United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarter ended___________________________________June 30, 2001

OR

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|[    ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________________to____________________

Commission File No________________________________________0-27942

Commonwealth Bancorp, Inc.

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|                                         |  |                       
|---------------------------------------- |  | ----------------------
|Pennsylvania                             |  | 23-2828883            
|(State or other jurisdiction of          |  | (I.R.S. Employer      
|                                        
|                                        
|                                        
|                                        
|incorporation or organization)           |  | Identification Number)
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|Commonwealth Bank Plaza                 
|                                        
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|2 West Lafayette Street                 
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|Norristown, Pennsylvania                 |  | 19401-4758            
|(Address of principal executive offices) |  | (Zip Code)            

Registrants telephone number, including area code:(610) 313-1600

Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date: As of August 2, 2001, there
were 18,068,127 issued and 10,961,103 outstanding shares of the Registrants
Common Stock.

1



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Commonwealth Bancorp, Inc. and Subsidiaries

TABLE OF CONTENTS

|     |  |                                                                              |  |      |    | 
|---- |  | ---------------------------------------------------------------------------- |  | ---- | -- | 
|Item |  |                                                                              |  | Page
|No.  |  |                                                                              |  | No. 
|     |  |                                                                              |  |     
|     |  | PART I  CONSOLIDATED FINANCIAL INFORMATION                                 
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|1    |  | Consolidated Financial Statements                                           
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|     |  | Consolidated Balance Sheets at June 30, 2001 and December 31, 2000           |  |      | 3  | 
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|     |  | Consolidated Statements of Income for the Quarter and Six Month             
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|     |  | Periods Ended June 30, 2001 and 2000                                         |  |      | 4  | 
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|     |  | Consolidated Statements of Changes in Shareholders Equity for the Six Month
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|     |  | Periods Ended June 30, 2001 and 2000                                         |  |      | 5  | 
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|     |  | Consolidated Statements of Cash Flows for the Six Month                     
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|     |  | Periods Ended June 30, 2001 and 2000                                         |  |      | 6  | 
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|     |  | Notes to Consolidated Financial Statements                                   |  |      | 8  | 
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|2    |  | Managements Discussion and Analysis of Financial Condition and Results of  
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|     |  | Operations                                                                   |  |      | 14 | 
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|3    |  | Quantitative and Qualitative Disclosures about Market Risk                   |  |      | 26 | 
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|     |  | PART II  OTHER INFORMATION                                                 
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|1    |  | Legal Proceedings                                                            |  |      | 27 | 
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|2    |  | Changes in Securities                                                        |  |      | 27 | 
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|3    |  | Default Upon Senior Securities                                               |  |      | 27 | 
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|4    |  | Submission of Matters to a Vote of Security Holders                          |  |      | 27 | 
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|5    |  | Other Information                                                            |  |      | 27 | 
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|6    |  | Exhibits and Reports on Form 8-K                                             |  |      | 27 | 
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|     |  | Signatures                                                                   |  |      | 28 | 

2



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Commonwealth Bancorp, Inc. and Subsidiaries



Consolidated Balance Sheets



(in thousands, except share and per share amounts)

|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |              |          |         |           | 
|------------------------------------------------------------------------ | --------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------- | ------------------------------------------ | -------- | -------- | --------- | ------------ | -------- | ------- | --------- | 
|                                                                         |                                                           |                                                                          |                                              |                                            |          | June 30, |           | December 31,
|                                                                         |                                                           |                                                                          |                                              |                                            |          | 2001     |           | 2000        
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|Assets:                                                                  |                                                           | (Unaudited)                                                             
|Cash and due from banks                                                  |                                                           | $                                                                        | 66,546                                       |                                            |          | $        | 66,329    |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Interest-bearing deposits                                                |                                                           |                                                                          | 45,381                                       |                                            |          |          | 371       |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Mortgage loans held for sale                                             |                                                           |                                                                          | 6,131                                        |                                            |          |          | 43,007    |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Investment securities                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Securities available for sale (cost of $13,279           
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                           |                                                                          | and $13,350, respectively), at market value  |                                            |          | 13,552   |           |              |          | 14,051  |          
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Mortgage-backed securities                                              
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Securities available for sale (cost of $169,871          
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                           |                                                                          | and $201,448, respectively), at market value |                                            |          | 172,726  |           |              |          | 202,700 |          
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Loans receivable, net                                                    |                                                           |                                                                          | 1,393,178                                    |                                            |          |          | 1,416,110 |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Accrued interest receivable, net                                         |                                                           |                                                                          | 8,378                                        |                                            |          |          | 9,435     |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|FHLB stock, at cost                                                      |                                                           |                                                                          | 12,565                                       |                                            |          |          | 18,400    |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Premises and equipment, net                                              |                                                           |                                                                          | 14,211                                       |                                            |          |          | 15,349    |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Intangible assets                                                        |                                                           |                                                                          | 27,281                                       |                                            |          |          | 30,450    |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other assets, including net deferred taxes of $5,845                    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | and $6,255, respectively                                  |                                                                          |                                              | 51,513                                     |          |          |           | 53,308       |         
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|                                                                         |                                                           |                                                                          |                                              | Total assets                               |          | $        | 1,811,462 |              |          | $       | 1,869,510 | 
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|Liabilities:                                                            
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Deposits                                                                 |                                                           | $                                                                        | 1,464,068                                    |                                            |          | $        | 1,454,592 |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Notes payable and other borrowings:                                     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Secured notes due to Federal Home Loan Bank of Pittsburgh |                                                                          |                                              | 124,889                                    |          |          |           | 171,666      |         
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Securities sold under agreements to repurchase            |                                                                          |                                              | 10,000                                     |          |          |           | 35,000       |         
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other borrowings                                          |                                                                          |                                              | 23,722                                     |          |          |           | 17,830       |         
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Advances from borrowers for taxes and insurance                          |                                                           |                                                                          | 9,838                                        |                                            |          |          | 7,851     |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Accrued interest payable, accrued expenses and other liabilities         |                                                           |                                                                          | 20,758                                       |                                            |          |          | 22,118    |             
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|                                                                         |                                                           |                                                                          |                                              | Total liabilities                          |          |          | 1,653,275 |              |          |         | 1,709,057 | 
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|Commitments and contingencies                                           
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Shareholders equity:                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Preferred stock, $0.10 par value; 5,000,000 shares                      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | authorized; none issued                                   |                                                                          |                                              |                                           |          |          |           |             |         
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Common stock, $0.10 par value; 30,000,000 shares authorized;            
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                           | 18,068,127 shares issued and 11,070,437 outstanding at June 30, 2001    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                           | 18,068,127 shares issued and 11,309,487 outstanding at December 31, 2000 |                                              |                                            | 1,807    |          |           |              | 1,807    |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Additional paid-in capital                                               |                                                           |                                                                          | 138,698                                      |                                            |          |          | 138,166   |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Retained earnings                                                        |                                                           |                                                                          | 145,832                                      |                                            |          |          | 145,869   |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Unearned stock benefit plan compensation                                 |                                                           |                                                                          | (5,691                                       | )                                          |          |          | (6,596    | )           
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Accumulated other comprehensive income                                   |                                                           |                                                                          | 2,047                                        |                                            |          |          | 1,286     |             
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Treasury stock, at cost; 6,997,690 and 6,758,640 shares at June 30, 2001
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                           | and December 31, 2000, respectively                                      |                                              |                                            | (124,506 | )        |           |              | (120,079 | )      
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|                                                                         |                                                           |                                                                          |                                              | Total shareholders equity                 |          |          | 158,187   |              |          |         | 160,453   | 
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             
|                                                                         |                                                           |                                                                          |                                              | Total liabilities and shareholders equity |          | $        | 1,811,462 |              |          | $       | 1,869,510 | 
|                                                                         |                                                           |                                                                          |                                              |                                            |          |          |           |             

The accompanying notes are an integral part of these statements.

3



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Commonwealth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except share and per share amounts)

|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |        |     |        | 
|----------------------------------------------------- | --------------------------------------- | - | -------------------------- | ------ | ----------- | --------------- | -------------- | ------------------ | ---- | ------ | ---------- | ------ | -------------- | ------ | ---------- | ------ | --- | ------ | 
|                                                      |                                         |   |                            |        |             | For the Quarter |                | For the Six Months
|                                                      |                                         |   |                            |        |             |                 | Ended June 30, |                    |      |        |            |        | Ended June 30,
|                                                      |                                         |   |                            |        | 2001        |                 | 2000           |                    | 2001 |        | 2000      
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |           
|                                                      |                                         |   |                            |        | (Unaudited) |                 | (Unaudited)   
|Interest income:                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on loans                       |   | $                          | 28,501 |             |                 | $              | 28,366             |      |        | $          | 57,535 |                |        | $          | 55,722 |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest and dividends on deposits and 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         |   | money market investments   |        | 588         |                 |                |                    | 496  |        |            |        | 1,024          |        |            |        | 971 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on investment securities       |   |                            | 149    |             |                 |                | 530                |      |        |            | 298    |                |        |            | 1,495  |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on mortgage-backed securities  |   |                            | 3,084  |             |                 |                | 4,477              |      |        |            | 6,475  |                |        |            | 9,327  |    
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Total interest income      |        |             | 32,322          |                |                    |      | 33,869 |            |        |                | 65,332 |            |        |     | 67,515 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense:                                    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on deposits                    |   |                            | 11,555 |             |                 |                | 12,227             |      |        |            | 23,638 |                |        |            | 24,575 |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on notes payable and other    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         |   | borrowings                 | 2,480  |             |                 |                | 3,160              |      |        |            | 5,683  |                |        |            | 6,408  |    
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Total interest expense     |        |             | 14,035          |                |                    |      | 15,387 |            |        |                | 29,321 |            |        |     | 30,983 | 
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Net interest income        |        |             | 18,287          |                |                    |      | 18,482 |            |        |                | 36,011 |            |        |     | 36,532 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Provision for loan losses                             |                                         |   | 2,250                      |        |             |                 | 1,200          |                    |      |        | 3,750      |        |                |        | 2,325      |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net interest income after provision for
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         |   | loan losses                |        |             | 16,037          |                |                    |      | 17,282 |            |        |                | 32,261 |            |        |     | 34,207 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Noninterest income:                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deposit fees and related income         |   |                            | 3,490  |             |                 |                | 3,069              |      |        |            | 6,467  |                |        |            | 5,660  |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Servicing fees                          |   |                            | 160    |             |                 |                | 189                |      |        |            | 396    |                |        |            | 420    |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net gain on sale of mortgage loans      |   |                            | 371    |             |                 |                | 1,036              |      |        |            | 1,612  |                |        |            | 2,096  |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                   |   |                            | 1,081  |             |                 |                | 1,158              |      |        |            | 2,158  |                |        |            | 2,179  |    
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Total noninterest income   |        |             | 5,102           |                |                    |      | 5,452  |            |        |                | 10,633 |            |        |     | 10,355 | 
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Noninterest expense:                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Compensation and employee benefits      |   |                            | 7,467  |             |                 |                | 8,732              |      |        |            | 17,065 |                |        |            | 17,441 |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Occupancy and office operations         |   |                            | 2,318  |             |                 |                | 2,687              |      |        |            | 4,842  |                |        |            | 5,411  |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Amortization of intangible assets       |   |                            | 1,135  |             |                 |                | 1,239              |      |        |            | 2,369  |                |        |            | 2,450  |    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                   |   |                            | 4,801  |             |                 |                | 4,900              |      |        |            | 11,354 |                |        |            | 9,440  |    
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Total noninterest expense  |        |             | 15,721          |                |                    |      | 17,558 |            |        |                | 35,630 |            |        |     | 34,742 | 
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|                                                      |                                         |   | Income before income taxes |        |             | 5,418           |                |                    |      | 5,176  |            |        |                | 7,264  |            |        |     | 9,820  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax provision                                  |                                         |   | 1,354                      |        |             |                 | 1,371          |                    |      |        | 1,816      |        |                |        | 2,602      |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Net income                                            |                                         | $ | 4,064                      |        |             | $               | 3,805          |                    |      | $      | 5,448      |        |                | $      | 7,218      |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Basic weighted average number of shares outstanding   |                                         |   | 10,487,756                 |        |             |                 | 10,738,767     |                    |      |        | 10,532,642 |        |                |        | 10,804,089 |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Basic earnings per share                              |                                         | $ | 0.39                       |        |             | $               | 0.35           |                    |      | $      | 0.52       |        |                | $      | 0.67       |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Diluted weighted average number of shares outstanding |                                         |   | 10,812,469                 |        |             |                 | 10,962,546     |                    |      |        | 10,873,670 |        |                |        | 11,057,845 |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       
|Diluted earnings per share                            |                                         | $ | 0.38                       |        |             | $               | 0.35           |                    |      | $      | 0.50       |        |                | $      | 0.65       |       
|                                                      |                                         |   |                            |        |             |                 |                |                    |      |        |            |        |                |        |            |       

The accompanying notes are an integral part of these statements.

