SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                FORM 10-K

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

      For the Fiscal Year Ended March 31, 2001                OR

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

                      Commission File Number: 0-26993

                       EVERTRUST FINANCIAL GROUP, INC.
------------------------------------------------------------------------------
         (Exact name of registrant as specified in its charter)

        Washington                                             91-1613658
----------------------------------------------               ---------------
(State or other jurisdiction of incorporation                I.R.S. Employer
or organization)                                               I.D. Number)

2707 Colby Avenue, Suite 600, Everett, Washington                 98201
-------------------------------------------------            ---------------
  (Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code:          (425) 258-3645
                                                             ---------------

Securities registered pursuant to Section 12(b) of the Act:        None
                                                             ---------------

Securities registered pursuant
to Section 12(g) of the Act:             Common Stock, no par value per share
                                         ------------------------------------
                                                    (Title of Class)

     Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for 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
                    ---        ---

     Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-K contained herein, and no disclosure will be contained, to
the best of the Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K.
                              ---
     As of June 8, 2001, there were issued and outstanding 6,914,919 shares of
the Registrant's Common Stock, which are listed on the Nasdaq National Market
System under the symbol "EVRT."  Based on the average of the high/low price
for the Common Stock on June 8, 2001, the aggregate value of the Common Stock
outstanding held by nonaffiliates of the registrant was $102,202,503
(6,914,919 shares at $14.78 per share).  For purposes of this calculation,
Common Stock held by officers and directors of the Registrant and the
Registrant's Employee Stock Ownership Plan and Trust are considered
nonaffiliates.

                   DOCUMENTS INCORPORATED BY REFERENCE

     1.   Portions of Definitive Proxy Statement for the 2001 Annual Meeting
          of Stockholders (Part III).

<PAGE>



                       EVERTRUST FINANCIAL GROUP, INC.
                       2001 ANNUAL REPORT ON FORM 10-K
                              TABLE OF CONTENTS

                                                                        Page
                                                                        ----
PART I..................................................................    1
     Item 1. Business...................................................    1
       General..........................................................    1
       Bank Name Change and Merger......................................    1
       Market Area......................................................    2
       Lending Activities...............................................    2
       Investment Activities............................................   19
       Deposit Activities and Other Sources of Funds....................   22
       Subsidiary Activities............................................   27
       Charitable Foundation............................................   28
       Regulation.......................................................   28
       Taxation.........................................................   35
       Competition......................................................   37
       Personnel........................................................   37
     Item 2. Properties.................................................   37
     Item 3. Legal Proceedings..........................................   37
     Item 4. Submission of Matters to a Vote of Security Holders........   37
PART II.................................................................   38
     Item 5. Market for the Registrant's Common Equity and Related
       Stockholder Matters..............................................   38
     Item 6. Selected Financial Data ...................................   39
     Item 7. Management's Discussion and Analysis of Financial
       Condition and Results of Operations .............................   41
       General..........................................................   41
       Forward-Looking Statements.......................................   41
       Operating Strategy...............................................   41
       Comparison of Financial Condition at March 31, 2001 and 2000.....   42
       Comparison of Operating Results for Years Ended March 31, 2001
         and 2000.......................................................   43
       Comparison of Operating Results for Years Ended March 31, 2000
         and 1999.......................................................   45
       Average Balances, Interest and Average Yields/Cost...............   47
       Rate/Volume Analysis.............................................   48
       Yields Earned and Rates Paid.....................................   49
       Asset and Liability Management and Market Risk...................   49
       Liquidity and Capital Resources..................................   51
       Impact of Accounting Pronouncements and Regulatory Policies......   52
       Effect of Inflation and Changing Prices..........................   53
     Item 7A. Quantitative and Qualitative Disclosures About Market
       Risk.............................................................   53
     Item 8. Financial Statements and Supplementary Data................   53
     Item 9. Changes in and Disagreements with Accountants on
       Accounting and Financial Disclosure..............................   92
PART III................................................................   92
     Item 10. Directors and Executive Officers of the Registrant........   92
     Item 11. Executive Compensation....................................   93
     Item 12. Security Ownership of Certain Beneficial Owners and
       Management.......................................................   93
     Item 13. Certain Relationships and Related Transactions............   94
PART IV.................................................................   94
     Item 14. Exhibits, Financial Statement Schedules, and Reports on
       Form 8-K.........................................................   94

<PAGE>


                              PART I

Item 1.  Business
-----------------

General

     EverTrust Financial Group,  Inc. ("EverTrust" or the "Company"), a
Washington state corporation, is the successor to Mutual Bancshares, a mutual
holding company, which converted to stock form on September 30, 1999
("Conversion").  The Company replaced Mutual Bancshares as the holding company
for EverTrust Bank (formerly, Everett Mutual Bank, and referred to herein as
"EverTrust  Bank" or the "Bank"), a Washington chartered stock savings bank;
I-Pro, Inc., a Washington corporation; and Mutual Bancshares Capital Inc., a
Washington corporation.   In connection with the Conversion in September 1999,
the Company issued 8,596,250 shares to the public.  In April 2000, the Company
elected to become a financial holding company pursuant to regulations of the
Board of Governors of the Federal Reserve ("Federal Reserve") issued in
connection with the enactment of the Gramm-Leach-Bliley Financial Services
Modernization Act of 1999.  The Federal Reserve declared this election to be
effective May 12, 2000.  For further information regarding the Company's
financial holding company election, see "Regulation -- The Company."

     At March 31, 2001, the Company had total assets of $602.4 million, total
deposits of $397.6 million and total equity of $120.1 million.  The Company's
business activities are conducted primarily by EverTrust Bank, whose
operations are enhanced by the activities and operations of the Company's
other two subsidiaries:  I-Pro, Inc. and Mutual Bancshares Capital, Inc.
Accordingly the information regarding the Company's business set forth in this
report, including consolidated financial statements and related data, relates
primarily to the Bank.

     EverTrust Bank was formed as a federally chartered savings institution in
1916 and converted to a Washington chartered mutual savings bank in 1987.  In
1993, the Bank became a stock entity in connection with its mutual holding
company reorganization in 1993.  The Bank's deposits are insured by the
Federal Deposit Insurance Corporation ("FDIC") up to applicable legal limits
under the Bank Insurance Fund ("BIF").  The Bank is regulated by the
Washington Department of Financial Institutions, Division of Banks
("Division") and the FDIC.

     EverTrust Bank is a community oriented savings bank dedicated to
financing residential related and commercial real estate properties and
providing quality customer service.  The Bank's principal business is
attracting deposits from the general public and using those funds to originate
residential (including multi-family) mortgage loans as well as commercial real
estate and construction loans.

Bank Name Change and Merger

     In December 2000, the Company announced a name change for Everett Mutual
Bank.  Effective January 1, 2001, Everett Mutual Bank began operating as
EverTrust Bank, a change in name to establish an identity consistent with
EverTrust Financial as the Company expands into new markets outside of
Snohomish County.  The new name is being used throughout the organization,
including the Bank's new Bellevue, Washington office as well as for the
recently opened commercial mortgage banking group office in Tacoma,
Washington.

     Also in December 2000, the Company announced that one of its
subsidiaries, Commercial Bank of Everett, would merge into EverTrust Bank
(then Everett Mutual Bank).  The merger was effective on February 1, 2001, and
the  Bank's new Commercial Banking Group was established.  The merger
eliminated a second set of regulatory reporting, streamlined internal
operations and builds on the combined strengths of each bank.  In addition,
the merger provides increased lending capacity, allowing EverTrust Bank to be
more competitive in both commercial business and real estate lending.

                                      1

<PAGE>




Market Area

     The Bank conducts the majority of its lending and deposit operations out
of 12 full service offices in Snohomish County, located in Northwest
Washington, and one loan production office in King County.  Snohomish County
is located north of King County (Seattle) and south of Skagit County along the
I- 5 corridor.  Snohomish County, the state's third largest county covering
2,098 square miles, has an estimated population of 583,000 for a density of
278 persons per square mile.  Everett, the largest city in Snohomish County,
is the county seat and serves as the county's economic and cultural center.
Everett, a port city, is located approximately 30 miles north of Seattle.

     In December 2000, the Company established the EverTrust Financial Center
in downtown Bellevue, Washington.  From this location, the Bank will serve
East King County as well as Seattle and offers an expanded line of financial
products and services including enhanced jumbo home loan programs, commercial
real estate loans, private banking, and business banking services.  The Bank's
commercial mortgage banking group provides portfolio and secondary market
products from commercial loan origination offices located in Tacoma, Bellevue,
Seattle and Everett.

     For additional information regarding the Company's and the Bank's
offices, see "Item 2.  Properties" and Note  6 of the Notes to Consolidated
Financial Statements included in Item 8 of this Form 10-K.

Lending Activities

     General.  Historically, the principal lending activity of the Bank
consisted of the origination of loans secured by first mortgages on
owner-occupied, one- to- four family residences and loans for the construction
of one- to- four family residences.  In recent years, EverTrust Bank has
increased its origination of loans secured by multi-family properties,
commercial real estate loans and construction and land development loans.  At
March 31, 2001, EverTrust Bank's total loans were $483.9 million, including
approximately $794,000 of loans held for sale.

     The Bank's internal loan policy limits the maximum amount of loans to one
borrower to 15% of its capital.  At March 31, 2001, the maximum amount which
EverTrust Bank could have lent to any one borrower and the borrower's related
entities was approximately $12.1 million under its policy.  At March 31, 2001,
EverTrust Bank had loans to one builder/developer (including loans for
construction, land development and permanent financing) with an aggregate
committed balance in excess of this amount which were specifically approved as
policy exceptions by the Board of Directors: the borrower had $16.7 million
committed, of which $13.5 million was outstanding, representing 21.0% and
17.0% of EverTrust Bank's total capital of $80.5 million, respectively.  All
loans to the borrower  were performing according to their terms at March 31,
2001.  Loans in excess of 25% of EverTrust Bank's capital are participated to
the Company on a last-in, first-out basis.  There were no participations with
the Company outstanding as of March 31, 2001, since no amounts outstanding to
any one borrower exceeded 25% of EverTrust Bank's capital.

