 34
Aberdeen, NJ 07747                           McConnell, Budd & Downes, Inc.
                                             365 South Street
Telephone:     (732) 583-7300                Morristown, NJ 07960
Fax:           (732) 583-7800                (973) 538-1680

Bernards Township Office                     Sandler O'Neill & Partners, L.P.
578 Allen Road                               Two World Trade Center
Basking Ridge, NJ 07920                      104th Floor
                                             New York, NY 10048
Telephone:     (908) 781-5800                (212) 466-7743
Fax:           (908) 781-5959
                                             ===============================
                                             Coming Soon in 2001
                                             A new branch will be
                                             opening in Edison,
                                             New Jersey on Oak Tree Road.




                                       36