4



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Commonwealth Bancorp, Inc. and Subsidiaries



Consolidated Statements of Changes in Shareholders Equity



(in thousands)

|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |        |       |  |     | 
|---------------------------- | -------------------------------------- | -------------------------- | ----------------------------------- | ----------------------------------- | - | ----------- | ----- | ------ |  | ------- | ------- | ---------- |  | ------------ | ------- | ------------- | ----- | -------- | ------- | ----- |  | ----------- | ------- | - |  |  | --------- | ------ | - | - | ------- | ------ | ----- |  | --- | 
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  | Accumulated
|                             |                                        |                            |                                     |                                     |   | Common      |       |        |  |         |         | Additional |  |              |         |               |       | Stock    |         | Other
|                             |                                        |                            |                                     |                                     |   | Shares      |       | Common |  | Paid-In |         | Retained   |  | Benefit Plan |         | Comprehensive |       | Treasury
|                             |                                        |                            |                                     |                                     |   | Outstanding |       | Stock  |  | Capital |         | Earnings   |  | Compensation |         | Income (Loss) |       | Stock    |         | Total
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |      
|Balance at December 31, 1999 |                                        |                            | 11,935                              |                                     |   | $           | 1,807 |        |  | $       | 136,966 |            |  | $            | 135,780 |               |       |          | ($8,504 | )     |  |             | ($3,171 | ) |  |  | ($110,513 | )      |   | $ | 152,365 |       
|                            
|                            
|                            
|                            
|                             | Comprehensive income:                 
|                            
|                            
|                            
|                            
|                             |                                        | Net income                 |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               | 7,218 |          |         |       |  |             |         |   |  |  |           |        |   |   |         |        | 7,218 | 
|                            
|                            
|                            
|                            
|                             |                                        |                            | Other-unrealized loss on marketable
|                            
|                            
|                            
|                            
|                             |                                        |                            |                                     | securities, net of $425 tax expense |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  | 790       |        |   |   |         |        |       |  | 790 | 
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |       
|                             |                                        | Total comprehensive income |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |        | 8,008 | 
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |       
|                             | Dividends                              |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         | (2,401        | )     |          |         |       |  |             |         |   |  |  |           |        |   |   |         | (2,401 | )    
|                            
|                            
|                            
|                            
|                             | Release of ESOP shares                 |                            |                                     |                                     |   |             |       |        |  |         |         | 281        |  |              |         |               |       |          |         | 460   |  |             |         |   |  |  |           |        |   |   |         | 741    |      
|                            
|                            
|                            
|                            
|                             | Amortization of unearned compensation  |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         | 493   |  |             |         |   |  |  |           |        |   |   |         | 493    |      
|                            
|                            
|                            
|                            
|                             | Stock issued pursuant to benefit plans |                            |                                     | 27                                  |   |             |       |        |  |         |         | 32         |  |              |         | (146          | )     |          |         |       |  |             |         |   |  |  |           | 433    |   |   |         | 319    |      
|                            
|                            
|                            
|                            
|                             | Purchase of treasury stock             |                            |                                     | (394                                | ) |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           | (6,177 | ) |   |         | (6,177 | )    
|                             |                                        |                            |                                     |                                    
|Balance at June 30, 2000     |                                        |                            | 11,568                              |                                     |   | $           | 1,807 |        |  | $       | 137,279 |            |  | $            | 140,451 |               |       |          | ($7,551 | )     |  |             | ($2,381 | ) |  |  | ($116,257 | )      |   | $ | 153,348 |       
|                             |                                        |                            |                                     |                                    
|Balance at December 31, 2000 |                                        |                            | 11,309                              |                                     |   | $           | 1,807 |        |  | $       | 138,166 |            |  | $            | 145,869 |               |       |          | ($6,596 | )     |  | $           | 1,286   |   |  |  | ($120,079 | )      |   | $ | 160,453 |       
|                            
|                            
|                            
|                            
|                             | Comprehensive income:                 
|                            
|                            
|                            
|                            
|                             |                                        | Net income                 |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               | 5,448 |          |         |       |  |             |         |   |  |  |           |        |   |   |         |        | 5,448 | 
|                            
|                            
|                            
|                            
|                             |                                        |                            | Other-unrealized gain on marketable
|                            
|                            
|                            
|                            
|                             |                                        |                            |                                     | securities, net of $410 tax expense |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  | 761       |        |   |   |         |        |       |  | 761 | 
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |       
|                             |                                        | Total comprehensive income |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |        | 6,209 | 
|                             |                                        |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           |        |   |   |         |       
|                             | Dividends                              |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         | (2,977        | )     |          |         |       |  |             |         |   |  |  |           |        |   |   |         | (2,977 | )    
|                            
|                            
|                            
|                            
|                             | Release of ESOP shares                 |                            |                                     |                                     |   |             |       |        |  |         |         | 488        |  |              |         |               |       |          |         | 460   |  |             |         |   |  |  |           |        |   |   |         | 948    |      
|                            
|                            
|                            
|                            
|                             | Amortization of unearned compensation  |                            |                                     |                                     |   |             |       |        |  |         |         |            |  |              |         |               |       |          |         | 445   |  |             |         |   |  |  |           |        |   |   |         | 445    |      
|                            
|                            
|                            
|                            
|                             | Stock issued pursuant to benefit plans |                            |                                     | 282                                 |   |             |       |        |  |         |         | 44         |  |              |         | (2,508        | )     |          |         |       |  |             |         |   |  |  |           | 4,849  |   |   |         | 2,385  |      
|                            
|                            
|                            
|                            
|                             | Purchase of treasury stock             |                            |                                     | (521                                | ) |             |       |        |  |         |         |            |  |              |         |               |       |          |         |       |  |             |         |   |  |  |           | (9,276 | ) |   |         | (9,276 | )    
|                             |                                        |                            |                                     |                                    
|Balance at June 30, 2001     |                                        |                            | 11,070                              |                                     |   | $           | 1,807 |        |  | $       | 138,698 |            |  | $            | 145,832 |               |       |          | ($5,691 | )     |  | $           | 2,047   |   |  |  | ($124,506 | )      |   | $ | 158,187 |       
|                             |                                        |                            |                                     |                                    

The accompanying notes are an integral part of these statements.

5



---



Commonwealth Bancorp, Inc. and Subsidiaries



Consolidated Statements of Cash Flows


(in thousands)

|                      |                                                 |                                             |                                                      |                                                                  |  |                    |            |       |  |         |       |  
|--------------------- | ----------------------------------------------- | ------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------------------- |  | ------------------ | ---------- | ----- |  | ------- | ----- | -
|                      |                                                 |                                             |                                                      |                                                                  |  | For the Six Months
|                      |                                                 |                                             |                                                      |                                                                  |  | Ended June 30,    
|                      |                                                 |                                             |                                                      |                                                                  |  |                   
|                      |                                                 |                                             |                                                      |                                                                  |  | 2001               |            | 2000 
|                      |                                                 |                                             |                                                      |                                                                  |  |                    |            |      
|Operating activities:
|                     
|                     
|                     
|                     
|                      | Net income                                      |                                             | $                                                    | 5,448                                                            |  |                    | $          | 7,218 | 
|                     
|                     
|                     
|                     
|                      | Adjustments to reconcile net income to net cash
|                     
|                     
|                     
|                     
|                      |                                                 | provided by (used in) operating activities-
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Proceeds from loans sold to others                   |                                                                  |  | 193,480            |            |       |  | 129,182 |      
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Loans originated for sale                            |                                                                  |  | (84,492            | )          |       |  | (93,415 | )    
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Purchases of loans held for sale                     |                                                                  |  | (70,620            | )          |       |  | (47,800 | )    
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Principal collection on mortgage loans held for sale |                                                                  |  | 235                |            |       |  | 138     |      
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Net gain on sale of mortgage loans                   |                                                                  |  | (1,612             | )          |       |  | (2,096  | )    
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Decrease in net deferred loan fees                   |                                                                  |  | (456               | )          |       |  | (184    | )    
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Provision for loan losses and foreclosed real estate |                                                                  |  | 3,750              |            |       |  | 2,325   |      
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Depreciation and amortization                        |                                                                  |  | 1,349              |            |       |  | 1,581   |      
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Net amortization of other assets and liabilities     |                                                                  |  | 3,912              |            |       |  | 2,873   |      
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Interest reinvested on repurchase agreements         |                                                                  |  | (847               | )          |       |  | (2,460  | )    
|                     
|                     
|                     
|                     
|                      |                                                 |                                             | Changes in assets and liabilities-                  
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Decrease (increase) in-                                         
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Accrued interest receivable, net                                 |  |                    | 1,057      |       |  |         | 675   |  
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Other assets                                                     |  |                    | (1,378     | )     |  |         | (303  | )
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Increase (decrease) in-                                         
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Advances from borrowers for taxes and insurance                  |  |                    | 1,987      |       |  |         | 2,919 |  
|                     
|                     
|                     
|                     
|                      |                                                 |                                             |                                                      | Accrued interest payable, accrued expenses and other liabilities |  |                    | (560       | )     |  |         | 6,436 |  
|                      |                                                 |                                             |                                                      |                                                                  |  |                    |            |      
|                      |                                                 |                                             |                                                      | Net cash provided by operating activities                        |  | $                  | 51,253     |       |  | $       | 7,089 |  
|                      |                                                 |                                             |                                                      |                                                                  |  |                    |            |      
|                      |                                                 |                                             |                                                      |                                                                  |  |                    | (continued | )    

The accompanying notes are an integral part of these statements.

6



---



Commonwealth Bancorp, Inc. and Subsidiaries


Consolidated Statements of Cash Flows



(in thousands)

|                                                   |                                                                  |              |                                           |          |                    |         |        |          |        |         |  
|-------------------------------------------------- | ---------------------------------------------------------------- | ------------ | ----------------------------------------- | -------- | ------------------ | ------- | ------ | -------- | ------ | ------- | -
|                                                   |                                                                  |              |                                           |          | For the Six Months
|                                                   |                                                                  |              |                                           |          | Ended June 30,    
|                                                   |                                                                  |              |                                           |          |                   
|                                                   |                                                                  |              |                                           |          | 2001               |         | 2000  
|                                                   |                                                                  |              |                                           |          |                    |         |       
|Investing activities:                             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchases of investment securities                               |              |                                           | ($79     | )                  |         | $      |         |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from maturities of investment securities                |              |                                           |         |                    |         |        | 35,000   |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Principal collected on mortgage-backed securities                |              |                                           | 31,578   |                    |         |        | 42,016   |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Principal collected on loans                                     |              |                                           | 160,741  |                    |         |        | 133,327  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Loans originated                                                 |              |                                           | (132,112 | )                  |         |        | (167,220 | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Loans purchased                                                  |              |                                           | (6,723   | )                  |         |        | (18,924  | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Sales of real estate acquired through foreclosure                |              |                                           | 838      |                    |         |        | 662      |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Sale of FHLB stock                                               |              |                                           | 5,835    |                    |         |        |         |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchases of premises and equipment                              |              |                                           | (674     | )                  |         |        | (1,574   | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of business                                             |              |                                           |         |                    |         |        | (1,498   | )     
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|                                                   |                                                                  |              | Net cash provided by investing activities |          |                    | 59,404  |        |          |        | 21,789  |  
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|Financing activities:                             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase (decrease) in deposits                              |              |                                           | 9,476    |                    |         |        | (15,250  | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Repayment of notes payable and other borrowings, net of proceeds |              |                                           | (65,038  | )                  |         |        | (2,282   | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net purchase of common stock                                     |              |                                           | (6,891   | )                  |         |        | (5,858   | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash dividends paid                                              |              |                                           | (2,977   | )                  |         |        | (2,401   | )     
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|                                                   |                                                                  |              | Net cash used in financing activities     |          |                    | (65,430 | )      |          |        | (25,791 | )
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|                                                   |                                                                  |              | Net increase in cash and cash equivalents |          |                    | 45,227  |        |          |        | 3,087   |  
|                                                  
|                                                  
|                                                  
|                                                  
|Cash and cash equivalents at beginning of period   |                                                                  |              | 66,700                                    |          |                    |         | 61,751 |         
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|Cash and cash equivalents at end of period         |                                                                  | $            | 111,927                                   |          |                    | $       | 64,838 |         
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|Supplemental disclosures of cash flow information:
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid during the year for-                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                  | Interest     |                                           | $        | 23,187             |         |        | $        | 24,919 |        
|                                                   |                                                                  |              |                                           |          |                    |         |        |         
|                                                   |                                                                  | Income taxes |                                           | $        | 3,000              |         |        | $        | 2,750  |        
|                                                   |                                                                  |              |                                           |          |                    |         |        |         

The accompanying notes are an integral part of these statements.