                                      2

<PAGE>


<TABLE>

     Loan Portfolio Analysis.  The following table sets forth the composition of the Bank's consolidated
loan portfolio by type of loan as of the dates indicated.
                                                          At March 31,
                     --------------------------------------------------------------------------------------
                           2001             2000             1999              1998             1997
                     ----------------  ---------------  ---------------   ---------------   ---------------
                     Amount   Percent  Amount  Percent  Amount  Percent   Amount  Percent   Amount  Percent
                     -------  -------  ------  -------  ------  -------   ------  -------   ------  -------
                                                       (Dollars in thousands)
<S>                <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Real Estate:
 One- to- four
  family
  residential(1)...$ 67,705  12.11%  $ 70,042  14.73%  $101,649  26.61%  $ 95,305  26.73%  $ 94,612  29.40%
 One- to- four
  family construc-
  tion and land
  development......  40,729   7.28     37,266   7.84     34,928   9.14     36,444  10.23     27,226   8.46
 Income property:
  Commercial
   construction....  25,475   4.56     23,871   5.02     12,491   3.27      4,620   1.30      1,624   0.50
  Commercial real
   estate.......... 168,199  30.08    128,892   27.10    72,573  19.00     76,121  21.36     70,042  21.76
  Multi-family
   construction....  62,055  11.10     32,304    6.79    14,012   3.67      7,153   2.01      2,323   0.72
  Multi-family
   residential..... 128,846  23.04    136,727   28.75   115,972  30.35    111,975  31.42    109,003  33.87
Consumer:
 Home equity and
  other mortgages..  25,756   4.61     23,301    4.90    18,601   4.87     15,866   4.45     12,187   3.79
 Credit cards......   2,426   0.43      1,375    0.29       488   0.13        124   0.03         --     --
 Other installment
  loans............   6,219   1.11      5,281    1.11     2,399   0.63      2,560   0.72      2,647   0.82
Business loans.....  31,707   5.68     16,494    3.47     8,949   2.34      6,226   1.75      2,181   0.68
                   -------- ------   --------  ------  -------- ------   -------- ------   -------- ------
    Total loans.... 559,117 100.00%   475,553  100.00%  382,062 100.00%   356,394 100.00%   321,845 100.00%
                            ======             ======           ======            ======            ======
Less:
 Undisbursed loan
   proceeds........ (63,888)           (49,460)          (28,183)          (22,563)           (8,526)
 Deferred loan fees
   and other.......  (3,879)            (3,493)           (3,239)           (3,278)           (3,243)
 Reserve for loan
   losses..........  (7,439)            (6,484)           (5,672)           (4,897)           (4,509)
                   --------           --------          --------          --------          --------
                    483,911            416,116           344,968           325,656           305,566
Loans held for
 sale..............    (794)                --           (29,641)          (13,705)          (12,432)
                   --------           --------          --------          --------          --------
Loans receivable,
 net.............. $483,117           $416,116          $315,327          $311,951          $293,134
                   ========           ========          ========          ========          ========
------------
(1)  Includes owner/builder construction/permanent loans of $6.4 million, $6.0 million, $5.5 million,
     $8.4 million and $5.3 million at March 31, 2001, 2000, 1999, 1998 and 1997, respectively.

</TABLE>




     Residential One- to- Four Family Lending.  At March 31, 2001, $67.7
million of the Bank's loan portfolio consisted of permanent loans secured by
one- to- four family residences, including approximately $794,000 of loans
held for sale.  This amount represents 12.1% of the Bank's total loans.

     EverTrust Bank originates both fixed-rate loans and adjustable-rate
loans.  Generally, 30 year fixed-rate loans are originated to meet the
requirements for sale in the secondary market to Federal National Mortgage
Association ("Fannie Mae"), however, from time to time, a portion of these
fixed-rate loans originated by EverTrust Bank may be retained in EverTrust
Bank's loan portfolio to meet EverTrust Bank's asset/liability management
objectives.

     At March 31, 2001, $40.3  million, or 62.5%, of the Bank's one- to- four
family loan portfolio consisted of fixed rate one- to- four family mortgage
loans, both held for sale and held for investment.  EverTrust Bank also offers
adjustable rate mortgage loans at rates and terms competitive with market
conditions.  All of EverTrust Bank's adjustable rate mortgage loans are
retained in its loan portfolio and not with a view toward sale in the
secondary market.

     EverTrust Bank offers several adjustable rate mortgage products which
adjust annually after an initial period ranging from one to seven years.
Contractual annual adjustments generally range from 2% to unlimited, subject
to a general overall limitation of 6%.  These adjustable rate mortgage
products have generally utilized the weekly average yield on one year U.S.
Treasury securities adjusted to a constant maturity of one year plus a margin
of  2.5% to 3.5%.  Adjustable rate mortgage loans held in EverTrust Bank's
portfolio do not permit negative amortization of principal and

                                      3

<PAGE>



carry no prepayment restrictions.   Borrower demand for adjustable rate
mortgage loans versus fixed-rate mortgage loans is a function of the level of
interest rates, the expectations of changes in the level of interest rates and
the difference between the initial interest rates and fees charged for each
type of loan.  The relative amount of fixed-rate mortgage loans and adjustable
rate mortgage loans that can be originated at any time is largely determined
by the demand for each in a competitive environment.  At March 31, 2001, $24.2
million, or 37.5%, of the Bank's one- to- four family loan portfolio consisted
of adjustable rate mortgage loans.

     The retention of adjustable rate mortgage loans in EverTrust Bank's loan
portfolio helps reduce EverTrust Bank's exposure to changes in interest rates.
There are, however, credit risks resulting from the potential of increased
interest to be paid by the customer due to increases in interest rates.  It is
possible that, during periods of rising interest rates, the risk of default on
adjustable rate mortgage loans may increase as a result of repricing and the
increased costs to the borrower.  Furthermore, because the adjustable rate
mortgage loans originated by EverTrust Bank may provide, as a marketing
incentive, for initial rates of interest below the rates which would apply
were the adjustment index used for pricing initially, these loans are subject
to increased risks of default or delinquency.  EverTrust Bank attempts to
reduce the potential for delinquencies and defaults on adjustable rate
mortgage loans by qualifying the borrower based on the borrower's ability to
repay the loan assuming that the maximum interest rate that could be charged
at the first adjustment period remains constant during the loan term.  Another
consideration is that although adjustable rate mortgage loans allow EverTrust
Bank to increase the sensitivity of its asset base due to changes in the
interest rates, the extent of this interest sensitivity is limited by the
periodic and lifetime interest rate adjustment limits.  Because of these
considerations, EverTrust Bank has no assurance that yields on adjustable rate
mortgage loans will be sufficient to offset increases in EverTrust Bank's cost
of funds.

     While fixed-rate, single-family residential mortgage loans are normally
originated with 15 to 30 year terms, such loans typically remain outstanding
for substantially shorter periods.  This is because borrowers often prepay
their loans in full upon sale of the property pledged as security or upon
refinancing the original loan.  In addition, substantially all mortgage loans
in EverTrust Bank's loan portfolio contain due-on-sale clauses providing that
the Bank may declare the unpaid amount due and payable upon the sale of the
property securing the loan.  Typically, EverTrust Bank enforces these due-on-
sale clauses to the extent permitted by law and as business judgment dictates.
Thus, average loan maturity is a function of, among other factors, the level
of purchase and sale activity in the real estate market, prevailing interest
rates and the interest rates payable on outstanding loans.

     The Bank requires fire and extended coverage casualty insurance to be
maintained on all of its real estate secured loans.  EverTrust Bank is not
able to obtain and generally does not require earthquake insurance because of
competitive market factors.

     EverTrust Bank's lending policies generally limit the maximum loan-to-
value ratio on mortgage loans secured by owner-occupied properties to 95% of
the lesser of the appraised value or the purchase price.  However, the Bank
usually obtains private mortgage insurance on the portion of the principal
amount that exceeds 80% of the appraised value of the security property.  The
maximum loan-to-value ratio on mortgage loans secured by non-owner-occupied
properties is generally 75%, or 70% for loans originated for sale in the
secondary market to Fannie Mae.

     Construction and Land Development Lending.  EverTrust Bank has an
established market niche as an originator of construction and land development
loans.  Competition from other financial institutions has increased in recent
periods and the Bank expects that its margins on construction loans may be
reduced in the future.

     The Bank currently originates two types of residential construction
loans:   speculative construction loans, and owner/builder loans.  To a
lesser, but increasing extent, EverTrust Bank also originates construction
loans for the development of multi-family and commercial properties.  Annual
originations of construction and land development loans have been $56.4,
million $29.5 million and $32.1 million for the three years ended March 31,
2001, 2000 and 1999, respectively.  Subject to market conditions, EverTrust
Bank intends to continue to emphasize its construction lending activities.

                                    4

<PAGE>



     At March 31, 2001, the composition of the Bank's construction and land
development loan portfolio was as follows:

                                            Outstanding    Percent of
                                              Balance        Total
                                              -------        -----
                                             (Dollars in thousands)

     Speculative construction...............  $ 13,395        10.2%
     Owner/builder construction.............     6,371         4.9
     Multi-family construction..............    62,055        47.4
     Land development.......................    23,516        18.0
     Commercial real estate construction....    25,475        19.5
                                              --------       -----
        Total...............................  $130,812       100.0%
                                              ========       =====
     Speculative construction loans are made to home builders and are termed
"speculative" because the home builder does not have, at the time of loan
origination, a signed contract with a home buyer who has a commitment for
permanent financing with either EverTrust Bank or another lender for the
finished home.  The home buyer may be identified either during or after the
construction period, with the risk that the builder will have to service the
debt on the speculative construction loan and finance real estate taxes and
other carrying costs of the completed home for a significant time after the
completion of construction until the home buyer is identified.  The Bank lends
to approximately 30 builders located in its primary market area, each of which
generally have two to 25 speculative loans from the Bank during a 12 month
period, with approximately five to six loans outstanding at any one time.
Rather than originating lines of credit to home builders to construct several
homes at once, EverTrust Bank generally originates and underwrites a separate
loan for each home.  Speculative construction loans are originated for a term
of 12 months, with a variable interest rate tied to the prime rate as
published in The Wall Street Journal, plus a margin ranging from 0% to 2%, and
with a loan-to-value ratio of no more than 80% of the appraised estimated
value of the completed property.  During this 12 month period, the borrower is
required to make monthly payments of accrued interest on the outstanding loan
balance.  At March 31, 2001, speculative construction loans totaled $13.4
million, or 10.2%, of the total construction loan portfolio. At March 31,
2001, the Bank had two borrowers each with aggregate outstanding speculative
loan balances of more than $1.0 million, all of which were performing
according to their respective terms and the largest of which amounted to $2.5
million.

     Owner/builder construction loans are originated to the home owner rather
than the home builder as a single loan that automatically converts to a
permanent loan at the completion of construction.  The construction phase of a
owner/builder construction loan generally lasts six to 12 months.  Borrowers
have three financing options:

     .    they may opt for a fixed interest rate during the construction
          period, with the rate on the permanent loan set at the completion
          of construction based on the required net yield for Fannie Mae
          loans, plus a margin;

     .    the rate on the construction and permanent loans will be set at
          the start of construction based on the required net yield for
          Fannie Mae loans, plus a margin and an additional fixed fee based on
          the loan amount; or,

     .    the borrower may choose an adjustable rate mortgage option during
          the construction and permanent phases.