7



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
condition of Commonwealth Bancorp, Inc. (Commonwealth or the Company) as of
June 30, 2001, and the results of operations, changes in shareholders equity,
and cash flows for the periods presented.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
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
accompanying unaudited consolidated financial statements were prepared in
accordance with the instructions for Form 10-Q. For further information, refer
to the Companys consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2000.

The Company is a Pennsylvania corporation which is the holding company for
Commonwealth Bank (the Bank). Headquartered in Norristown, Pennsylvania,
Commonwealth Bank conducts business through 60 full-service offices located in
Berks, Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties,
Pennsylvania.

2.   Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Commonwealth; CFSL Investment Corporation; ComLife, Inc.; Commonwealth Bank;
Commonwealth Investment Corporation of Delaware, Inc.; CS Corporation;
Firstcor, Ltd.; QME, Inc.; and Tyler Wealth Counselors, Inc. All material
intercompany accounts and transactions have been eliminated in consolidation.

3.   Shareholders Equity

At June 30, 2001, shareholders equity totaled $158 million, or 8.7% of
assets, compared to $160 million, or 8.6%, at December 31, 2000.

During the first six months of 2001, the Company purchased 0.5 million
shares of its common stock, representing purchases of $9 million. During the
first six months of 2000, the Company purchased 0.4 million shares of its
common stock, representing purchases of $6 million. The repurchased shares
were held as treasury stock at June 30, 2001, and are reserved for general
corporate purposes and/or issuance pursuant to the Companys stock benefit
plans.

On June 19, 2001, the Board of Directors declared a $0.14 per share cash
dividend for the quarter ended June 30, 2001, which was made payable to
shareholders of record at the close of business on June 29, 2001. This
dividend was paid on July 13, 2001.

8



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 142 changes the
accounting for goodwill from an amortization method to assessing impairment on
a fair-value-based test approach. SFAS No. 142 requires companies with a fiscal year end of December  31 to implement the change in accounting
for goodwill beginning January  1, 2002.  The Company and its independent auditors are currently reviewing whether
SFAS No. 142 is applicable to the intangible assets recorded by the Company in connection with the acquisition of certain
branch offices and business interests. Until the completion of this review, the potential impact, if any, on Commonwealths
future financial statements cannot be determined.

The Company adopted SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities an amendment of SFAS No. 133, on
January 1, 2001. The adoption of these Statements did not have a material
impact on the consolidated statements of income or comprehensive income.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities. This
Statement replaces SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. This Statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. Those standards are based on
consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities
it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. The Company
adopted SFAS No. 140 on March 31, 2001, as required. There was no impact on
the consolidated financial statements as a result of the adoption of this
statement.

5.   Earnings Per Share

Basic earnings per share (EPS) is calculated by dividing net income
available to common shareholders by the weighted average number of common
shares outstanding during the period, adjusted for Employee Stock Ownership
Plan (ESOP) shares that have not been committed to be released, and the
effects of shares held by the Recognition Plans. Options, warrants, and other
potentially dilutive securities and treasury shares are excluded from the basic
calculation.

Diluted EPS is computed by dividing net income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period, adjusted for ESOP shares that have not been
committed to be released, and the effects of shares held by the Recognition
Plans. The effect of dilutive securities, such as stock options and
Recognition Plan stock, are considered common stock equivalents and are
included in the computation of the number of outstanding shares using the
treasury stock method. Common shares outstanding exclude treasury shares.

9



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables set forth the Companys basic weighted average number
of common shares outstanding and diluted weighted average number of common
shares outstanding during the periods indicated:

|                                                             |                        |  |                                |         |      |  |            |         | 
|------------------------------------------------------------ | ---------------------- |  | ------------------------------ | ------- | ---- |  | ---------- | ------- | 
|                                                             |                        |  | For the Quarter Ended June 30,
|                                                             |                        |  |                               
|                                                             |                        |  | 2001                           |         | 2000
|                                                             |                        |  |                                |         |     
|Basic weighted average number of common shares outstanding   |                        |  | 10,487,756                     |         |      |  | 10,738,767 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Effect of dilutive securities:                              
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Stock options          |  |                                | 285,583 |      |  |            | 209,382 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Recognition Plan stock |  |                                | 39,130  |      |  |            | 14,397  | 
|                                                             |                        |  |                                |         |      |  |            |        
|Diluted weighted average number of common shares outstanding |                        |  | 10,812,469                     |         |      |  | 10,962,546 |        
|                                                             |                        |  |                                |         |      |  |            |        

Basic EPS was $0.39 per common share for the quarter ended June 30, 2001,
compared to $0.35 per common share for the quarter ended June 30, 2000.
Diluted EPS was $0.38 per common share for the quarter ended June 30, 2001,
compared to $0.35 per common share for the quarter ended June 30, 2000.

|                                                             |                        |  |                                   |         |      |  |            |         | 
|------------------------------------------------------------ | ---------------------- |  | --------------------------------- | ------- | ---- |  | ---------- | ------- | 
|                                                             |                        |  | For the Six Months Ended June 30,
|                                                             |                        |  |                                  
|                                                             |                        |  | 2001                              |         | 2000
|                                                             |                        |  |                                   |         |     
|Basic weighted average number of common shares outstanding   |                        |  | 10,532,642                        |         |      |  | 10,804,089 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Effect of dilutive securities:                              
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Stock options          |  |                                   | 310,333 |      |  |            | 235,184 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Recognition Plan stock |  |                                   | 30,695  |      |  |            | 18,572  | 
|                                                             |                        |  |                                   |         |      |  |            |        
|Diluted weighted average number of common shares outstanding |                        |  | 10,873,670                        |         |      |  | 11,057,845 |        
|                                                             |                        |  |                                   |         |      |  |            |        

Basic EPS was $0.52 per common share for the six months ended June 30,
2001, compared to $0.67 per common share for the six months ended June 30,
2000. Diluted EPS was $0.50 per common share for the six months ended June 30,
2001, compared to $0.65 per common share for the six months ended June 30,
2000.

10



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   Segment Reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, introduces a new model for segment reporting, called the
management approach. The management approach is based on the way the chief
operating decision maker organizes segments within a company for making
operating decisions and assessing performance. Reportable segments are based
on product and services, geography, legal structure, management structure any
manner in which management disaggregates a company. The Companys segment
reports follow:

|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |        | 
|---------------------------------- | ------------------------- | - | ------------------------------ | ------ | -------- | - | ------ | --- | ------- | - | --------- | ------ | -------- | - | --------- | ------ |  | - | ------ | ----- |  | - | --------- | ------ | 
|                                   |                           |   | For the Quarter Ended June 30,
|                                   |                           |   |                               
|                                   |                           |   | 2001                           |        | 2000    
|                                   |                           |   |                                |        |         
|                                   |                           |   | Community                      |        | Mortgage |   |        |     |         |   | Community |        | Mortgage
|                                   |                           |   | Banking                        |        | Banking  |   | Total  |     | Banking |   | Banking   |        | Total   
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |         
|                                   |                           |   | (in thousands)                
|Net interest income after         
|                                  
|                                  
|                                  
|                                  
|provision for loan losses          |                           | $ | 16,064                         |        |          | $ | (27    | )   |         | $ | 16,037    |        |          | $ | 16,708    |        |  | $ | 574    |       |  | $ | 17,282    |       
|                                  
|                                  
|                                  
|                                  
|Noninterest income:               
|                                  
|                                  
|                                  
|                                  
|Servicing fees                     |                           |   | (76                            | )      |          |   | 236    |     |         |   | 160       |        |          |   | (614      | )      |  |   | 803    |       |  |   | 189       |       
|                                  
|                                  
|                                  
|                                  
|Net gain on sale of mortgage loans |                           |   | (51                            | )      |          |   | 422    |     |         |   | 371       |        |          |   | (96       | )      |  |   | 1,132  |       |  |   | 1,036     |       
|                                  
|                                  
|                                  
|                                  
|Other                              |                           |   | 4,571                          |        |          |   |       |     |         |   | 4,571     |        |          |   | 4,136     |        |  |   | 91     |       |  |   | 4,227     |       
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|                                   | Total noninterest income  |   |                                | 4,444  |          |   |        | 658 |         |   |           | 5,102  |          |   |           | 3,426  |  |   |        | 2,026 |  |   |           | 5,452  | 
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Noninterest expense:              
|                                  
|                                  
|                                  
|                                  
|Compensation and employee benefits |                           |   | 7,287                          |        |          |   | 180    |     |         |   | 7,467     |        |          |   | 6,821     |        |  |   | 1,911  |       |  |   | 8,732     |       
|                                  
|                                  
|                                  
|                                  
|Other                              |                           |   | 7,692                          |        |          |   | 562    |     |         |   | 8,254     |        |          |   | 7,716     |        |  |   | 1,110  |       |  |   | 8,826     |       
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|                                   | Total noninterest expense |   |                                | 14,979 |          |   |        | 742 |         |   |           | 15,721 |          |   |           | 14,537 |  |   |        | 3,021 |  |   |           | 17,558 | 
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Income (loss) before income taxes  |                           |   | 5,529                          |        |          |   | (111   | )   |         |   | 5,418     |        |          |   | 5,597     |        |  |   | (421   | )     |  |   | 5,176     |       
|                                  
|                                  
|                                  
|                                  
|Income tax provision               |                           |   | 1,393                          |        |          |   | (39    | )   |         |   | 1,354     |        |          |   | 1,518     |        |  |   | (147   | )     |  |   | 1,371     |       
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Net income (loss)                  |                           | $ | 4,136                          |        |          | $ | (72    | )   |         | $ | 4,064     |        |          | $ | 4,079     |        |  | $ | (274   | )     |  | $ | 3,805     |       
|                                   |                           |   |                                |        |          |   |        |     |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Assets                             |                           | $ | 1,801,345                      |        |          | $ | 10,117 |     |         | $ | 1,811,462 |        |          | $ | 1,864,134 |        |  | $ | 49,608 |       |  | $ | 1,913,742 |       
|                                  
|                                  
|                                  
|                                  
|Liabilities                        |                           | $ | 1,644,904                      |        |          | $ | 8,371  |     |         | $ | 1,653,275 |        |          | $ | 1,714,090 |        |  | $ | 46,304 |       |  | $ | 1,760,394 |       
|                                  
|                                  
|                                  
|                                  
|Shareholders equity               |                           | $ | 156,441                        |        |          | $ | 1,746  |     |         | $ | 158,187   |        |          | $ | 150,044   |        |  | $ | 3,304  |       |  | $ | 153,348   |       

On February 9, 2001, Commonwealth announced the restructuring of its
residential mortgage banking division, ComNet Mortgage Services, which resulted
in a $2.3 million pre-tax charge for related expenses. As part of this
restructuring, ComNets Pennsylvania and Maryland loan production offices were
sold to American Home Mortgage Holdings, Inc. on March 30, 2001. As an
additional part of this restructuring, Commonwealth outsourced the servicing
function relating to its portfolio of residential mortgage loans during the
second quarter of 2001. Commonwealth will continue to provide mortgage loans
and services to its customers through agreements with American Home Mortgage
Holdings, Inc. and a third party servicer. As a result of this restructuring,
Commonwealth will not report mortgage banking segment information in future
quarters.