     Loan-to-value ratios under all three options are up to 80%, or up to 90%
with private mortgage insurance, of the appraised estimated value of the
completed property or cost, whichever is less.  During the construction
period, the borrower is required to make monthly payments of accrued interest
on the outstanding loan balance.  At March 31, 2001, owner/builder
construction loans totaled $6.4 million, or 4.9%, of the total construction
loan portfolio.  At March 31,

                                      5

<PAGE>



2001, the largest outstanding owner/builder construction loan had an
outstanding balance of approximately $600,000 and was performing according to
its terms.

     For over 15 years, EverTrust Bank has originated loans to local real
estate developers for the purpose of developing residential subdivisions,
which includes installing roads, sewers, water and other utilities for plats
generally ranging from 10 to 50 lots.  At March 31, 2001, subdivision
development loans totaled $23.5 million, or 18.0% of construction and land
development loans receivable.  Land development loans are secured by a lien on
the property and made for a period of one to three years with generally
variable interest rates tied to the prime rate as published in The Wall Street
Journal, plus a margin ranging from 0% to 3%, and are made with loan-to-value
ratios not exceeding 75%.  Monthly interest payments are required during the
term of the loan.  Land development loans are structured so that the Bank is
repaid in full upon the sale by the borrower of approximately 80% of the
subdivision lots.  Substantially all of EverTrust Bank's land development
loans are secured by property located in its primary market area.  In
addition, in the case of a corporate borrower, EverTrust Bank also obtains
personal guarantees from corporate principals and reviews their personal
financial statements.  At March 31, 2001, EverTrust Bank had no nonaccruing
land development loans.

     Land development loans secured by land under development involve greater
risks than one- to- four family residential mortgage loans because such loans
are advanced upon the predicted future value of the developed property.  If
the estimate of the future value of the developed property proves to be
inaccurate, in the event of default and foreclosure, EverTrust Bank may be
confronted with a property the value of which is insufficient to assure full
repayment.  The Bank attempts to minimize this risk by limiting the maximum
loan-to-value ratio on land loans to 75% of the estimated developed value of
the secured property and getting guarantees.

     EverTrust Bank also provides construction and construction permanent
financing for multi-family and commercial properties.  At March 31, 2001, such
construction loans amounted to $87.5 million of which $77.3 million was
construction/permanent financing (i.e., loans will role into permanent
financing when certain lease-up and debt service requirements are met) at the
completion of the construction phase.  These loans are typically secured by
apartment buildings, condominiums, warehouses, mini-storage facilities,
industrial use buildings, office and medical office buildings and retail
shopping centers located in the Bank's market area and typically range in
amount from $500,000 to $5.0 million.  At March 31, 2001, the largest multi-
family construction loan was for $6.7 million secured by a 62 unit apartment
building located in EverTrust Bank's market area and was performing according
to its terms. At March 31, 2001, the largest commercial construction loan was
for $7.0 million, secured by a retail store located in the Bank's market area
and was performing according to its terms.  Periodically, EverTrust Bank
purchases, without recourse to the seller other than for fraud, from other
lenders participation interests in multi-family and commercial construction
loans secured by properties located in EverTrust Bank's market area.  The Bank
underwrites such participation interests according to its own standards.

     All construction loans must be approved by the Bank's Loan Committee.
See "-- Loan Solicitation and Processing."  Prior to preliminary approval of
any construction loan application, EverTrust Bank reviews the existing or
proposed improvements, identifies the market for the proposed project and
analyzes the pro forma data and assumptions on the project.  In the case of a
speculative or custom construction loan, EverTrust Bank reviews the experience
and expertise of the builder and the borrower.  After preliminary approval has
been given, the application is processed, which includes obtaining credit
reports, financial statements and tax returns on the borrowers and guarantors,
an independent appraisal of the project, and any other expert reports
necessary to evaluate the proposed project.  In the event of cost overruns,
the Bank requires that the borrower increase the funds available for
construction by depositing its own funds into a loans in process account.

     Loan disbursements during the construction period are made to the builder
based on a line item budget, which is assessed by periodic on-site inspections
by qualified employees of EverTrust Bank or an independent inspection service.
EverTrust Bank believes that its internal monitoring system helps reduce many
of the risks inherent in its construction lending.

                                    6

<PAGE>



     EverTrust Bank originates construction loan applications through walk-in
customers, customer referrals, contacts in the business community and real
estate brokers seeking financing for their clients.

     Construction lending affords the Bank the opportunity to achieve higher
interest rates and fees with shorter terms to maturity than does its permanent
mortgage lending.  Construction lending, however, is generally considered to
involve a higher degree of risk than permanent mortgage lending because of the
inherent difficulty in estimating both a property's value at completion of the
project and the estimated cost of the project.  The nature of these loans is
such that they are generally more difficult to evaluate and monitor.  If the
estimate of construction cost proves to be inaccurate, EverTrust Bank may be
required to advance funds beyond the amount originally committed to permit
completion of the project.  If the estimate of value upon completion proves to
be inaccurate, EverTrust Bank may be confronted with a project whose value is
insufficient to assure full repayment.  Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors.  Loans to builders to construct homes for which no
purchaser has been identified carry more risk because the payoff for the loan
depends on the builder's ability to sell the property prior to the time that
the construction loan is due.  EverTrust Bank has sought to address these
risks by adhering to strict underwriting policies, disbursement procedures,
and monitoring practices.  In addition, because the Bank's construction
lending is primarily secured by properties in its market area, changes in the
local and state economies and real estate markets could adversely affect
EverTrust Bank's construction loan portfolio.

     Multi-Family Lending.  At March 31, 2001, $128.8 million, or 23.0% of the
Bank's total loan portfolio was secured by multi-family dwelling units, which
consist of more than four units, located primarily in its market area.

     Multi-family adjustable rate mortgage loans are originated with variable
rates which generally adjust annually after an initial period ranging from one
to seven years.  Contractual annual adjustments generally range from 2% to
unlimited, subject to a overall limitation of 6%.  These adjustable rate
mortgage loans have generally utilized the weekly average yield on one year
U.S. Treasury securities adjusted to a constant maturity of one year plus a
margin of 2.50% to 3.50%, with principal and interest payments fully
amortizing over terms of up to 30 years.  EverTrust Bank has also originated
fixed rate multi-family loans due in five and ten years, with amortization
terms of up to 30 years.  Multi-family loans originated since 1993 generally
contain prepayment penalties during the first three years.  Multi-family loans
typically range in principal amount from $500,000 to $5.0 million.  At March
31, 2001, the largest non-construction multi-family loan was on an 85 unit
apartment building with an outstanding principal balance of $4.4 million
located in the Bank's market area.  At March 31, 2001, this loan was
performing according to its terms.

     The maximum loan-to-value ratio for multi-family loans is generally 75%.
EverTrust Bank requires appraisals of all properties securing multi-family
real estate loans.  Appraisals are performed by an independent appraiser
designated by the Bank, all of which are reviewed by EverTrust Bank's review
appraiser.  EverTrust Bank requires its multi-family loan borrowers to submit
financial statements and rent rolls on the subject property annually.
EverTrust Bank also inspects the subject property annually if the balance of
the loan exceeds $750,000.  EverTrust Bank  generally imposes a minimum debt
coverage ratio of approximately 1.20 times for loans secured by multi-family
properties.

     Multi-family mortgage lending affords EverTrust Bank an opportunity to
receive interest at rates higher than those generally available from one- to-
four family residential lending.  However, loans secured by such properties
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to- four family
residential mortgage loans.  Because payments on loans secured by multi-
family properties are often dependent on the successful operation and
management of the properties, repayment of such loans may be affected by
adverse conditions in the real estate market or the economy.  The Bank seeks
to minimize these risks by carefully reviewing the financial condition of the
borrower, the quality of the collateral and the management of the property
securing the loan. EverTrust Bank generally obtains loan guarantees from
financially capable parties based on a review of personal financial
statements, or if the borrower is a corporation, EverTrust Bank also generally
obtains personal guarantees from corporate principals based on a review of
personal financial statements.

                                       7

<PAGE>



     Commercial Real Estate Lending.  Commercial real estate loans totaled
$168.2 million, or 30.1% of total loans receivable at March 31, 2001, and
consisted of 239 loans.  EverTrust Bank originates commercial real estate
loans primarily secured by warehouses, mini-storage facilities, industrial use
buildings, office and medical office buildings and retail shopping centers
located in EverTrust Bank's market area.  Commercial real estate loans
typically range in principal amount from $500,000 to $5.2 million.  At March
31, 2001, the largest commercial real estate loan on one property had an
outstanding balance of $6.6 million and is secured by an office building and
marina located in the Bank's market area.  This loan was performing according
to its terms at March 31, 2001.

     Commercial adjustable rate mortgage loans are originated with variable
rates which generally adjust annually after an initial period ranging from one
to seven years.  Contractual annual adjustments generally range from 2% to
unlimited, subject to an overall limitation of 6%.  These adjustable rate
mortgage loans have generally utilized the weekly average yield on one year
U.S. Treasury securities adjusted to a constant maturity of one year plus a
margin of  2.75% to 3.50%, with principal and interest payments fully
amortizing over terms of up to 30 years but generally due in ten years.
EverTrust Bank  has also originated fixed rate commercial loans due in five
and ten years, with amortization terms of up to 30 years.  Commercial loans
originated since 1993 generally contain prepayment penalties during the first
three years.

     The Bank requires appraisals of all properties securing commercial real
estate loans.  Appraisals are performed by an independent appraiser designated
by EverTrust Bank, all of which are reviewed by the Bank's review appraiser.
EverTrust Bank requires its commercial loan borrowers to submit financial
statements and rent rolls on the subject property annually.  The Bank also
inspects the subject property annually if the balance of the loan exceeds
$750,000.  EverTrust Bank considers the quality and location of the real
estate, the credit of the borrower, the cash flow of the project and the
quality of management involved with the property.  EverTrust Bank generally
imposes a minimum debt coverage ratio of approximately 1.30 times for
originated loans secured by income producing commercial properties.  The Bank
generally obtains loan guarantees from financially capable parties based on a
review of personal financial statements, or if the borrower is a corporation,
EverTrust Bank also generally obtains personal guarantees from corporate
principals based on a review of personal financial statements.

     Commercial real estate lending affords EverTrust Bank an opportunity to
receive interest at rates higher than those generally available from one- to-
four family residential lending.  However, loans secured by such properties
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to- four family
residential mortgage loans.  Because payments on loans secured by commercial
properties often depend upon the successful operation and management of the
properties, repayment of such loans may be affected by adverse conditions in
the real estate market or the economy.  EverTrust Bank seeks to minimize these
risks by limiting the maximum loan-to-value ratio to 75% and carefully
reviewing the financial condition of the borrower, the quality of the
collateral and the management of the property securing the loan.