11



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |        | 
|---------------------------------- | ------------------------- | - | ------------------------------ | ------ | -------- | - | ------ | ----- | ------- | - | --------- | ------ | -------- | - | --------- | ------ |  | - | ------ | ----- |  | - | --------- | ------ | 
|                                   |                           |   | For the Quarter Ended June 30,
|                                   |                           |   |                               
|                                   |                           |   | 2001                           |        | 2000    
|                                   |                           |   |                                |        |         
|                                   |                           |   | Community                      |        | Mortgage |   |        |       |         |   | Community |        | Mortgage
|                                   |                           |   | Banking                        |        | Banking  |   | Total  |       | Banking |   | Banking   |        | Total   
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |         
|                                   |                           |   | (in thousands)                
|Net interest income after         
|                                  
|                                  
|                                  
|                                  
|provision for loan losses          |                           | $ | 32,064                         |        |          | $ | 197    |       |         | $ | 32,261    |        |          | $ | 33,139    |        |  | $ | 1,068  |       |  | $ | 34,207    |       
|                                  
|                                  
|                                  
|                                  
|Noninterest income:                |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|                                  
|                                  
|                                  
|                                  
|Servicing fees                     |                           |   | (307                           | )      |          |   | 703    |       |         |   | 396       |        |          |   | (1,218    | )      |  |   | 1,638  |       |  |   | 420       |       
|                                  
|                                  
|                                  
|                                  
|Net gain on sale of mortgage loans |                           |   | (166                           | )      |          |   | 1,778  |       |         |   | 1,612     |        |          |   | (235      | )      |  |   | 2,331  |       |  |   | 2,096     |       
|                                  
|                                  
|                                  
|                                  
|Other                              |                           |   | 8,625                          |        |          |   |       |       |         |   | 8,625     |        |          |   | 7,536     |        |  |   | 303    |       |  |   | 7,839     |       
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|                                   | Total noninterest income  |   |                                | 8,152  |          |   |        | 2,481 |         |   |           | 10,633 |          |   |           | 6,083  |  |   |        | 4,272 |  |   |           | 10,355 | 
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Noninterest expense:              
|                                  
|                                  
|                                  
|                                  
|Compensation and employee benefits |                           |   | 15,461                         |        |          |   | 1,604  |       |         |   | 17,065    |        |          |   | 13,695    |        |  |   | 3,746  |       |  |   | 17,441    |       
|                                  
|                                  
|                                  
|                                  
|Other                              |                           |   | 15,063                         |        |          |   | 3,502  |       |         |   | 18,565    |        |          |   | 15,040    |        |  |   | 2,261  |       |  |   | 17,301    |       
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|                                   | Total noninterest expense |   |                                | 30,524 |          |   |        | 5,106 |         |   |           | 35,630 |          |   |           | 28,735 |  |   |        | 6,007 |  |   |           | 34,742 | 
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Income (loss) before income taxes  |                           |   | 9,692                          |        |          |   | (2,428 | )     |         |   | 7,264     |        |          |   | 10,487    |        |  |   | (667   | )     |  |   | 9,820     |       
|                                  
|                                  
|                                  
|                                  
|Income tax provision               |                           |   | 2,666                          |        |          |   | (850   | )     |         |   | 1,816     |        |          |   | 2,835     |        |  |   | (233   | )     |  |   | 2,602     |       
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Net income (loss)                  |                           | $ | 7,026                          |        |          | $ | (1,578 | )     |         | $ | 5,448     |        |          | $ | 7,652     |        |  | $ | (434   | )     |  | $ | 7,218     |       
|                                   |                           |   |                                |        |          |   |        |       |         |   |           |        |          |   |           |        |  |   |        |       |  |   |           |       
|Assets                             |                           | $ | 1,801,345                      |        |          | $ | 10,117 |       |         | $ | 1,811,462 |        |          | $ | 1,864,134 |        |  | $ | 49,608 |       |  | $ | 1,913,742 |       
|                                  
|                                  
|                                  
|                                  
|Liabilities                        |                           | $ | 1,644,904                      |        |          | $ | 8,371  |       |         | $ | 1,653,275 |        |          | $ | 1,714,090 |        |  | $ | 46,304 |       |  | $ | 1,760,394 |       
|                                  
|                                  
|                                  
|                                  
|Shareholders equity               |                           | $ | 156,441                        |        |          | $ | 1,746  |       |         | $ | 158,187   |        |          | $ | 150,044   |        |  | $ | 3,304  |       |  | $ | 153,348   |       

Community Banking results for the first six months of 2001 reflected a
$0.7 million pre-tax charge relating to the retirement of Commonwealths Chief
Executive Officer, and a $0.5 million pre-tax charge relating to a disputed
interest rate on a loan originated in the 1970s. Exclusive of these items, net
income from Community Banking would have been $8.1 million for the first six
months of 2001.

Mortgage Banking results for the first six months of 2001 reflected a $2.3
million pre-tax charge associated with the sale of Commonwealths mortgage loan
production offices and the outsourcing of its mortgage servicing function.
Exclusive of this item, the net loss from Mortgage Banking would have been $0.1
million for the first six months of 2001.

12



---



Commonwealth Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   Acquisitions and Divestitures

On February 9, 2001, Commonwealth announced the restructuring of its
residential mortgage banking division, ComNet Mortgage Services, which resulted
in a $2.3 million pre-tax charge for related expenses. As part of this
restructuring, ComNets Pennsylvania and Maryland loan production offices were
sold to American Home Mortgage Holdings, Inc. on March 30, 2001. As an
additional part of this restructuring, Commonwealth outsourced the servicing
function relating to its portfolio of residential mortgage loans during the
second quarter of 2001. Commonwealth will continue to provide mortgage loans
and services to its customers through agreements with American Home Mortgage
Holdings, Inc. and a third party servicer.

On September 8, 2000, Commonwealth Bank completed the sale of two branches
in Lehigh County, Pennsylvania to another financial institution. At that date,
the two branches had $13 million of combined deposits and $4 million of
consumer loans. The deposits, loans and certain other assets were sold
essentially at book value.

On January 31, 2000, the Company completed the acquisition of certain
business interests of the Tyler Group (Tyler). Tyler offers financial
planning and investment advisory services to individuals and small businesses
in southeast Pennsylvania. Its products and services are marketed to
Commonwealth customers through Tyler Wealth Counselors, Inc., a subsidiary of
Commonwealth Bank.

13



---



Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations

Forward Looking Statements.When used in this Form 10-Q, in future
filings by the Company with the Securities and Exchange Commission, in the
Companys press releases or other public or shareholder communications, or in
oral statements made with the approval of an authorized executive officer, the
words or phases will likely result, are expected to, will continue, is
anticipated, estimate, project, or similar expressions are intended to
identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in the
Companys market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Companys market area and
competition that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
also wishes to advise readers that the factors listed above could affect the
Companys financial performance and could cause the Companys actual results
for future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions which may be made to
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

General. The Company is a Pennsylvania corporation which is the holding
company for the Bank. During January 2001, the Bank converted to a
Pennsylvania chartered savings bank, primarily regulated by the Pennsylvania
Department of Banking and the Federal Deposit Insurance Corporation (FDIC)
from a federally chartered savings bank, primarily regulated by the Office of
Thrift Supervision (OTS). The Bank conducts business from its executive
offices in Norristown, Pennsylvania and 60 full-service branches located in
southeast Pennsylvania.

During the first quarter of 2001, Commonwealth announced the restructuring
of its residential mortgage banking division, ComNet Mortgage Services, which
resulted in a $2.3 million pre-tax charge for related expenses. As part of
this restructuring, ComNets Pennsylvania and Maryland loan production offices
were sold to American Home Mortgage Holdings, Inc. on March 30, 2001. As an
additional part of this restructuring, Commonwealth outsourced the servicing
function relating to its portfolio of residential mortgage loans during the
second quarter of 2001. Commonwealth will continue to provide mortgage loans
and services to its customers through agreements with American Home Mortgage
Holdings, Inc. and a third party servicer.

Financial Condition

General. Total assets were $1.8 billion at June 30, 2001, compared to
$1.9 billion at December 31, 2000. During the first six months of 2001,
decreases in the Companys mortgage loans held for sale, mortgage-backed
securities, loans receivable, and FHLB stock were offset, in part, by an
increase in cash and due from banks and interest-bearing deposits (Cash and
cash equivalents). Total liabilities were $1.7 billion at both June 30, 2001
and December 31, 2000. During the first six months of 2001, a decrease in
notes payable and other borrowings was offset, in part, by an increase in
deposits. Shareholders equity was $158 million as of June 30, 2001, compared
to $160 million at December 31, 2000.

Cash and Cash Equivalents. Cash and cash equivalents increased by $45
million, or 68%, from $67 million at December 31, 2000, to $112 million at June
30, 2001.

Mortgage Loans Held for Sale. Mortgage loans held for sale decreased by
$37 million, or 86%, from $43 million at December 31, 2000, to $6 million at
June 30, 2001. The decrease was attributable to the March 30, 2001 sale of
Commonwealths mortgage loan production offices.

14



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Investment Securities.Investment securities were $14 million at both
June 30, 2001 and December 31, 2000, as follows:

|                    |                    |       |   |                |        |            |   |            |     |        |   |   |   |  |   |        |        | 
|------------------- | ------------------ | ----- | - | -------------- | ------ | ---------- | - | ---------- | --- | ------ | - | - | - |  | - | ------ | ------ | 
|                    |                    |       |   | June 30, 2001 
|                    |                    |       |   |               
|                    |                    |       |   | Amortized      |        | Unrealized |   | Unrealized |     | Market
|                    |                    |       |   | Cost           |        | Gains      |   | Losses     |     | Value 
|                    |                    |       |   |                |        |            |   |            |     |       
|                    |                    |       |   | (in thousands)
|Available for sale:
|                   
|                   
|                   
|                   
|                    | Equity Investments |       | $ | 13,279         |        |            | $ | 273        |     |        | $ |  |   |  | $ | 13,552 |       
|                    |                    |       |   |                |        |            |   |            |     |        |   |   |   |  |   |       
|                    |                    | Total |   | $              | 13,279 |            |   | $          | 273 |        |   | $ |  |  |   | $      | 13,552 | 
|                    |                    |       |   |                |        |            |   |            |     |        |   |   |   |  |   |       

|                    |                    |       |   |                   |        |            |   |            |     |        |   |     |     |  |   |        |        | 
|------------------- | ------------------ | ----- | - | ----------------- | ------ | ---------- | - | ---------- | --- | ------ | - | --- | --- |  | - | ------ | ------ | 
|                    |                    |       |   | December 31, 2000
|                    |                    |       |   |                  
|                    |                    |       |   | Amortized         |        | Unrealized |   | Unrealized |     | Market
|                    |                    |       |   | Cost              |        | Gains      |   | Losses     |     | Value 
|                    |                    |       |   |                   |        |            |   |            |     |       
|                    |                    |       |   | (in thousands)   
|Available for sale:
|                   
|                   
|                   
|                   
|                    | Equity Investments |       | $ | 13,350            |        |            | $ | 801        |     |        | $ | 100 |     |  | $ | 14,051 |       
|                    |                    |       |   |                   |        |            |   |            |     |        |   |     |     |  |   |       
|                    |                    | Total |   | $                 | 13,350 |            |   | $          | 801 |        |   | $   | 100 |  |   | $      | 14,051 | 
|                    |                    |       |   |                   |        |            |   |            |     |        |   |     |     |  |   |       

All investment securities are classified as available for sale and are
reported at fair value, with unrealized gains and losses, net of tax, excluded
from earnings and reported as a separate component of shareholders equity.

15



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Mortgage-Backed Securities. Mortgage-backed securities decreased by $30
million, or 15%, from $203 million at December 31, 2000, to $173 million at
June 30, 2001. The decrease in mortgage-backed securities during the first six
months of 2001 was primarily related to repayments and prepayments.

At June 30, 2001 and December 31, 2000, $113 million, or 65%, and $132
million, or 65%, respectively, of the Companys mortgage-backed securities were
insured or guaranteed by the Government National Mortgage Association (GNMA),
the Federal Home Loan Mortgage Corporation (FHLMC), or the Federal National
Mortgage Association (FNMA). As part of its investment policy, the Company
also has the ability to invest in private mortgage-backed securities. These
non-federally insured mortgage-backed securities, which are generally rated AA
or better, yield a higher rate of return and involve a higher risk of loss than comparable
mortgage-backed securities issued by the GNMA, FHLMC, or the FNMA.
Mortgage-backed securities at June 30, 2001 and December 31, 2000 were as
follows:

|                    |         |       |   |                |         |            |   |            |       |        |   |     |     |  |   |        |         | 
|------------------- | ------- | ----- | - | -------------- | ------- | ---------- | - | ---------- | ----- | ------ | - | --- | --- |  | - | ------ | ------- | 
|                    |         |       |   | June 30, 2001 
|                    |         |       |   |               
|                    |         |       |   | Amortized      |         | Unrealized |   | Unrealized |       | Market
|                    |         |       |   | Cost           |         | Gains      |   | Losses     |       | Value 
|                    |         |       |   |                |         |            |   |            |       |       
|                    |         |       |   | (in thousands)
|Available for sale:
|                   
|                   
|                   
|                   
|                    | GNMA    |       | $ | 28,349         |         |            | $ | 967        |       |        | $ |    |     |  | $ | 29,316 |        
|                   
|                   
|                   
|                   
|                    | FHLMC   |       |   | 24,359         |         |            |   | 771        |       |        |   |    |     |  |   | 25,130 |        
|                   
|                   
|                   
|                   
|                    | FNMA    |       |   | 57,564         |         |            |   | 799        |       |        |   | 294 |     |  |   | 58,069 |        
|                   
|                   
|                   
|                   
|                    | Private |       |   | 59,599         |         |            |   | 664        |       |        |   | 52  |     |  |   | 60,211 |        
|                    |         |       |   |                |         |            |   |            |       |        |   |     |     |  |   |       
|                    |         | Total |   | $              | 169,871 |            |   | $          | 3,201 |        |   | $   | 346 |  |   | $      | 172,726 | 
|                    |         |       |   |                |         |            |   |            |       |        |   |     |     |  |   |       

|                    |         |       |   |                   |         |            |   |            |       |        |   |     |     |  |   |        |         | 
|------------------- | ------- | ----- | - | ----------------- | ------- | ---------- | - | ---------- | ----- | ------ | - | --- | --- |  | - | ------ | ------- | 
|                    |         |       |   | December 31, 2000
|                    |         |       |   |                  
|                    |         |       |   | Amortized         |         | Unrealized |   | Unrealized |       | Market
|                    |         |       |   | Cost              |         | Gains      |   | Losses     |       | Value 
|                    |         |       |   |                   |         |            |   |            |       |       
|                    |         |       |   | (in thousands)   
|Available for sale:
|                   
|                   
|                   
|                   
|                    | GNMA    |       | $ | 33,293            |         |            | $ | 642        |       |        | $ |    |     |  | $ | 33,935 |        
|                   
|                   
|                   
|                   
|                    | FHLMC   |       |   | 30,374            |         |            |   | 639        |       |        |   | 9   |     |  |   | 31,004 |        
|                   
|                   
|                   
|                   
|                    | FNMA    |       |   | 66,493            |         |            |   | 518        |       |        |   | 258 |     |  |   | 66,753 |        
|                   
|                   
|                   
|                   
|                    | Private |       |   | 71,288            |         |            |   | 64         |       |        |   | 344 |     |  |   | 71,008 |        
|                    |         |       |   |                   |         |            |   |            |       |        |   |     |     |  |   |       
|                    |         | Total |   | $                 | 201,448 |            |   | $          | 1,863 |        |   | $   | 611 |  |   | $      | 202,700 | 
|                    |         |       |   |                   |         |            |   |            |       |        |   |     |     |  |   |       

All mortgage-backed securities are classified as available for sale and
are reported at fair value, with unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of shareholders
equity.

16



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED



| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loans Receivable.Loans receivable, net of reserves, deferred loan
fees, and unamortized premiums and unaccreted discounts, were $1.4
billion at both June 30, 2001 and December 31, 2000. The decrease in
residential mortgage loans was offset, in part, by growth in consumer
and commercial loans. The following table depicts the composition of
the Companys loan portfolio at the dates indicated.

|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |       |       | 
|----------------------------- | ------------------------------ | ---------------------- | --------- | ---------------------- | ------- | ------------ | ------ | ------ | ----- | ----- | --------- | ------- | ------- | ---- | ------ | ----- | ----- | 
|                              |                                |                        |           | June 30,               |         | December 31,
|                              |                                |                        |           | 2001                   |         | 2000        
|                              |                                |                        |           |                        |         |             
|                              |                                |                        |           |                        |         |              |        | % of   |       |       |           |         |         | % of
|                              |                                |                        |           | Amount                 |         | Total        |        | Amount |       | Total
|                              |                                |                        |           |                        |         |              |        |        |       |      
|                              |                                |                        |           | (dollars in thousands)
|Mortgage loans  residential:
|                             
|                             
|                             
|                             
|                              | Fixed rate                     |                        | $         | 476,471                |         |              |        | 33.88  | %     |       | $         | 495,384 |         |      |        | 34.68 | %    
|                             
|                             
|                             
|                             
|                              | Adjustable rate                |                        |           | 242,224                |         |              |        | 17.22  |       |       |           | 304,498 |         |      |        | 21.32 |      
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |      
|                              |                                | Total mortgage loans   |           |                        | 718,695 |              |        |        | 51.10 |       |           |         | 799,882 |      |        |       | 56.00 | 
|                             
|                             
|                             
|                             
|Consumer loans:              
|                             
|                             
|                             
|                             
|                              | Second mortgages               |                        |           | 277,708                |         |              |        | 19.74  |       |       |           | 257,971 |         |      |        | 18.06 |      
|                             
|                             
|                             
|                             
|                              | Equity lines of credit         |                        |           | 27,764                 |         |              |        | 1.97   |       |       |           | 26,667  |         |      |        | 1.87  |      
|                             
|                             
|                             
|                             
|                              | Recreational vehicles          |                        |           | 44,571                 |         |              |        | 3.17   |       |       |           | 51,194  |         |      |        | 3.58  |      
|                             
|                             
|                             
|                             
|                              | Other                          |                        |           | 44,055                 |         |              |        | 3.13   |       |       |           | 48,619  |         |      |        | 3.40  |      
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |      
|                              |                                | Total consumer loans   |           |                        | 394,098 |              |        |        | 28.01 |       |           |         | 384,451 |      |        |       | 26.91 | 
|                             
|                             
|                             
|                             
|Commercial loans:            
|                             
|                             
|                             
|                             
|                              | Business loans                 |                        |           | 183,695                |         |              |        | 13.06  |       |       |           | 157,643 |         |      |        | 11.04 |      
|                             
|                             
|                             
|                             
|                              | Commercial real estate         |                        |           | 102,855                |         |              |        | 7.31   |       |       |           | 78,435  |         |      |        | 5.49  |      
|                             
|                             
|                             
|                             
|                              | Small Business Administration  |                        |           | 7,244                  |         |              |        | 0.52   |       |       |           | 8,087   |         |      |        | 0.56  |      
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |      
|                              |                                | Total commercial loans |           |                        | 293,794 |              |        |        | 20.89 |       |           |         | 244,165 |      |        |       | 17.09 | 
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |      
|Total loans receivable        |                                |                        | 1,406,587 |                        |         |              | 100.00 | %      |       |       | 1,428,498 |         |         |      | 100.00 | %    
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |         |         |      |        |      
|Less:                        
|                             
|                             
|                             
|                             
|                              | Net premium on loans purchased |                        |           | (1,541                 | )       |              |        |        |       |       |           | (1,849  | )      
|                             
|                             
|                             
|                             
|                              | Allowance for loan losses      |                        |           | 12,247                 |         |              |        |        |       |       |           | 11,078  |        
|                             
|                             
|                             
|                             
|                              | Deferred loan fees             |                        |           | 2,703                  |         |              |        |        |       |       |           | 3,159   |        
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |        
|Loans receivable, net         |                                | $                      | 1,393,178 |                        |         |              |        |        |       | $     | 1,416,110 |        
|                              |                                |                        |           |                        |         |              |        |        |       |       |           |        

17



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Residential mortgage loans totaled $719 million at June 30, 2001, a
decrease of $81 million, or 10%, compared to $800 million at December 31, 2000.
At June 30, 2001, residential mortgage loans represented 51% of the Companys
loan portfolio, compared to 56% at December 31, 2000.

Consumer loans increased by $10 million, or 3%, from $384 million at
December 31, 2000, to $394 million at June 30, 2001. At June 30, 2001,
consumer loans represented 28% of the Companys loan portfolio and were
comprised of $278 million of second mortgage loans, $28 million of equity lines
of credit, $45 million of recreational vehicle loans, and $44 million of other
consumer loans. At December 31, 2000, consumer loans represented 27% of total
loans and were comprised of $258 million of second mortgage loans, $27 million
of equity lines of credit, $51 million of recreational vehicle loans, and $49
million of other consumer loans. Consumer loans are generally considered to
involve greater risk than residential mortgage loans because the risk of
borrower default is greater. In addition, certain consumer loans are unsecured
or involve collateral which is more likely to decline in value than
single-family residences.

Commercial loans increased by $50 million, or 20%, from $244 million at
December 31, 2000, to $294 million at June 30, 2001. At June 30, 2001,
commercial loans represented 21% of the Companys loan portfolio and were
comprised of $184 million of business loans, $103 million of commercial real
estate loans, and $7 million of loans guaranteed by the Small Business
Administration (SBA). At December 31, 2000, commercial loans represented 17%
of total loans and were comprised of $158 million of business loans, $78
million of commercial real estate loans, and $8 million of SBA loans.
Commercial loans are generally considered to involve greater risk than
residential mortgage loans because the risk of borrower default is greater. In
addition, collateral relating to commercial loans may be more likely to decline
in value and may be more difficult to liquidate than single-family residences.

The increases in the consumer and commercial loan portfolios and the
decrease in the mortgage loan portfolio during the first six months of 2001
were in line with the Companys ongoing strategy to shift its business mix from
that of a traditional thrift institution to that of a community bank.

18



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Nonperforming Assets. The Companys nonperforming assets, which primarily
consist of nonaccrual loans, an equity investment in a mortgage servicing
partnership, and real estate and other assets acquired through foreclosure
totaled $10.5 million at June 30, 2001, compared to $10.7 million at December
31, 2000. At June 30, 2001, nonperforming assets represented 0.58% of total
assets, compared to 0.57% of total assets at December 31, 2000. The following
table sets forth information relating to the Companys nonperforming assets at
the dates indicated.

|                                        |                                     |                            |        |   |                        |      |                   |   |        |      |  
|--------------------------------------- | ----------------------------------- | -------------------------- | ------ | - | ---------------------- | ---- | ----------------- | - | ------ | ---- | -
|                                        |                                     |                            |        |   | June 30, 2001          |      | December 31, 2000
|                                        |                                     |                            |        |   |                        |      |                  
|                                       
|                                       
|                                       
|                                       
|                                        |                                     |                            |        |   | (dollars in thousands)
|                                       
|                                       
|                                       
|                                       
|Mortgage loans  residential            |                                     | $                          | 3,956  |   |                        | $    | 4,193             |  
|                                       
|                                       
|                                       
|                                       
|Consumer loans                          |                                     |                            | 3,376  |   |                        |      | 2,782             |  
|                                       
|                                       
|                                       
|                                       
|Commercial loans                        |                                     |                            | 216    |   |                        |      | 1,020             |  
|                                        |                                     |                            |        |   |                        |      |                   |  
|                                        |                                     | Total nonperforming loans  |        |   | 7,548                  |      |                   |   | 7,995  |     
|                                       
|                                       
|                                       
|                                       
|Investment securities                   |                                     |                            | 1,500  |   |                        |      | 1,700             |  
|                                       
|                                       
|                                       
|                                       
|Real estate owned and                  
|                                       
|                                       
|                                       
|                                       
|                                        |                                     | other acquired assets, net |        |   | 1,411                  |      |                   |   | 1,003  |     
|                                        |                                     |                            |        |   |                        |      |                   |  
|                                        |                                     | Total nonperforming assets |        | $ | 10,459                 |      |                   | $ | 10,698 |     
|                                        |                                     |                            |        |   |                        |      |                   |  
|                                       
|                                       
|                                       
|                                       
|Nonperforming loans to total loans held
|                                       
|                                       
|                                       
|                                       
|                                        |                                     | for investment             |        |   | 0.54                   | %    |                   |   | 0.56   | %   
|                                        |                                     |                            |        |   |                        |      |                   |  
|                                        | Total nonperforming assets to total
|                                       
|                                       
|                                       
|                                       
|                                        |                                     |                            | assets |   |                        | 0.58 | %                 |   |        | 0.57 | %
|                                        |                                     |                            |        |   |                        |      |                   |  

Allowance for Loan Losses.The Companys allowance for loan losses
amounted to $12.2 million at June 30, 2001, compared to $11.1 million at
December 31, 2000.