     Business Lending.  Through its commercial banking group, the Bank
originates business loans to small and medium sized businesses in its primary
market area. Business loans are generally made to finance the purchase of
seasonal inventory needs, new or used equipment, and for short-term working
capital. Such loans are generally secured by equipment, accounts receivable
and inventory, although business loans are sometimes granted on an unsecured
basis. Such loans are made for terms of seven years or less, depending on the
purpose of the loan and the collateral, with loans to finance operating
expenses made for one year or less, with interest rates that adjust at least
annually at a rate equal to the prime rate, as published in The Wall Street
Journal, plus a margin ranging from 0% to 3.50%. At March 31, 2001, the
business loans amounted to $31.7 million, or 5.7%, of the Bank's total loans.
The increase in business loans from the year ending March 31, 2000 is
attributable to increased market penetration, the addition of a new loan
officer and growth in average loan amounts.

     At March 31, 2001, the Bank's two largest outstanding business loans were
for $4.5 million each and were  secured by accounts receivable/inventory.  One
customer is a lumber broker, the other is in hotel management.  Both loans
were performing according to their respective terms at March 31, 2001.

                                      8

<PAGE>



     The Bank underwrites its business loans on the basis of the borrower's
cash flow and ability to service the debt from earnings rather than on the
basis of underlying collateral value, and the Bank seeks to structure such
loans to have more than one source of repayment. The borrower is required to
provide the Bank with sufficient information to allow it to make its lending
determination. In most instances, this information consists of at least three
years of financial statements, tax returns, a statement of projected cash
flows, current financial information on any guarantor and any additional
information on the collateral. Generally, for loans with balances exceeding
$750,000, the Bank  requires that borrowers and guarantors provide updated
financial information at least annually.

     The Bank's business loans may be structured as term loans or as lines of
credit. Business term loans are generally made to finance the purchase of
long-lived assets and have maturities of five years or less. Business lines of
credit are typically made for the purpose of providing working capital and are
usually approved with a term of between six months and one year.

     The Bank provides borrowers with secured standby letters of credit based
on the same underwriting requirements and conditions as described above.  The
letters of credit are backed by signed notes payable to the Bank  for like
terms of the letter of credit.  At March 31, 2001, EverTrust Bank had no
outstanding letters of credit.  International letters of credit are offered
through a correspondent bank that assumes credit and payment risk on the
instrument.  EverTrust Bank receives a fee from the borrower and the
correspondent bank for arranging the international letters of credit.

     Business loans may involve greater risk than other types of lending.
Because payments on such loans are often dependent on successful operation of
the business involved, repayment of such loans may be subject to a greater
extent to adverse conditions in the economy. The Bank seeks to minimize these
risks through its underwriting guidelines, which require that the loan be
supported by adequate cash flow of the borrower, profitability of the
business, collateral and personal guarantees of the individuals in the
business.  In addition, the Bank limits this type of lending to its market
area.

     Consumer Lending.  Consumer lending has traditionally been a secondary,
but recently growing part of the Bank's business.  Consumer loans generally
have shorter terms to maturity and higher interest rates than mortgage loans.
Consumer loans include home equity lines of credit, home improvement loans,
second mortgage loans, lot acquisition loans, savings account loans,
automobile loans, boat loans, recreational vehicle loans, personal unsecured
loans and credit card loans.  Consumer loans are made with both fixed and
variable interest rates and with varying terms.  At March 31, 2001, consumer
loans, excluding credit card loans, amounted to $32.0 million, or 5.7% of the
total loan portfolio.

     At March 31, 2001, the largest component of the consumer loan portfolio
consisted of real estate secured loans, such as residential first mortgage
loans, second mortgages and home equity lines of credit, which totaled $25.8
million, or 4.6%, of the total loan portfolio.  Home equity lines of credit
and second mortgage loans are made for purposes such as the improvement of
residential properties, debt consolidation and education expenses, among
others.  The majority of these loans are made to existing customers and are
secured by a first or second mortgage on residential property.  EverTrust Bank
also solicits loans from non-customers.  The loan-to-value ratio is typically
80% or less, when taking into account both the first and second mortgage
loans.  Second mortgage loans typically carry fixed interest rates with a
fixed payment over a term between five and 15 years.  Home equity lines of
credit allow for a ten year draw period, plus an additional 15 year repayment
period, and the interest rate is tied to the prime rate as published in The
Wall Street Journal, plus a margin.

     Credit card loans are offered through the Bank's commercial banking group
and are underwritten using suggested Independent Community Bankers Association
guidelines, credit scoring and financial statement analysis.  Credit cards are
issued to the Bank's commercial banking business customers and qualified
retail customers.  At March 31, 2001, the credit card portfolio consisted of
business credit lines of $500,000 and personal credit card lines of $1.9
million for a total of $2.4 million or .43% of total loans.  Credit card loans
entail greater risk than do other loans

                                       9

<PAGE>



especially given their unsecured status.  The Bank attempts to limit this risk
by adhering to sound underwriting and collection practices, although there can
be no assurances that these will prevent credit card losses.  At March 31,
2001, no credit card loans were 90 days or more past due or in nonaccrual
status.

     Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
rapidly depreciating assets such as automobiles.  In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation.  The remaining
deficiency often does not warrant further substantial collection efforts
against the borrower beyond obtaining a deficiency judgment.  In addition,
consumer loan collections are dependent on the borrower's continuing financial
stability, and are more likely to be adversely affected by job loss, divorce,
illness or personal bankruptcy.  Furthermore, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.  EverTrust
Bank believes that these risks are not as prevalent in the case of EverTrust
Bank's consumer loan portfolio because a large percentage of the portfolio
consists of first and second mortgage loans and home equity lines of credit
for existing customers that are underwritten in a manner such that they result
in credit risk that is substantially similar to one- to- four family
residential mortgage loans.  Nevertheless, second mortgage loans and home
equity lines of credit have greater credit risk than one- to- four family
residential mortgage loans because they are secured by mortgages subordinated
to the existing first mortgage on the property, which may or may not be held
by the Bank.  At March 31, 2001, there were $10,000 of consumer loans
delinquent in excess of 90 days or in nonaccrual status.

     Loan Maturity and Repricing.  The following table sets forth information
at March 31, 2001 regarding the dollar amount of loans maturing or repricing
in the Bank's portfolio based on their contractual terms to maturity or
repricing, but does not include scheduled payments or potential prepayments.
Demand loans, loans having no stated schedule of repayments and no stated
maturity, and overdrafts are reported as due in one year or less.  Loan
balances do not include undisbursed loan proceeds, unearned discounts,
unearned income and allowance for loan losses.

                                   After    After   After
                                  One Year 3 Years 5 Years
                          Within  Through  Through Through    Beyond
                         One Year 3 Years  5 Years 10 Years  10 Years   Total
                         -------- -------  ------- --------  --------   -----
                                             (In thousands)
Real Estate:
 One- to- four family
  residential.......... $ 19,073  $11,451  $ 4,484  $10,372  $19,039  $ 64,419
 One- to- four family
  construction and
  land development.....   36,093      818       --       --       --    36,911
 Income property:
  Commercial
   construction........    7,436    2,824      228    3,023       --    13,511
  Commercial real
   estate..............   83,866   25,699   26,503   28,427    2,549   167,064
  Multi-family
   construction........   21,586    7,664    6,697      533       --    36,480
  Multi-family
   residential.........   73,124   22,583   15,225   16,337    1,572   128,841
Consumer:
 Home equity and other
  mortgages............    5,688    3,643    2,806    5,809    2,797    20,743
 Credit cards..........      343       --       --       --       --       343
 Other installment
  loans................    2,028    2,839      595      624       95     6,181
Business loans.........   16,886    1,951    1,039       65       --    19,941
                        --------  -------  -------  -------  -------  --------
Total.................. $266,143  $79,472  $57,577  $65,190  $26,052  $494,434
                        ========  =======  =======  =======  =======  ========

                                     10

<PAGE>



     The following table sets forth the dollar amount of all loans due after
March 31, 2001, which have fixed interest rates and have floating or
adjustable interest rates.

                                             Fixed      Floating or
                                             Rates    Adjustable Rates
                                             -----    ----------------
                                                  (In thousands)
Real Estate:
   One- to- four family residential....... $ 40,259      $ 24,160
   One- to- four family construction
      and land development................      400        36,511
   Income property:
      Commercial construction.............    2,943        10,568
      Commercial real estate..............   46,607       120,457
      Multi-family construction...........       --        36,480
      Multi-family residential............   19,066       109,775
Consumer:
   Home equity and other mortgages........   17,066         3,677
   Credit cards ..........................       --           343
   Other installment loans................    4,435         1,746
Business loans............................    3,501        16,440
                                           --------      --------
Total .................................... $134,277      $360,157
                                           ========      ========

     Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets.  The average life of loans is substantially less
than their contractual terms because of prepayments.  In addition, due-on-sale
clauses on loans generally give EverTrust Bank the right to declare loans
immediately due and payable in the event, among other things, that the
borrower sells the real property subject to the mortgage and the loan is not
repaid.  The average life of mortgage loans tends to increase, however, when
current mortgage loan market rates are substantially higher than rates on
existing mortgage loans and, conversely, decrease when rates on existing
mortgage loans are substantially higher than current mortgage loan market
rates.

     Loan Solicitation and Processing.  Loan originations are obtained from a
variety of sources, including walk-in customers, loan brokers for primarily
multi-family and commercial loans, and referrals from builders and realtors.
Upon receipt of a loan application from a prospective borrower, a credit
report and other data are obtained to verify specific information relating to
the loan applicant's employment, income and credit standing.  An appraisal of
the real estate offered as collateral generally is undertaken by an appraiser
retained by EverTrust Bank and certified by the State of Washington.

     Mortgage loan applications are initiated by loan officers and are
required to be approved by EverTrust Bank's Management Loan Committee, which
presently consists of the President and Chief Operating Officer, the Chief
Financial Officer, the Credit Administrator and the Branch Administrator.  All
loans up to and including $1.5 million may be approved by the Management Loan
Committee without Board approval; loans in excess of $1.5 million and up to
$4.0 million must be approved by the Board Loan Committee; and loans exceeding
$4.0 million, as well as loans of any size granted to a single borrower whose
aggregate lending relationship exceeds 15% of total capital, must be approved
by EverTrust Bank's Board of Directors.

     Loan Originations, Purchases and Sales.  During the year ended March 31,
2001, the Bank's total gross loan originations were $214.2 million.
Periodically, EverTrust Bank purchases participation interests in construction
and land development loans and multi-family loans, secured by properties
located in the Bank's primary market area, from other lenders.  Such purchases
are underwritten to EverTrust Bank's underwriting guidelines and are without
recourse to the seller other than for fraud.  See "-- Construction and Land
Development Lending" and "-- Multi-Family Lending."

                                       11

<PAGE>



     Consistent with its asset/liability management strategy in prior years,
EverTrust Bank's policy has been to retain in its portfolio all of the
adjustable rate mortgage loans and shorter-term fixed rate loans.  Thirty-year
fixed rate loans are originated with a view toward sale in the secondary
market to Fannie Mae; however, from time to time, a portion of fixed-rate
loans may be retained in the Bank's portfolio to meet its asset/liability
objectives.  Loans sold in the secondary market are generally sold on a
servicing retained basis.  At March 31, 2001, EverTrust Bank's loan servicing
portfolio totaled $104.5 million.

     In the year ending March 31, EverTrust Bank sold $14.3 million of
adjustable rate multi-family loans as a test of the secondary market for its
multi-family loan products.  Future sales of adjustable rate loans may occur
as a result of EverTrust Bank's asset/liability objectives and liquidity
management practices.

     The origination of commercial and multi-family construction and permanent
loans decreased from the prior year due to increased market competition for
these types of loans by other lenders.

     The following table shows total loans originated, purchased, sold and
repaid during the periods indicated.

                                               Year Ended March 31,
                                          -----------------------------
                                          2001         2000        1999
                                          ----         ----        ----
                                                  (In thousands)
Loans originated:
 Real estate:
   One- to- four family residential    $ 19,795     $ 19,663    $ 39,034
   One- to- four family construction
      and loan development               56,359       29,537      32,063
   Income property:
      Commercial construction            13,188       19,520       9,941
      Commercial real estate             42,395       59,972      11,095
      Multi-family construction          21,944       26,768      11,387
      Multi-family residential           12,532       31,795      20,892
 Consumer:
    Home equity and other mortgages      11,416       10,919      10,078
    Credit cards                          1,133        1,027         427
    Other installment loans               2,115        4,248       1,260
 Business loans                          33,369       11,828       4,517
                                       --------     --------    --------
          Total loans originated        214,246      215,277     140,694
                                       --------     --------    --------

Loans purchased:
   Income property:
      Commercial construction                --           --          --
      Commercial real estate                 --        1,000          --
      Multi-family construction              --           --          --
      Multi-family residential               --           --          --
                                       --------     --------    --------
        Total loans purchased                --        1,000          --

Loans sold:
 Total whole loans sold                  24,501       33,895       3,958
 Participation loans                         --        1,500          --
                                       --------     --------    --------
          Total loans sold               24,501       35,395       3,958
                                       --------     --------    --------

Principal repayments                    123,545       91,280     113,624
Loans securitized                            --           --          --
Transfer to real estate owned                85           --         117
Increase (decrease) in other items, net   2,635      (17,642)     (2,908)
                                       --------     --------    --------
Net increase (decrease) in loans
   receivable, net and loans held
   for sale                            $ 68,750     $ 71,960    $ 20,087
                                       ========     ========    ========

                                      12

<PAGE>



     Loan Origination and Other Fees.  The Bank, in some instances, receives
loan origination fees.  Loan fees are a percentage of the principal amount of
the mortgage loan which are charged to the borrower for funding the loan.  The
amount of fees charged by the Bank range up to 1.50%.  Current accounting
standards require fees received, net of certain loan origination costs, for
originating loans to be deferred and amortized into interest income over the
contractual life of the loan.  Net deferred fees or costs associated with
loans that are prepaid are recognized as income at the time of prepayment.
The Bank had $3.9 million of net deferred mortgage loan fees at March 31,
2001.

     Nonperforming Assets and Delinquencies.  EverTrust Bank generally
assesses late fees or penalty charges on delinquent loans of 5% of the monthly
loan payment amount.  Substantially all fixed-rate and adjustable rate
mortgage loan payments are due on the first day of the month; however, the
borrower is given a 15 day grace period to make the loan payment.  When a
mortgage loan borrower fails to make a required payment when due, EverTrust
Bank institutes collection procedures.  The first notice is mailed to the
borrower on the 16th day requesting payment and assessing a late charge.
Attempts to contact the borrower by telephone generally begin upon the 30th
day of delinquency.  If a satisfactory response is not obtained, continuous
follow-up contacts are attempted until the loan has been brought current.
Before the 90th day of delinquency, attempts to interview the borrower are
made to establish the cause of the delinquency,  whether the cause is
temporary, the attitude of the borrower toward the debt, and a mutually
satisfactory arrangement for curing the default.

     If the borrower is chronically delinquent and all reasonable means of
obtaining payment on time have been exhausted, foreclosure is initiated
according to the terms of the security instrument and applicable law.
Interest income on loans is reduced by the full amount of accrued and
uncollected interest (i.e., placed on nonaccrual status).

     When a consumer loan borrower fails to make a required payment on a
consumer loan by the payment due date, EverTrust Bank institutes the same
collection procedures as for its mortgage loan borrowers.

     EverTrust Bank's Board of Directors is informed monthly as to the status
of all mortgage and consumer loans that are delinquent by more than 90 days or
nonaccruing, the status on all loans currently in foreclosure, and the status
of all foreclosed and repossessed property owned by EverTrust Bank.

     The following table sets forth information with respect to the Bank's
non-performing assets and restructured loans within the meaning of Statement
of Financial Accounting Standards No. 15 for the periods indicated.

                                         Year Ended  March 31,
                            ------------------------------------------------
                            2001       2000        1999       1998     1997
                            ----       ----        ----       ----     ----
                                    (Dollars in thousands)
Loans accounted for on
a nonaccrual basis:
 Mortgage loans:
  One- to- four family
   residential............ $   57    $   402      $   --    $   517   $   657
  One- to- four family
   construction and
   land development.......     --         --          --         --        --
 Income property:
  Commercial construction.     --         --          --         --        --
  Commercial real estate..     --         --         364        293       313
  Multi-family
   construction...........  1,233         --          --         --        --
  Multi-family
   residential............     --         --          --         --        --
 Consumer:
  Residential mortgages...     --         --          --         --        --
  Home equity and second
   mortgages..............     --         --          --         27        47
  Credit cards............     --         --          --         --        --
  Automobiles.............     --          4           7          4         6
  Other installment loans.     10         --           7         --        --
 Business.................     --         --          --         --        --
                           ------     ------      ------     ------    ------
     Total................  1,300        406         378        841     1,023

                        (table continued on following page)

                                          13

<PAGE>



                                         Year Ended  March 31,
                            ------------------------------------------------
                            2001       2000        1999       1998     1997
                            ----       ----        ----       ----     ----
                                    (Dollars in thousands)

Accruing loans which are
contractually past
due 90 days or more:
 Mortgage loans:
  One- to- four family
   residential............     --         --          --         --        --
  One- to- four family
   construction and
   land development.......     --         --          --         --        --
 Income property:
  Commercial construction.     --         --          --         --        --
  Commercial real estate..     --         --          --         --        --
  Multi-family
   construction...........     --         --          --         --        --
  Multi-family
   residential............     --         --          --         --        --
                           ------     ------      ------     ------    ------
 Consumer:
  Residential mortgages...     --         --          --         --        --
  Home equity and second
   mortgages..............     --         --          --         --        --
  Credit cards............     --         --          --         --        --
  Automobiles.............     --         --          --         --        --
  Other installment loans.     --         --          --         --        --
                           ------     ------      ------     ------    ------
     Total................     --         --          --         --        --

Total of nonaccrual and
 90 days  past due loans..  1,300        406         378        841     1,023

Real estate owned
 acquired in satisfaction
 of debts previously
 contracted...............     85         --          --         --       876

Total nonperforming
 assets...................  1,385        406         378        841     1,899
Restructured loans........     --         --          --         --        --

Nonaccrual and 90 days or
 more past due loans as a
 percentage of loans
 receivable, net..........   0.27%      0.10%       0.12%      0.27%     0.35%
Nonaccrual and 90 days or
 more past due loans as a
 percentage of total
 assets...................   0.22%      0.07%       0.08%      0.20%     0.26%
Nonperforming assets as a
 percentage of total
 assets...................   0.23%      0.07%       0.08%      0.20%     0.48%

     Additional interest income, which would have been recorded for the year
ended March 31, 2001 had nonaccruing loans been current in accordance with
their original terms, amounted to approximately $41,000.  The amount of
interest included in interest income on such loans for the year ended March
31, 2001 was approximately $24,000.

     Real Estate Owned.  Real estate acquired by EverTrust Bank as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate
owned until it is sold.  When property is acquired it is recorded at the lower
of its cost, which is the unpaid principal balance of the related loan plus
foreclosure costs, or fair market value.  Subsequent to foreclosure, the
property is carried at the lower of the foreclosed amount or fair value, less
estimated selling costs.  At March 31, 2001, EverTrust Bank had approximately
$85,000 of real estate owned.

     Restructured Loans.  Under generally accepted accounting principles,
EverTrust Bank is required to account for certain loan modifications or
restructuring as a "troubled debt restructuring."  In general, the
modification or restructuring of a debt constitutes a troubled debt
restructuring if EverTrust Bank for economic or legal reasons related to the
borrower's financial difficulties grants a concession to the borrowers that
the Bank would not otherwise consider.  Debt restructures or loan
modifications for a borrower do not necessarily always constitute troubled
debt restructures, however, and troubled debt restructures do not necessarily
result in nonaccrual loans.  EverTrust Bank had no restructured loans as of
March 31, 2001.

                                    14

<PAGE>



     Asset Classification.  Applicable regulations require that each insured
institution review and classify its assets on a regular basis.  In addition,
in connection with examinations of insured institutions, regulatory examiners
have authority to identify problem assets and, if appropriate, require them to
be classified.  There are three classifications for problem assets:
substandard, doubtful and loss.  Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies are not corrected.
Doubtful assets have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full on
the basis of currently existing facts, conditions and values questionable, and
there is a high possibility of loss.  An asset classified as loss is
considered uncollectible and of such little value that continuance as an asset
of the institution is not warranted.  When an insured institution classifies
problem assets as either substandard or doubtful, it is required to establish
general allowances for loan losses in an amount deemed prudent by management.
These allowances represent loss allowances which have been established to
recognize the inherent risk associated with lending activities and the risks
associated with particular problem assets.  When an insured institution
classifies problem assets as loss, it charges off the balances of the asset.
Assets which do not currently expose the insured institution to sufficient
risk to warrant classification in one of the aforementioned categories but
possess weaknesses are required to be designated as special mention.
EverTrust Bank's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the FDIC and the
Division which can order the establishment of additional loss allowances.

     Allowance for Loan Losses.   EverTrust Bank has established a systematic
methodology for the determination of provisions for loan losses that takes
into consideration the need for an overall general valuation allowance.