It is managements policy to maintain an allowance for estimated loan
losses based upon the probable losses inherent in the loan portfolio which
have occurred as of the date of the financial statements. In determining the
allowance for loan losses, Commonwealth assesses prior loss experience, the
volume and type of lending conducted by the Company, industry standards, past
due loans, general economic conditions, and other factors related to the
collectability of the loan portfolio. At June 30, 2001, the Companys
allowance for loan losses represented 0.87% of total loans held for
investment, compared to 0.78% of total loans held for investment at December
31, 2000.

Over the past several years, Commonwealth has diversified its lending
efforts, increasing emphasis on consumer and commercial loans, while
decreasing emphasis on residential mortgage loans. As a result of the
increased risk inherent in this shift in loan mix, management will continue
to evaluate its loan portfolio and record additional loan loss reserves as
deemed necessary.

19



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

The following table sets forth the activity in the Companys allowance for
loan losses during the periods indicated.

|                                 |                           |                   |        |                                   |        |      |        |        |        |  
|-------------------------------- | ------------------------- | ----------------- | ------ | --------------------------------- | ------ | ---- | ------ | ------ | ------ | -
|                                 |                           |                   |        | For the Six Months Ended June 30,
|                                 |                           |                   |        |                                  
|                                 |                           |                   |        | 2001                              |        | 2000
|                                 |                           |                   |        |                                   |        |     
|                                
|                                
|                                
|                                
|                                 |                           |                   |        | (dollars in thousands)           
|                                
|                                
|                                
|                                
|Allowance at beginning of period |                           | $                 | 11,078 |                                   |        | $    | 10,478 |       
|                                
|                                
|                                
|                                
|Provision for loan losses        |                           |                   | 3,750  |                                   |        |      | 2,325  |       
|                                
|                                
|                                
|                                
|Charge-offs:                    
|                                
|                                
|                                
|                                
|                                 | Mortgage loans            |                   |        |                                  |        |      |        | (99    | )     
|                                
|                                
|                                
|                                
|                                 | Consumer loans            |                   |        | (2,694                            | )      |      |        | (2,196 | )     
|                                
|                                
|                                
|                                
|                                 | Commercial loans          |                   |        | (101                              | )      |      |        | (18    | )     
|                                 |                           |                   |        |                                   |        |      |        |       
|                                 |                           | Total charge-offs |        |                                   | (2,795 | )    |        |        | (2,313 | )
|                                
|                                
|                                
|                                
|Recoveries:                     
|                                
|                                
|                                
|                                
|                                 | Mortgage loans            |                   |        | 2                                 |        |      |        | 1      |       
|                                
|                                
|                                
|                                
|                                 | Consumer loans            |                   |        | 82                                |        |      |        | 77     |       
|                                
|                                
|                                
|                                
|                                 | Commercial loans          |                   |        | 130                               |        |      |        | 13     |       
|                                 |                           |                   |        |                                   |        |      |        |       
|                                 |                           | Total recoveries  |        |                                   | 214    |      |        |        | 91     |  
|                                 |                           |                   |        |                                   |        |      |        |       
|Allowance at end of period       |                           | $                 | 12,247 |                                   |        | $    | 10,581 |       
|                                 |                           |                   |        |                                   |        |      |        |       
|Allowance for loan losses to    
|                                
|                                
|                                
|                                
|                                 | total nonperforming loans
|                                
|                                
|                                
|                                
|                                 | at end of period          |                   |        | 162.26                            | %      |      |        | 160.60 | %     
|                                 |                           |                   |        |                                   |        |      |        |       
|Allowance for loan losses to    
|                                
|                                
|                                
|                                
|                                 | total loans held for     
|                                
|                                
|                                
|                                
|investment at end of period      |                           |                   | 0.87   | %                                 |        |      | 0.74   | %     
|                                 |                           |                   |        |                                   |        |      |        |       

20



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED



| |                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FHLB Stock.FHLB stock deceased by $6 million, or 32%, from $18
million at December 31, 2000, to $13 million at June 30, 2001. This decrease was a result of
the required sale of FHLB Stock which was primarily attributable to the
decrease in the Companys mortgage related assets.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Intangible Assets.Intangible assets are comprised of the excess
of cost over net assets acquired (Goodwill) and core deposit
intangibles (CDI). The Companys intangible assets were recorded in
connection with the acquisition of certain business interests of the
Tyler Group during the first quarter of 2000, the acquisition of twelve
branches in Berks and Lebanon Counties in 1996, and the acquisition of
four branches in Philadelphia County in 1995. On June 28,1999,
Commonwealth sold two branches in Lebanon County, which resulted in
reductions of $1.4 million and $0.6 million in Goodwill and CDI,
respectively. During the second quarter of 2001, Commonwealth reduced
the Tyler Acquisition Goodwill by $0.8 million to reflect the reduced
likelihood that the portion of the Tyler purchase price which is
dependent on future earnings performance will be paid. Intangible
assets are amortized over periods not to exceed 13 years. The following
table details the components of intangible assets at the dates
indicated.

|                        |                |       |        |                |        |                   |        |        |        | 
|----------------------- | -------------- | ----- | ------ | -------------- | ------ | ----------------- | ------ | ------ | ------ | 
|                        |                |       |        | June 30, 2001  |        | December 31, 2000
|                        |                |       |        |                |        |                  
|                       
|                       
|                       
|                       
|                        |                |       |        | (in thousands)
|                       
|                       
|                       
|                       
|Goodwill (Berks)        |                | $     | 13,473 |                |        | $                 | 14,319 |       
|                       
|                       
|                       
|                       
|Goodwill (Philadelphia) |                |       | 7,581  |                |        |                   | 8,116  |       
|                       
|                       
|                       
|                       
|Goodwill (Tyler)        |                |       | 1,172  |                |        |                   | 2,028  |       
|                        |                |       |        |                |        |                   |        |       
|                       
|                       
|                       
|                       
|                        | Total Goodwill |       |        | 22,226         |        |                   |        | 24,463 |       
|CDI (Berks)             |                |       | 3,708  |                |        |                   | 4,475  |       
|                       
|                       
|                       
|                       
|CDI (Philadelphia)      |                |       | 1,347  |                |        |                   | 1,512  |       
|                        |                |       |        |                |        |                   |        |       
|                        |                | Total |        | $              | 27,281 |                   |        | $      | 30,450 | 
|                        |                |       |        |                |        |                   |        |       



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 142 changes the
accounting for goodwill from an amortization method to assessing impairment on
a fair-value-based test approach. SFAS No. 142 requires companies with a fiscal year end of December  31 to implement the change in accounting
for goodwill beginning January  1, 2002.  The Company and its independent auditors are currently reviewing whether
SFAS No. 142 is applicable to the intangible assets recorded by the Company in connection with the acquisition of certain
branch offices and business interests. Until the completion of this review, the potential impact, if any, on Commonwealths
future financial statements cannot be determined.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Deposits.With respect to deposits, the Companys strategy is to
emphasize growth in relatively low-cost core deposits (demand, money
market, and savings deposits) through its retail and commercial banking
activities, while deemphasizing growth of relatively high-cost
certificates of deposit. Deposits increased by $9 million to $1.5
billion at June 30, 2001, primarily due to an increase in money market,
demand, and savings deposits offset, in part, by a decrease in
certificates of deposit.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Notes Payable and Other Borrowings.Notes payable and other
borrowings consist of advances from the Federal Home Loan Bank (FHLB),
securities sold under agreements to repurchase, and commercial
repurchase agreements. Notes payable and other borrowings decreased by
$66 million, or 29%, to $159 million at June 30, 2001, from $224 million
at December 31, 2000. The decrease was due to the $47 million, or 27%,
decrease in FHLB advances and the $25 million, or 71% decrease in
repurchase agreements. These decreases were offset, in part, by a $6
million, or 33%, increase in commercial repurchase agreements. The
Companys borrowings are used to fund lending and investment activities,
withdrawals from deposit accounts, and other disbursements which occur
in the normal course of business.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Shareholders Equity.At June 30, 2001, shareholders equity
equaled $158 million, or 8.7% of assets, compared to $160 million, or
8.6% at December 31, 2000. The Banks core and risk-based capital
ratios were 6.9% and 10.9%, respectively, at June 30, 2001, compared to
7.0% and 11.3%, respectively, at December 31, 2000. As of June 30,
2001, the Bank was in full compliance with all regulatory capital
requirements and maintained capital ratios which were generally in line
with internal targeted levels.

21



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Regulatory Capital Requirements.

The following table sets forth the Banks compliance with applicable regulatory
capital requirements at June 30, 2001:

|                                   |                              |  |        |      |          |   |            |         |       |  |             |     |                   |  |            |      |  
|---------------------------------- | ---------------------------- |  | ------ | ---- | -------- | - | ---------- | ------- | ----- |  | ----------- | --- | ----------------- |  | ---------- | ---- | -
|                                   |                              |  |        |      |          |   |            |         |       |  |             |     |                   |  | To Be Well
|                                   |                              |  |        |      |          |   |            |         |       |  | Minimum     |     | Capitalized      
|                                   |                              |  |        |      |          |   |            |         |       |  | For Capital |     | For Prompt       
|                                   |                              |  |        |      |          |   |            |         |       |  | Adequacy    |     | Corrective Action
|                                   |                              |  | Actual |      | Purposes |   | Provisions
|                                   |                              |  |        |      |          |   |           
|                                   |                              |  | Ratio  |      | Amount   |   | Ratio      |         | Ratio
|                                   |                              |  |        |      |          |   |            |         |      
|(dollars in thousands)            
|                                  
|                                  
|                                  
|                                  
|Shareholders equity,             
|                                  
|                                  
|                                  
|                                  
|                                   | and ratio to the            
|                                  
|                                  
|                                  
|                                  
|                                   | Banks total assets          |  |        | 8.5  | %        |   | $          | 153,623 |      
|                                   |                              |  |        |     
|Intangible assets                  |                              |  |        |      |          |   | (27,281    | )      
|                                  
|                                  
|                                  
|                                  
|Unrealized gain on                
|                                  
|                                  
|                                  
|                                  
|                                   | available for sale          
|                                  
|                                  
|                                  
|                                  
|                                   | securities, net of tax       |  |        |      |          |   |            | (2,004  | )    
|                                   |                              |  |        |      |          |   |            |        
|Tangible capital, and             
|                                  
|                                  
|                                  
|                                  
|                                   | ratio to the Banks adjusted
|                                  
|                                  
|                                  
|                                  
|                                   | average total assets         |  |        | 6.9  | %        |   | $          | 124,338 |       |  |             | 1.5 | %                
|                                   |                              |  |        |      |          |   |            |         |       |  |             |    
|                                  
|                                  
|                                  
|                                  
|Core capital, and                 
|                                  
|                                  
|                                  
|                                  
|                                   | ratio to the Banks adjusted
|                                  
|                                  
|                                  
|                                  
|                                   | average total assets         |  |        | 6.9  | %        |   | $          | 124,338 |       |  |             | 4.0 | %                 |  |            | 5.0  | %
|                                   |                              |  |        |      |          |   |            |         |       |  |             |     |                   |  |            |     
|                                  
|                                  
|                                  
|                                  
|Core capital, and                 
|                                  
|                                  
|                                  
|                                  
|                                   | ratio to the Banks         
|                                  
|                                  
|                                  
|                                  
|                                   | risk-weighted assets         |  |        | 9.9  | %        |   | $          | 124,338 |       |  |             |     |                   |  |            | 6.0  | %
|                                   |                              |  |        |      |          |   |            |         |       |  |             |     |                   |  |            |     
|Allowance for loan losses          |                              |  |        |      |          |   | 12,247     |        
|                                   |                              |  |        |      |          |   |            |        
|Other supplementary capital        |                              |  |        |      |          |   | 92         |        
|                                   |                              |  |        |      |          |   |            |        
|Total risk-based capital,         
|                                  
|                                  
|                                  
|                                  
|                                   | and ratio to the Banks     
|                                  
|                                  
|                                  
|                                  
|                                   | risk-weighted assets         |  |        | 10.9 | %        |   | $          | 136,677 |       |  |             | 8.0 | %                 |  |            | 10.0 | %
|                                   |                              |  |        |      |          |   |            |         |       |  |             |     |                   |  |            |     
|                                  
|                                  
|                                  
|                                  
|Bank total assets                  |                              |  |        |      |          | $ | 1,811,156  |        
|                                   |                              |  |        |      |          |   |            |        
|Bank adjusted average total assets |                              |  |        |      |          | $ | 1,789,434  |        
|                                   |                              |  |        |      |          |   |            |        
|Bank risk-weighted assets          |                              |  |        |      |          | $ | 1,258,409  |        
|                                   |                              |  |        |      |          |   |            |        