     In originating loans, EverTrust Bank recognizes that losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower, general
economic conditions and, in the case of a secured loan, the quality of the
security for the loan.  Management recognizes that these losses will occur
over the life of the loan and may not necessarily result in current impairment
of the loan balance.  Management also believes that certain loans may
currently be impaired that are not yet evident in the loan's performance.  The
general valuation allowance for loan losses is maintained to cover these
losses inherent in the loan portfolio but not yet apparent.  Management
reviews the adequacy of the allowance at least quarterly, as computed by a
consistently applied formula-based methodology, supplemented by management's
assessment of current economic conditions, past loss and collection
experience, and risk characteristics of the loan portfolio.  At March 31,
2001, the Bank had a general allowance for loan losses of $7.4 million,
representing 1.51% of total loans, compared to $6.5 million, or 1.53% of total
loans at March 31, 2000.

     The Bank recorded a $1.0 million provision for loan losses for the year
ended March 31, 2001, compared to $810,000 and $780,000 for the years ended
March 31, 2000 and 1999, respectively.  Provisions for loan losses are charges
to earnings to bring the total allowance for loan losses to a level considered
by management as adequate to provide for known and inherent risks in the loan
portfolio, including management's continuing analysis of factors underlying
the quality of the loan portfolio.  These factors include changes in portfolio
size and composition, actual loan loss experience, current economic
conditions, detailed analysis of individual loans from which full
collectibility may not be assured, and determination of the existence and
realizable value of the collateral and guarantees securing the loans.

     The Bank's charge-offs as a percentage of average loans outstanding
reflected in the following table has been consistent over the past several
years, largely the result of extremely favorable economic conditions in the
market area.  The level of non-performing assets has fluctuated from month to
month, and the allowance for loan losses as a percentage of nonperforming
loans was 572.23% at March 31, 2001.  The relatively low amount of
nonperforming loans at March 31, 2001 cannot reasonably be relied upon to
reflect the current level of risk inherent in the loan portfolio, especially
given the dollar amount of loans in higher-risk lending categories, including
construction, land development, multi-family and commercial loans at March 31,
2001.

     Although allocated, the entire allowance for loan losses is available for
the entire portfolio.  The following table reflects the allowance allocated to
each respective loan category using a consistently applied formula-based
approach.  Reserve percentages are applied against outstanding loans and
certain commitments as follows:  single family loans,

                                    15

<PAGE>



0.80%; two- to- four family loans, 1.00%; permanent multi-family loans, 1.25%;
permanent commercial loans, 1.50%; construction and land development loans,
2.00%; consumer loans, 1.00% to 3.00% based on collateral type; business loans
generally, 1.00% to 2.00% based on credit grade.  These reserve factors have
been developed based on management's understanding of the relative credit risk
which could indicate it is probable that current impairment has occurred in
the portfolio, and to a lesser extent, the factors that peers are applying to
similar loan categories.  The management loan committee  reviews the reserve
factors in conjunction with the quarterly loan loss allowance analysis and may
be adjusted in future periods to reflect changes in delinquency percentages
and loss experience.  The unallocated portion of the reserve, if any,
represents the amount management deems necessary to account for estimation
risk in the formula method, and to incorporate other critical factors
impacting credit quality, such as loan volumes and concentrations, seasoning
of the loan portfolio, specific industry conditions within portfolio segments,
governmental regulatory actions, recent loss experience in particular segments
of the portfolio and the duration of the current business cycle, and the
economic conditions described in Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," contained herein.

     Management believes that the amount maintained in the allowances will be
adequate to absorb losses inherent in the portfolio. Although management
believes that it uses the best information available to make such
determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations.

     While the Bank believes it has established its existing allowance for
loan losses in accordance with generally accepted accounting principals, there
can be no assurance that regulators, in reviewing the Bank's loan portfolio,
will not request the Bank to increase significantly its allowance for loan
losses. In addition, because future events affecting borrowers and collateral
cannot be predicted with certainty, there can be no assurance that the
existing allowance for loan losses is adequate or that substantial increases
will not be necessary should the quality of any loans deteriorate as a result
of the factors discussed above.  Any material increase in the allowance for
loan losses may adversely affect the Bank's financial condition and results of
operations.

                                   16

<PAGE>



     The following table sets forth an analysis of the Bank's allowance for
loan losses at the dates and for the periods indicated.

                                              Year Ended  March 31,
                                   ------------------------------------------
                                    2001     2000     1999     1998     1997
                                   ------   ------   ------   ------   ------
                                             (Dollars in thousands)

Allowance at beginning of period.. $6,484   $5,672   $4,897   $4,509   $4,178
Provision for loan losses.........  1,005      810      780      420      420
Charge-offs:
  Mortgage loans:
   One- to- four family
    residential...................     --       --       --       --       43
   One- to- four family construction
    and land development..........     --       --       --       --       38
   Income property:
    Commercial construction.......     --       --       --       --       --
    Commercial real estate........     --       --       --      112       --
    Multi-family construction.....     --       --       --       --       --
    Multi-family residential......     --       --       --       --       --
  Consumer:
    Residential mortgages.........     --       --       --       --       --
    Home equity and second
     mortgages....................     --       --       --       --        5
    Credit cards..................     20       --       --       --       --
    Automobiles...................     --       --        2       --        4
    Other installment loans.......      6       12        3       --       --
  Business loans..................     43        4       --       --       --
                                   ------   ------   ------   ------   ------
      Total charge-offs...........     70       16        5      112       90
Recoveries:
  Mortgage loans:
   One- to- four family
    residential...................     --       --       --       --       --
   One- to- four family
    construction and land
    development...................     --       --       --       --       --
   Income property:
    Commercial construction.......     --       --       --       79       --
    Commercial real estate........     --       --       --       --       --
    Multi-family construction.....     --       --       --       --       --
    Multi-family residential......     --       --       --       --       --
  Consumer:
    Residential mortgages.........     --       --       --       --       --
    Home equity and second
     mortgages....................     --       18       --       --       --
    Credit cards..................     --       --       --       --       --
    Automobiles...................     --       --       --        1       --
    Other installment loans.......      6       --       --       --        1
  Business loans..................     14       --       --       --       --
                                   ------   ------   ------   ------   ------
    Total recoveries..............     20       18       --       80        1
                                   ------   ------   ------   ------   ------
    Net charge-offs...............     50       (2)       5       32       89
                                   ------   ------   ------   ------   ------
    Balance at end of period...... $7,439   $6,484   $5,672   $4,897   $4,509
                                   ======   ======   ======   ======   ======
Allowance for loan losses as a
 percentage of  total loans out-
 standing at the end of the
 period...........................  1.51%    1.53%    1.62%    1.48%    1.45%

Net charge-offs as a percentage
 of average loans outstanding
 during the period................  0.01%      --%      --%    0.01%    0.03%

Allowance for loan losses as a
 percentage of nonperforming
 loans at end of period...........572.19% 1593.12% 1500.53%  582.28%  440.33%

                                      17

<PAGE>


<TABLE>

The following table sets forth the breakdown of the Bank's allowance for loan losses by loan category for
the periods indicated.

                                                          At March 31,
                      ------------------------------------------------------------------------------------
                                 2001                         2000                        1999
                      --------------------------   --------------------------   --------------------------
                                        Percent                      Percent                      Percent
                      Amount            of Loans   Amount            of Loans   Amount            of Loans
                        of                 in        of                 in        of                 in
                       Loan      Loan   Category    Loan      Loan   Category    Loan      Loan   Category
                       Loss     Amount      to      Loss     Amount      to      Loss     Amount     to
                      Allow-      By      Total    Allow-      By      Total    Allow-      By      Total
                       ance    Category   Loans     ance    Category   Loans     ance    Category   Loans
                       ----    --------   -----     ----    --------   -----     ----    --------   -----
                                                      (Dollars in thousands)
<S>                    <C>     <C>        <C>      <C>      <C>        <C>      <C>      <C>        <C>
Real Estate:
 One- to- four family
  residential........ $  650   $ 67,705   12.11%   $  481   $ 70,042   14.73%   $  784   $101,649   26.61%
 One- to- four family
  construction and
  land development...    630     40,729    7.28       775     37,266    7.84       838     34,928    9.14
 Income property:
  Commercial
   construction......    645     25,475    4.56       583     23,871    5.02       271     12,491    3.27
  Commercial real
   estate............  2,033    168,199   30.08     1,729    128,892   27.10     1,073     72,573   19.00
  Multi-family
   construction......    955     62,055   11.10       536     32,304    6.79       267     14,012    3.67
  Multi-family
   residential.......  1,393    128,846   23.04     1,591    136,727   28.75     1,450    115,972   30.35
Consumer:
  Home equity and
   other mortgages...    454     25,756    4.61       388     23,301    4.90       341     18,601    4.87
  Credit cards.......     23      2,426    0.43        12      1,375    0.29        16        488    0.13
  Other installment
   loans.............     97      6,219    1.11        79      5,281    1.11        59      2,399    0.63
Business loans.......    559     31,707    5.68       310     16,494    3.47       196      8,949    2.34
   Total allocated...  7,439         --      --     6,484         --       -     5,295         --      --
Unallocated..........     --         --      --        --         --      --       377         --      --
                      ------   --------  ------    ------   --------  ------    ------   --------  ------
   Total............. $7,439   $559,117  100.00%   $6,484   $475,553  100.00%   $5,672   $382,062  100.00%
                      ======   ========  ======    ======   ========  ======    ======   ========  ======
</TABLE>



<TABLE>
                                           At March 31,
                      -------------------------------------------------------
                                 1998                         1997
                      --------------------------   --------------------------
                                        Percent                      Percent
                      Amount            of Loans   Amount            of Loans
                        of                 in        of                 in
                       Loan      Loan   Category    Loan      Loan   Category
                       Loss     Amount      to      Loss     Amount      to
                      Allow-      By      Total    Allow-      By      Total
                       ance    Category   Loans     ance    Category   Loans
                       ----    --------   -----     ----    --------   -----
                                      (Dollars in thousands)
<S>                    <C>     <C>        <C>      <C>      <C>        <C>
Real Estate:
 One- to- four family
  residential........$  320    $ 95,305   26.73%   $  334   $ 94,612    29.40%
 One- to- four family
  construction and
  land development... 1,008      36,444   10.23       778     27,226     8.46
 Income property:
  Commercial
   construction......    71       4,620    1.30        42      1,624     0.50
  Commercial real
   estate............ 1,142      76,121   21.36     1,051     70,042    21.76
  Multi-family
   construction......   138       7,153    2.01         4      2,323     0.72
  Multi-family
   residential....... 1,399     111,975   31.42     1,377    109,003    33.87
  Home equity and
   other mortgages...   307      15,866    4.45       239     12,187     3.79
  Credit cards.......     6         124    0.03        --         --       --
  Other installment
   loans.............    53       2,560    0.72        55      2,647     0.82
Business loans.......   125       6,226    1.75        11      2,181     0.68
   Total allocated... 4,568          --      --     3,891         --       --
Unallocated..........   329          --      --       618         --       --
                     ------    --------  ------    ------   --------   ------
   Total.............$4,897    $356,394  100.00%   $4,509   $321,845   100.00%
                     ======    ========  ======    ======   ========   ======
</TABLE>
                                               18
<PAGE>



Investment Activities

     The investment policies of the Company and  EverTrust Bank are
substantially the same with the exception of the dollar limitations of
individual investments.  Under Washington law, banks are permitted to invest
in various types of marketable securities.  Authorized securities include but
are not limited to U.S. Treasury obligations, securities of various federal
agencies, mortgage-backed securities, certain certificates of deposit of
insured banks and savings institutions, banker's acceptances, repurchase
agreements, federal funds, commercial paper, corporate debt and equity
securities and obligations of states and their political sub-divisions. The
investment policies of the Company are designed to provide and maintain
adequate liquidity and to generate favorable rates of return without incurring
undue interest rate or credit risk. The Company's policies generally limit
investments to U.S. Government and agency securities, municipal bonds,
certificates of deposit, marketable corporate debt obligations,
mortgage-backed securities and equity securities.  Investment in
mortgage-backed securities includes those issued or guaranteed by Federal Home
Loan Mortgage Corporation ("Freddie Mac"), Fannie Mae and Government National
Mortgage Association ("GNMA").

     At March 31, 2001, the Company's consolidated investment portfolio
totaled $76.3 million and consisted principally of U.S. Government and agency
obligations, municipal bonds, mortgage-backed securities, corporate debt
obligations, equity securities, mutual funds, and Federal Home Loan Bank
("FHLB") stock.  From time to time, investment levels may be increased or
decreased depending upon yields available on investment alternatives, and
management's projections as to the demand for funds to be used in the
Company's loan originations, deposits and other activities.

     Mortgage-Backed Securities. The Company's mortgage-backed securities,
which at March 31, 2001, totaled $26.8 million at estimated fair value, was
comprised of Fannie Mae, Freddie Mac and GNMA mortgage-backed securities.

     State and Municipal Bonds.  The Company's tax exempt and taxable
municipal bond portfolio, which at March 31, 2001, totaled $9.0 million at
estimated fair value, or $8.9 million at amortized cost, was comprised of
general obligation bonds (i.e., backed by the general credit of the issuer)
and revenue bonds (i.e., backed by revenues from the specific project being
financed) issued by various housing authorities, hospitals, schools, water and
sanitation districts and other authorities located in the State of Washington.
At March 31, 2001, general obligation bonds and revenue bonds had total
estimated fair values of $2.6 million and $6.4 million, respectively.  Most of
the municipal bonds are not rated by a nationally recognized credit rating
agency such as Moody's or Standard and Poor's.  Non-rated municipal bonds held
in portfolio are generally comprised of housing bonds issued by various local
housing authorities in the Company's market area.  At March 31, 2001, the
Company's municipal bond portfolio had a weighted average maturity of
approximately five years and a weighted average coupon rate of 5.3%.

     Corporate Bonds.  The Company's corporate bond portfolio, which totaled
$21.8 million at fair value ($21.7 million at amortized cost) at March 31,
2001, was comprised of short to intermediate-term fixed-rate securities from
issuers generally rated Baa by Moody's or BBB by Standard and Poor's.  A high
credit rating indicates only that the rating agency believes there is a low
risk of loss or default. However, all of the Company's investment securities,
including those that have high credit ratings, are subject to market risk and
credit risk in so far as a change in market rates of interest or other
conditions may cause a change in an investment's market value.  In addition,
credit ratings are also subject to change at the discretion of the rating
agencies, which could also impact the market value of the investment.  At
March 31, 2001, the portfolio had a weighted average maturity of two years and
a weighted average coupon rate of 6.2%.  The longest term bond has an
amortized cost of $500,000 and a term to maturity of 29 years.

     At March 31, 2001, the holdings of the largest single issuer totaled $2.0
million at amortized cost or 9.2% of the total portfolio and issuers in the
financial sector comprised 45.6% of the total portfolio.

     Equity Securities.  The Company's equity investments totaled $6.4 million
at fair value, or $6.7 million at cost, at March 31, 2001. The equity
portfolio consists primarily of trust preferred stocks, common stocks of
companies

                                    19

<PAGE>



included in the Dow Jones Industrial Average and has typically included other
mid to large cap companies, and mutual funds.

     U.S. Government and Agency Obligations.  The Company's portfolio of U.S.
Government and agency obligations had a fair value of $7.7 million, or $7.5
million at amortized cost, at  March 31, 2001.  The longest term bond has an
amortized cost of $1.0 million and a term to maturity of 3.9 years.

     Off Balance Sheet Derivatives.  Derivatives include "off balance sheet"
financial products whose value is dependent on the value of an underlying
financial asset, such as a stock, bond, foreign currency, or a reference rate
or index.  Such derivatives include "forwards," "futures," "options" or
"swaps."  The Company generally has not invested in "off balance sheet"
derivative instruments, although investment policies authorize such
investments to hedge the saleable loan pipeline of EverTrust Bank.  On March
31, 2001, the Company had no off balance sheet derivatives and no outstanding
commitments to purchase or sell securities.

     The following table sets forth the composition of the Company's
investment portfolio at the dates indicated.

                                              At March 31,
                         ---------------------------------------------------
                                2001              2000             1999
                         ---------------   ---------------   ---------------
                         Carrying   Fair   Carrying   Fair   Carrying   Fair
                          Value    Value    Value    Value    Value    Value
                          -----    -----    -----    -----    -----    -----
                                           (In thousands)

Available for sale:
Investment securities:
 U.S. Government Agency
  obligations........... $ 4,985  $ 5,124  $ 12,198 $ 12,119  $ 3,751  $ 3,749
 Corporate obligations..  20,672   20,801    41,359   40,650   45,875   45,841
 Municipal obligations..   5,236    5,260     5,661    5,537    5,097    5,080
 Equity securities......   6,650    6,407    12,223   11,821    5,978    6,203
 Certificates of
  deposit...............     195      200       185      185      175      175
 Mortgage-backed
  securities............  24,963   25,507    26,084   25,676      514      518
                         -------  -------  -------- --------  -------  -------
   Total available
    for sale............ $62,701  $63,299  $ 97,710 $ 95,988  $61,390  $61,566
                         =======  =======  ======== ========  =======  =======
Held to maturity:
Investment securities:
 U.S. Government Agency
  obligations........... $ 2,507  $ 2,611  $  2,514 $  2,538  $ 2,520  $ 2,684
 Corporate obligations..     992    1,024     1,486    1,505    1,965    2,048
 Municipal obligations..   3,634    3,709     5,996    6,003    6,773    6,876
 Certificates of
  deposit...............      --       --       481      481      455      455
 Mortgage-backed
  securities............   1,229    1,269     1,589    1,609    2,153    2,254
                         -------  -------  -------- --------  -------  -------
   Total held to
    maturity............ $ 8,362  $ 8,613  $ 12,066 $ 12,136  $13,866  $14,317
                         -------  -------  -------- --------  -------  -------
   Total................ $71,062  $71,911  $109,776 $108,124  $75,256  $75,883
                         =======  =======  ======== ========  =======  =======

                                         20

<PAGE>



<TABLE>



     The table below sets forth information regarding the carrying value, weighted average yields and
maturities or periods to repricing of the Company's
investment portfolio at March 31, 2001.


                                                        At March 31, 2001
                                                 Amount Due or Repricing within:
                     --------------------------------------------------------------------------------------
                       One Year or       Over One to       Over Five to
                         Or Less          Five Years         Ten Years      Over Ten Years       Totals
                     ----------------  ----------------  ----------------  ----------------  --------------
                     Carry-  Weighted  Carry-  Weighted  Carry-  Weighted  Carry-  Weighted  Carry- Weighted
                      ing    Average    ing    Average    ing    Average    ing    Average   ing    Average
                     Value    Yield    Value    Yield    Value    Yield    Value    Yield    Value   Yield
                     -----   -----     -----    -----    -----    -----    -----    -----    -----   -----
                                                           (Dollars in thousands)

<S>                  <C>      <C>     <C>      <C>       <C>       <C>    <C>      <C>      <C>      <C>
Available for sale:
Investment securities:
 U.S. Government
  Agency
  obligations....... $ 2,498  6.43%   $ 2,487   6.84%     $   --     --%   $   --      --%  $ 4,985  6.63%
 Corporate
  obligations.......   9,540  5.78     10,631   6.16          --     --       500    9.88    20,672  6.07
 Municipal
  obligations.......     794  4.85      2,501   4.49          --     --     1,941    5.10     5,236  5.10
 Equity securities..   5,177  2.70         --     --          --     --     1,473    7.45     6,650  7.47
 Certificates of
  deposit...........     195  5.20         --     --          --     --        --      --       195  5.20
 Mortgage-backed
  securities........      --    --      8,537   6.50       8,781   6.87     7,645    6.88    24,963  6.75
                     -------  ----    -------   ----      ------   ----   -------    ----   -------  ----
   Total available
    for sale........ $18,205  5.84%   $24,156   6.18%     $8,781   6.87%  $11,559    6.79%  $62,701  6.33%
                     =======  ====    =======   ====      ======   ====   =======    ====   =======  ====
Held to maturity:
Investment securities:
 U.S. Government
  Agency
  obligations....... $ 1,503  7.36%   $ 1,004   7.38%     $   --     --%  $    --      --%  $ 2,508  7.37%
 Corporate
  obligations.......     500  8.20        492   8.47          --     --        --      --       992  8.33
 Municipal
  obligations.......     546  5.76      1,447   4.86         650   5.38       991    6.50     3,633  5.54
 Equity securities..      --    --         --     --          --     --        --      --        --    --
 Certificates of
  deposit...........      --    --         --     --          --     --        --      --        --    --
 Mortgage-backed
  securities........       1    --         --     --          --     --     1,228    8.12     1,228  8.12
                     -------  ----    -------   ----      ------   ----   -------    ----   -------  ----
   Total held to
    maturity........ $ 2,550  6.31%   $ 2,943   6.33%     $  650   5.38%  $ 2,219    7.40%  $ 8,361  6.31%
                     =======  ====    =======   ====      ======   ====   =======    ====   =======  ====

   Total............ $20,754  6.31%   $27,099   6.33%     $9,431   6.95%  $13,778    6.29%  $71,062  6.18%
                     =======  ====    =======   ====      ======   ====   =======    ====   =======  ====
--------------
(*)    Yields on tax exempt obligations have been computed on a tax equivalent basis.  Deposit Activities
and Other Sources of Funds

</TABLE>

                                                                      21

<PAGE>



     Deposit Activities and Other Sources of Funds

     General.  Deposits and loan repayments are the major sources of EverTrust
Bank 's funds for lending and other investment purposes.  Scheduled loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are influenced significantly by general interest
rates and money market conditions.  Borrowings through the FHLB of Seattle or
Fed Funds lines may be used to compensate for reductions in the availability
of funds from other sources.