22



---



Commonwealth Bancorp, Inc. and Subsidiaries
Average Balance Sheets

|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |   |      |      |      |  
|---------------------------------- | ----------------------------------- | ---------------------------- | ----------------------- | -------------------------------------- | --------- | ------- | --------- | ------- | ------ | -------- | ------ | ---- | ---- | ------- | --------- | -------- | --------- | ------- | --------- | ------- | ------ | -------- | ------ | ------- | ---- | ------- | --------- | - | --------- | ------- | --------- | ------- | ------ | ------- | ------ | - | ---- | ---- | --------- | - | --------- | ------- | --------- | ------- | ------ | ------ | ------ | - | ---- | ---- | ---- | -
|                                  
|                                   |                                     | Quarter Ended June 30,       |                         | Six Months Ended June 30 ,            
|                                   |                                     |                              |                         |                                        |           |         |           |        
|                                   |                                     |                              |                         |                                        |           | 2001    |           | 2000    |        | 2001     |        | 2000
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |     
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      | Average |           |          |           |         |           |         |        |          |        | Average |      |         |           |   |           |         |           |         |        | Average |        |   |      |      |           |   |           |         |           | Average
|(dollars in thousands)             |                                     | Average                      |                         |                                        |           |         |           | Yield / |        | Average  |        |      |      |         |           | Yield /  |           | Average |           |         |        |          |        | Yield / |      | Average |           |   |           |         |           | Yield /
|                                   |                                     | Balance                      |                         | Interest                               |           | Cost    |           | Balance |        | Interest |        | Cost |      | Balance |           | Interest |           | Cost    |           | Balance |        | Interest |        | Cost   
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |  
|Loans receivable:                 
|                                  
|                                  
|                                  
|                                  
|                                   |                                     | Mortgage loans               |                         | $                                      | 756,633   |         |           | $       | 13,951 |          |        |      | 7.40 | %       |           | $        | 876,246   |         |           | $       | 16,049 |          |        |         | 7.37 | %       |           | $ | 794,168   |         |           | $       | 29,466 |         |        |   | 7.48 | %    |           | $ | 875,863   |         |           | $       | 31,945 |        |        |   | 7.33 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     | Consumer loans               |                         |                                        | 389,211   |         |           |         | 8,904  |          |        |      | 9.18 | %       |           |          | 344,857   |         |           |         | 7,861  |          |        |         | 9.17 | %       |           |   | 386,162   |         |           |         | 17,642 |         |        |   | 9.21 | %    |           |   | 335,757   |         |           |         | 15,147 |        |        |   | 9.07 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     | Commercial loans (1)         |                         |                                        | 275,991   |         |           |         | 5,778  |          |        |      | 8.40 | %       |           |          | 202,822   |         |           |         | 4,514  |          |        |         | 8.95 | %       |           |   | 261,782   |         |           |         | 10,684 |         |        |   | 8.23 | %    |           |   | 198,375   |         |           |         | 8,748  |        |        |   | 8.87 | %   
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|                                   |                                     |                              |                         | Total loans receivable                 |           |         | 1,421,835 |         |        |          | 28,633 |      |      |         | 8.08      | %        |           |         | 1,423,925 |         |        |          | 28,424 |         |      |         | 8.03      | % |           |         | 1,442,112 |         |        |         | 57,792 |   |      |      | 8.08      | % |           |         | 1,409,995 |         |        |        | 55,840 |   |      |      | 7.96 | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|Mortgage-backed securities         |                                     |                              | 184,727                 |                                        |           |         | 3,084     |         |        |          | 6.70   | %    |      |         | 259,483   |          |           |         | 4,477     |         |        |          | 6.94   | %       |      |         | 191,324   |   |           |         | 6,475     |         |        |         | 6.82   | % |      |      | 270,314   |   |           |         | 9,327     |         |        |        | 6.94   | %
|                                  
|                                  
|                                  
|                                  
|Investment securities              |                                     |                              | 14,092                  |                                        |           |         | 205       |         |        |          | 5.83   | %    |      |         | 38,169    |          |           |         | 587       |         |        |          | 6.19   | %       |      |         | 14,075    |   |           |         | 410       |         |        |         | 5.87   | % |      |      | 53,312    |   |           |         | 1,630     |         |        |        | 6.15   | %
|                                  
|                                  
|                                  
|                                  
|Other earning assets               |                                     |                              | 37,827                  |                                        |           |         | 588       |         |        |          | 6.23   | %    |      |         | 17,989    |          |           |         | 496       |         |        |          | 11.09  | %       |      |         | 27,888    |   |           |         | 1,024     |         |        |         | 7.40   | % |      |      | 18,145    |   |           |         | 971       |         |        |        | 10.76  | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|Total interest-earning assets (1)  |                                     |                              | 1,658,481               |                                        |           |         | 32,510    |         |        |          | 7.86   | %    |      |         | 1,739,566 |          |           |         | 33,984    |         |        |          | 7.86   | %       |      |         | 1,675,399 |   |           |         | 65,701    |         |        |         | 7.91   | % |      |      | 1,751,766 |   |           |         | 67,768    |         |        |        | 7.78   | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|Noninterest-earning assets         |                                     |                              | 156,569                 |                                        |           |         |           |         |        |          |        |      |      |         | 148,982   |          |           |         |           |         |        |          |        |         |      |         | 157,056   |   |           |         |           |         |        |         |        |   |      |      | 146,729   |  
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |  
|                                   |                                     | Total assets                 |                         | $                                      | 1,815,050 |         |           |         |        |          |        |      |      |         |           | $        | 1,888,548 |         |           |         |        |          |        |         |      |         |           | $ | 1,832,455 |         |           |         |        |         |        |   |      |      |           | $ | 1,898,495 |        
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |  
|                                   | Deposits:                          
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | Demand deposits         |                                        | $         | 773,455 |           |         |        | 4,110    |        |      |      | 2.13    | %         |          | $         | 745,777 |           |         |        | 4,379    |        |         |      | 2.36    | %         |   | $         | 761,492 |           |         |        | 8,452   |        |   |      | 2.24 | %         |   | $         | 737,763 |           |         |        | 8,699  |        |   |      | 2.37 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | Savings deposits        |                                        |           | 221,548 |           |         |        | 1,215    |        |      |      | 2.20    | %         |          |           | 225,194 |           |         |        | 1,238    |        |         |      | 2.21    | %         |   |           | 218,334 |           |         |        | 2,389   |        |   |      | 2.21 | %         |   |           | 223,672 |           |         |        | 2,463  |        |   |      | 2.21 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | Certificates of deposit |                                        |           | 475,760 |           |         |        | 6,230    |        |      |      | 5.25    | %         |          |           | 523,616 |           |         |        | 6,610    |        |         |      | 5.08    | %         |   |           | 485,248 |           |         |        | 12,797  |        |   |      | 5.32 | %         |   |           | 537,681 |           |         |        | 13,413 |        |   |      | 5.02 | %   
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|                                   |                                     |                              |                         | Total deposits                         |           |         | 1,470,763 |         |        |          | 11,555 |      |      |         | 3.15      | %        |           |         | 1,494,587 |         |        |          | 12,227 |         |      |         | 3.29      | % |           |         | 1,465,074 |         |        |         | 23,638 |   |      |      | 3.25      | % |           |         | 1,499,116 |         |        |        | 24,575 |   |      |      | 3.30 | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|                                   | Notes payable and other borrowings:
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | FHLB Advances           |                                        |           | 124,887 |           |         |        | 1,974    |        |      |      | 6.34    | %         |          |           | 128,473 |           |         |        | 1,949    |        |         |      | 6.10    | %         |   |           | 142,047 |           |         |        | 4,436   |        |   |      | 6.30 | %         |   |           | 123,314 |           |         |        | 3,646  |        |   |      | 5.95 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | Repurchase agreements   |                                        |           | 19,231  |           |         |        | 321      |        |      |      | 6.70    | %         |          |           | 69,121  |           |         |        | 1,024    |        |         |      | 5.96    | %         |   |           | 26,657  |           |         |        | 880     |        |   |      | 6.66 | %         |   |           | 82,747  |           |         |        | 2,461  |        |   |      | 5.98 | %   
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              | Other borrowings        |                                        |           | 19,268  |           |         |        | 185      |        |      |      | 3.85    | %         |          |           | 14,942  |           |         |        | 187      |        |         |      | 5.03    | %         |   |           | 17,292  |           |         |        | 367     |        |   |      | 4.28 | %         |   |           | 12,015  |           |         |        | 301    |        |   |      | 5.04 | %   
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|                                   |                                     |                              |                         | Total borrowings                       |           |         | 163,386   |         |        |          | 2,480  |      |      |         | 6.09      | %        |           |         | 212,536   |         |        |          | 3,160  |         |      |         | 5.98      | % |           |         | 185,996   |         |        |         | 5,683  |   |      |      | 6.16      | % |           |         | 218,076   |         |        |        | 6,408  |   |      |      | 5.91 | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|Total interest-bearing liabilities |                                     |                              | 1,634,149               |                                        |           | $       | 14,035    |         |        |          | 3.44   | %    |      |         | 1,707,123 |          |           | $       | 15,387    |         |        |          | 3.63   | %       |      |         | 1,651,070 |   |           | $       | 29,321    |         |        |         | 3.58   | % |      |      | 1,717,192 |   |           | $       | 30,983    |         |        |        | 3.63   | %
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |   |           |         |           |         |        |        |        |  
|Noninterest-bearing liabilities    |                                     |                              | 21,069                  |                                        |           |         |           |         |        |          |        |      |      |         | 31,420    |          |           |         |           |         |        |          |        |         |      |         | 21,155    |   |           |         |           |         |        |         |        |   |      |      | 30,515    |  
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |  
|                                   |                                     | Total liabilities            |                         |                                        | 1,655,218 |         |           |         |        |          |        |      |      |         |           |          | 1,738,543 |         |           |         |        |          |        |         |      |         |           |   | 1,672,225 |         |           |         |        |         |        |   |      |      |           |   | 1,747,707 |        
|                                  
|                                  
|                                  
|                                  
|Shareholders equity               |                                     |                              | 159,832                 |                                        |           |         |           |         |        |          |        |      |      |         | 150,005   |          |           |         |           |         |        |          |        |         |      |         | 160,230   |   |           |         |           |         |        |         |        |   |      |      | 150,788   |  
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |  
|                                   |                                     | Total liabilities and equity |                         | $                                      | 1,815,050 |         |           |         |        |          |        |      |      |         |           | $        | 1,888,548 |         |           |         |        |          |        |         |      |         |           | $ | 1,832,455 |         |           |         |        |         |        |   |      |      |           | $ | 1,898,495 |        
|                                   |                                     |                              |                         |                                        |           |         |           |         |        |          |        |      |      |         |           |          |           |         |           |         |        |          |        |         |      |         |           |   |           |         |           |         |        |         |        |   |      |      |           |  
|Yield on interest earning assets   |                                     |                              |                         |                                        |           |         |           |         |        |          | 7.86   | %    |      |         |           |          |           |         |           |         |        |          | 7.86   | %       |      |         |           |   |           |         |           |         |        |         | 7.91   | % |      |      |           |   |           |         |           |         |        |        | 7.78   | %
|                                  
|                                  
|                                  
|                                  
|Cost of supporting funds           |                                     |                              |                         |                                        |           |         |           |         |        |          | 3.39   | %    |      |         |           |          |           |         |           |         |        |          | 3.56   | %       |      |         |           |   |           |         |           |         |        |         | 3.53   | % |      |      |           |   |           |         |           |         |        |        | 3.56   | %
|                                  
|                                  
|                                  
|                                  
|Net interest margin:              
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              |                         | Taxable equivalent basis (1)           |           |         |           |         |        | $        | 18,475 |      |      |         | 4.47      | %        |           |         |           |         |        | $        | 18,597 |         |      |         | 4.30      | % |           |         |           |         |        | $       | 36,380 |   |      |      | 4.38      | % |           |         |           |         |        | $      | 36,785 |   |      |      | 4.22 | %
|                                  
|                                  
|                                  
|                                  
|                                   |                                     |                              |                         | Without taxable equivalent adjustments |           |         |           |         |        | $        | 18,287 |      |      |         | 4.42      | %        |           |         |           |         |        | $        | 18,482 |         |      |         | 4.27      | % |           |         |           |         |        | $       | 36,011 |   |      |      | 4.33      | % |           |         |           |         |        | $      | 36,532 |   |      |      | 4.19 | %

|      |  |                                                                                                                                                                                                                                                                                      
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | Interest and yields were calculated on a taxable equivalent basis, using a 35% tax rate and the actual number of days in the periods.
Loan fees, as well as nonaccrual loans and their related income effect, have been included in the calculation of average interest
yields/rates.



|(1) |  | Exclusive of the $0.5 million pre-tax charge in the first quarter of 2001 relating to a disputed interest rate on a loan originated in the 1970s, the taxable equivalent yield for the six months ended
June 30, 2001 on commercial loans, total interest-earning assets, and taxable equivalent net interest margin, would have been 8.60%, 7.97% and 4.44%, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Comparison of Results of Operations for the Quarter and Six Months Ended June
30, 2001 and 2000.

General.Net income was $4.1 million, or $0.38 per common share on a
diluted basis, for the second quarter of 2001, compared to net income of $3.8
million, or $0.35 per common share on a diluted basis, for the second quarter
of 2000.

For the six months ended June 30, 2001, net income was $5.4 million, or
$0.50 per common share on a diluted basis, compared to net income of $7.2
million, or $0.65 per common share on a diluted basis, for the six months ended
June 30, 2000.

The results for the first six months of 2001 were affected by:



| |  |  | A $2.3 million pre-tax charge associated with the sale of
Commonwealths mortgage loan production offices and the outsourcing
of its mortgage servicing function;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A $0.7 million pre-tax charge relating to the retirement of
Commonwealths Chief Executive Officer; and                                                          
|
| |  |  | A $0.5 million pre-tax charge relating to a disputed interest
rate on a loan originated in the 1970s.                                                           

Exclusive of these three items, net income for the first six months of 2001
would have been $8.1 million, or $0.74 per share on a diluted basis.

Net interest income.Net interest income was $18.3 million in the second
quarter of 2001, compared to $18.5 million in the second quarter of 2000.

For the six months ended June 30, 2001, net interest income was $36.0
million, versus $36.5 million for the comparable period in 2000. The decrease
for the six months ended June 30, 2001 was primarily attributable to a $0.5
million charge relating to a disputed interest rate on a loan originated in the
1970s.

Average interest-earning assets totaled $1.7 billion for both the second
quarter and six months ended June 30, 2001. This compared to $1.7 billion and
$1.8 billion for the second quarter and six months ended June 30, 2000,
respectively. The decreases in average interest-earning assets were due
primarily to decreases in the Companys mortgage loan, mortgage-backed
securities and investment securities portfolios offset, in part, by increases
in commercial and consumer loans.

The net interest margin on a fully taxable equivalent basis was 4.47% in
the second quarter of 2001, compared to 4.30% in the second quarter of 2000.
The increase was primarily attributable to a 0.19% decrease in the cost of
interest-bearing liabilities. The decrease in the cost of interest-bearing
liabilities was primarily related to a favorable change in funding mix,
involving an increase in lower costing demand deposits, and a decrease in
higher costing certificates and wholesale borrowings.

For the six months ended June 30, 2001, the net interest margin on a fully
taxable equivalent basis was 4.38%, versus 4.22% in the comparable 2000 period.
The increase was primarily attributable to a 0.13% increase in the yield on
interest-earning assets as a result of an increase in higher yielding consumer
and commercial loans, and a decrease in lower yielding mortgage loans and
securities. Also contributing to the increase in net interest margin was a
0.05% decrease in the cost of interest-bearing liabilities. The decrease in
the cost of interest-bearing liabilities was primarily related to the same
factors responsible for the decrease in the second quarter of 2001. The net
interest margin for the first six months of 2001 was impacted by the $0.5
million charge relating to a disputed interest rate on a loan originated in the
1970s. Exclusive of this item, the net interest margin on a fully taxable
equivalent basis would have been 4.44% for the six months ended June 30, 2001.

24



---



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED

Provision for loan losses.Provision for loan losses totaled $2.3 million
and $3.8 million in the second quarter and six months ended June 30, 2001,
respectively. The provision for loan losses totaled $1.2 million and $2.3
million in the second quarter and six months ended June 30, 2000, respectively.
At June 30, 2001, the allowance for loan losses totaled $12.2 million, or
0.87% of loans, compared to $11.1 million, or 0.78% of loans, at December 31,
2000. The increase in the allowance for loan losses reflects Commonwealths
on-going strategy to increase consumer and commercial lending, while
de-emphasizing mortgage lending. Consumer and commercial loans generally
involve greater credit risk than mortgage loans. At June 30, 2001, consumer
and commercial loans represented 49% of total loans, compared to 44% at
December 31, 2000.

Noninterest income.Noninterest income totaled $5.1 million in the second
quarter of 2001, compared to $5.5 million in the second quarter of 2000. The
decrease reflected a $0.7 million decrease in the net gain on sale of mortgage
loans, which was primarily attributable to Commonwealths restructuring of its
residential mortgage banking division. The decrease was partially offset by a
$0.4 million increase in deposit fees and related income relating to an
increase in transaction accounts.

Noninterest income was $10.6 million for the first six months of 2001,
compared to $10.4 million for the same 2000 period. The increase was primarily
attributable to a $0.8 million increase in deposit fees and related income
relating to an increase in transaction accounts. The increase was partially
offset by a $0.5 million decrease in the net gain on sale of mortgage loans,
which was primarily attributable to Commonwealths restructuring of its
residential mortgage banking division.

Noninterest expense.Noninterest expense was $15.7 million in the second
quarter of 2001, compared to $17.6 million in the second quarter of 2000. The
decrease was primarily attributable to a reduction in mortgage banking
expenses. Recurring noninterest expense excluding amortization of intangible
assets totaled 61.9% of recurring noninterest income and net interest income on
a fully taxable equivalent basis in the second quarter of 2001. This compared
to 67.9% in the second quarter of 2000.

Noninterest expense was $35.6 million for the six months ended June 30,
2001, compared to $34.7 million for the same period in 2000. The increase was
primarily attributable to the $2.3 million charge associated with the sale of
the mortgage loan production offices and the outsourcing of the mortgage
servicing function, and the $0.7 million charge relating to the retirement of
Commonwealths Chief Executive Officer. Exclusive of these items, noninterest
expense would have been $32.6 million for the first six months of 2001, a
decrease of 6% compared to the first six months of 2000. The decrease was
primarily due to a reduction in mortgage banking expenses. Recurring
noninterest expense excluding amortization of intangible assets totaled 63.7%
of recurring noninterest income and net interest income on a fully taxable
equivalent basis for the six months ended June 30, 2001. This compared to
68.5% for the same period in 2000.

Provision for income taxes.Provision for income taxes was $1.4 million,
or 25% of income before income taxes in the second quarter of 2001, compared to
$1.4 million, or 26.5%, in the second quarter of 2000. For the first six
months of 2001, provision for income taxes was $1.8 million, or 25% of income
before income taxes, compared to $2.6 million, or 26.5%, in the first six
months of 2000. The decrease in the effective tax rate in the second quarter
and first six months of 2001, relative to the comparable periods in 2000, was
primarily attributable to lower pre-tax income for the six months ended June
30, 2001, which resulted in a higher relative percentage of tax-exempt income
to total income.

25



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Item 3. Quantitative and Qualitative
Disclosures About Market Risk.

Commonwealth uses simulation models to analyze the estimated effects on
net interest income under multiple interest rate scenarios, including increases
and decreases in interest rates amounting to 100, 200, and 300 basis points.
Each scenario is modeled for a change in net interest income over a two year
period. Similar simulation models are
prepared to analyze the Companys net asset value, which is the present
value of the cash flows generated by the Companys assets minus the present
value of the cash flows generated by the Companys liabilities, plus or minus
the net cash flows produced by off-balance sheet contracts. At June 30, 2001,
the Companys income simulation model indicates net interest income would
increase by 0.15% over a two year period if interest rates increased by 200
basis points. The model projects that net interest income would decrease by
7.66% over a two year period if rates decreased by 200 basis points. The
anticipated changes in the level of net interest income and net asset value
over the various scenarios were within limits established by the
Asset/Liability Committee.

Since there are limitations inherent in any methodology used to estimate
the exposure to changes in market interest rates, this analysis is not intended
to be a forecast of the actual effect of a change in market interest rates on
the Company. Net asset value is significantly impacted by the estimated effect
of prepayments on the value of loans and mortgage-backed securities. Further,
this analysis is based on the Companys assets, liabilities, and
off-balance-sheet instruments at June 30, 2001 and does not contemplate any
actions the Company might undertake in response to changes in market interest
rates.

Management believes that the assumptions utilized to evaluate the
vulnerability of the Companys operations to changes in interest rates
approximate actual experience and considers them to be reasonable. However,
the interest rate sensitivity of the Companys assets and liabilities could
vary substantially if different assumptions were used or actual experience
differs from the historical experience on which they are based.

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PART II OTHER INFORMATION

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1. |  | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|        |  | There are no material legal proceedings, other than as previously
reported in the Companys 2000 Annual Report on Form 10-K, to which the
Company or any of its subsidiaries is a party, or to which any of their
property is subject, other than proceedings routine to the business of
the Company and its subsidiaries.                                                                                                                                                                                                                                                                                                                                           
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|Item 2. |  | Changes in Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|        |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Item 3. |  | Defaults Upon Senior Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|        |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|        |  | The Company held its Annual Meeting of Stockholders on April 17, 2001.
The results of the vote on matters submitted to stockholders at the
meeting were previously reported in the Companys Form 10-Q for the
quarter ended March 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                         
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|Item 5. |  | Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|        |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Item 6. |  | Exhibits and Reports on Form 8-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|        |  | a) Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|        |  | b) On April 2, 2001, the Company filed a Current Report on Form 8-K to
report under Item 5, the completion of the previously announced sale of
its mortgage loan production offices. On April 17, 2001, the Company
filed a Current Report on Form 8-K to report under Item 5, its earnings
for the first quarter of 2001. On April 24, 2001, the Company filed a
Current Report on Form 8-K to report under Item 5, the completion of its
previously announced stock repurchase program and the commencement of a
new stock repurchase program. On June 19, 2001, the Company filed a
Current Report on Form 8-K to report under Item 5, its declared cash
dividend.

27



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SIGNATURES

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

|                      |  |                                                                                                                   
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------
|                     
|                      |  | COMMONWEALTH BANCORP, INC.                                                                                        
|                     
|                     
|                     
|DATE: August 13, 2001 |  | /s/ Patrick J. Ward                                                                                               
|                      |  |                                                                                                                   
|                      |  | Patrick J. Ward
President and Chief Executive Officer
(Principal Executive Officer)                               
|                     
|                     
|                     
|DATE: August 13, 2001 |  | /s/ Charles M. Johnston                                                                                           
|                      |  |                                                                                                                   
|                      |  | Charles M. Johnston
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

28