     EverTrust Bank's deposit composition reflects a deposit mixture with
certificates of deposit accounting for 53.6% of total deposits and negotiable
order of withdrawal/checking accounts comprising a relatively modest 9.5% of
total deposits.

     Deposit Accounts.  Substantially all of EverTrust Bank's depositors are
residents of Washington.  Deposits are attracted from within the Bank's market
area through the offering of a broad selection of deposit instruments,
including checking accounts, money market deposit accounts, savings accounts
and certificates of deposit.  Deposit account terms vary according to the
minimum balance required, the time periods the funds must remain on deposit
and the interest rate, among other factors.  In determining the terms of its
deposit accounts, EverTrust Bank considers current market interest rates,
profitability to the Bank, matching deposit and loan products and its customer
preferences and concerns.   See Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," contained herein.

     At March 31, 2001, the Bank had $60.7 million of jumbo certificates of
deposit, including $9.8 million in public unit funds which represents 2.5% of
total deposits at March 31, 2001.  EverTrust Bank is also authorized to
utilize brokered deposits as a funding source, but has not done so to date.
Management believes that its jumbo certificates of deposit and the use of
brokered deposits present similar interest rate risk to its other deposit
products.

                                     22

<PAGE>




    The following table sets forth information concerning the Bank's time
deposits and other non-interest and interest-bearing deposits at March 31,
2001.

Weighted
Average                                                             Percentage
Interest                                                   Minimum   of Total
 Rate   Term            Category                Amount     Balance   Deposits
 ----   ----            --------                ------     -------   --------
                                              (In thousands)

--%     N/A             Non-interest bearing    $  8,462       --      2.1%
                           accounts
2.8     N/A             Savings accounts          10,867      300      2.7
2.2     N/A             Checking accounts         37,942      300      9.5
4.3     N/A             Money market deposit     127,009    1,000     31.9
                           accounts

                        Certificates of Deposit
                        -----------------------

5.7     1-11 months     Fixed-term, fixed-rate    36,041      500      9.1
6.2     12-23 months    Fixed-term, fixed-rate    83,641      500     21.0
5.9     24-35 months    Fixed-term, fixed-rate    23,601      500      5.9
5.9     36-59 months    Fixed-term, fixed-rate    17,500      500      4.4
6.3     60-84 months    Fixed-term, fixed rate    62,580      500     13.2
                                                --------            ------
                          TOTAL                 $397,643            100.00%
                                                ========            ======

     The following table indicates the amount of the Bank's jumbo certificates
of deposit by time remaining until maturity as of March 31, 2001.  Jumbo
certificates of deposit are certificates in amounts of $100,000 or more.

                                      Certificates
     Maturity Period                  of Deposits
     ---------------                  -----------
                                     (In thousands)

     Three months or less.............   $18,844
     Over three through six months....    11,534
     Over six through twelve months...    10,928
     Over twelve months...............    19,346
                                         -------
       Total..........................   $60,652
                                         =======

                                   23

<PAGE>



<TABLE>

      Deposit Flow.  The following table sets forth the balances of savings deposits in the various types of
savings accounts offered by the Bank at the dates indicated.


                                                                   At March 31,
                               ----------------------------------------------------------------------------
                                          2001                         2000                      1999
                               ----------------------------   ---------------------------   ---------------
                                        Percent                       Percent                       Percent
                                           of     Increase               of     Increase              of
                               Amount    Total   (Decrease)   Amount   Total   (Decrease)   Amount   Total
                               ------    -----   ----------   ------   -----   ----------   ------   -----
                                                               (Dollars in thousands)
<S>                           <C>        <C>      <C>       <C>         <C>      <C>      <C>        <C>

Savings accounts...........   $ 10,867    2.73%   $   344   $ 10,523    2.75%  $ (1,275)   $ 11,798    3.14%
Demand deposit accounts....     46,404   11.67      1,790     44,614   11.65      3,177      41,437   11.02
Money market deposit
  accounts.................    127,010   31.94     (2,512)   129,522   33.82     (4,226)    133,748   35.58
Fixed-rate certificates which
 mature in the year ending:
  Within 1 year............    140,734   35.39      8,324    132,410   34.57      6,487     125,923   33.50
  After 1 year, but
    within 2 years.........     26,500    6.66      2,398     24,102    6.29     (4,084)     28,186    7.50
  After 2 years, but
    within 5 years.........     36,656    9.22     (3,131)    39,787   10.39      7,546      32,241    8.58
  Certificates maturing
    thereafter.............      9,472    2.38      7,444      2,028    0.53       (535)      2,563    0.68
                              --------  ------    -------   --------  ------   --------    --------  ------
     Total.................   $397,643  100.00%   $14,657   $382,986  100.00%  $  7,090    $375,896  100.00%
                              ========  ======    =======   ========  ======   ========    ========  ======
</TABLE>
                                                                       24

<PAGE>



     Deposit Accounts.  Deposit accounts consisted of the following at the
dates indicated:

                            Weighted
                          Average Rate      2001               20000
                          at March 31, ---------------    ---------------
                             2001      Amount      %      Amount      %
                             ----      ------    -----    ------    -----
                                             (Dollars in thousands)

Noninterest-bearing
 accounts..............       --%     $  8,462    2.1%   $  7,902    2.1%
Savings accounts.......      2.8        10,867    2.7      10,523    2.7
Checking accounts......      2.2        37,942    9.5      36,712    9.6
Money market accounts..      4.3       127,009   31.9     129,522   33.8
Time deposits:
  1 to 11 months.......      5.7        36,041    9.1      32,200    8.4
  12 to 23 months......      6.2        83,641   21.0      77,273   20.2
  24 to 35 months......      5.9        23,601    5.9      22,827    6.0
  36 to 59 months......      5.9        17,500    4.4      17,899    4.7
  60 to 84 months......      6.3        52,580   13.2      48,128   12.5
                             ---      --------  -----    --------  -----
                             6.1       213,363   53.7     198,327   51.8
                             ---      --------  -----    --------  -----
                             4.9%     $397,643  100.0%   $382,986  100.0%
                             ===      ========  =====    ========  =====
     Time Deposits by Rates.  The following table sets forth the time deposits
of the Bank classified by rates for the periods indicated.

                                              Year Ended March 31,
                                       ----------------------------------
                                       2001          2000         1999
                                       ----          ----         ----
                                                (In thousands)

0.00 - 0.99%....................... $    409       $    200      $    273
1.00 - 1.99%.......................       --             85             1
2.00 - 2.99%.......................      359            118           374
3.00 - 3.99%.......................       --            100            79
4.00 - 4.99%.......................    2,551          8,158        44,666
5.00 - 5.99%.......................   74,649        130,296       106,603
6.00 - 6.99%.......................  132,191         58,553        33,282
7.00 - 7.99%.......................    3,194            817         3,621
8.00 - 8.99%.......................       10             --            14
                                    --------       --------      --------
     Total......................... $213,363       $198,327      $188,913
                                    ========       ========      ========

                                     25

<PAGE>




     Time Deposits by Maturities.  The following table sets forth the amount
and maturities of time deposits at March 31, 2001.

                                                Amount Due
                       ------------------------------------------------------
                       Less Than    1-2      2-3      3-4    After
                       One Year    Years    Years    Years  4 Years    Total
                       --------    -----    -----    -----  -------    -----
                                          (In thousands)
0.00 - 0.99%.........  $    309  $    --  $   100  $    --  $    --  $    409
1.00 - 1.99%.........        --       --       --       --       --        --
2.00 - 2.99%.........       359       --       --       --       --       359
3.00 - 3.99%.........        --       --       --       --       --        --
4.00 - 4.99%.........     1,091      961       60      416       23     2,551
5.00 - 5.99%.........    21,135   18,573   10,424    8,554   15,963    74,649
6.00 - 6.99%.........    13,138   63,747   13,017    6,468   35,821   132,191
7.00 - 7.99%.........        --      360       --       --    2,835     3,194
8.00 - 8.99%.........        10       --       --       --       --        10
                       --------  -------  -------  -------  -------  --------
     Total...........  $ 36,042  $83,641  $23,601  $15,438  $54,642  $213,363
                       ========  =======  =======  =======  =======  ========

     Deposit Activities.  The following table sets forth the savings
activities of the Bank for the periods indicated.

                                             Year Ended March 31,
                                          --------------------------
                                          2001       2000       1999
                                          ----       ----       ----
                                               (In thousands)


Beginning balance....................  $382,986    $375,896   $350,971
Net deposits (withdrawals) before
  interest credited..................    (4,512)    (10,234)     8,170
Interest credited....................    19,169      17,324     16,755
Net increase in deposits.............    14,657       7,090     24,925
                                       --------    --------   --------
Ending balance.......................  $397,643    $382,986   $375,896
                                       ========    ========   ========

     Borrowings.  Deposits are the primary source of funds for EverTrust
Bank's lending and investment activities and for general business purposes.
EverTrust Bank has the ability to use advances from the FHLB of  Seattle to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements.  The FHLB of Seattle functions as a central reserve bank
providing credit for savings and loan associations and certain other member
financial institutions.  As a member of the FHLB of Seattle, EverTrust Bank is
required to own capital stock in the FHLB of Seattle and is authorized to
apply for advances on the security of such stock and certain of its mortgage
loans and other assets (principally securities which are obligations of, or
guaranteed by, the U.S.  Government) provided certain creditworthiness
standards have been met.  Advances are made pursuant to several different
credit programs.  Each credit program has its own interest rate and range of
maturities.  Depending on the program, limitations on the amount of advances
are based on the financial condition of the member institution and the
adequacy of collateral pledged to secure the credit.  At March 31, 2001, the
Bank maintained a committed credit facility with the FHLB of Seattle that
provided for immediately available advances up to an aggregate of 35% of total
assets, or $205 million, of which $67.2 million was outstanding.  In addition,
EverTrust Bank has a $25 million unsecured Fed Funds line from a commercial
bank at March 31, 2001, of which none was outstanding at March 31, 2001 and a
$13 million repurchase agreement with a securities dealer.

                                      26

<PAGE>



     The following table sets forth information regarding FHLB advances by
EverTrust Bank at the end of and during the periods indicated.  The table
includes both short-term and long-term borrowings unless noted otherwise.
During the year ended March 31, 2001, borrowings increased primarily to fund
loan growth.

                                           For the Year Ended March 31,
                                           ---------------------------
                                            2001       2000       1999
                                            ----       ----       ----
                                              (Dollars in thousands)

Maximum amount of borrowings outstanding
 at any month end......................... $80,344    $34,423   $20,954

Approximate average borrowings
 outstanding.............................. $59,211    $19,417   $16,215

Approximate weighted average rate paid....    6.55%      6.13%     6.30%

                                                    At March 31,
                                            --------------------------
                                            2001        2000      1999
                                            ----        ----      ----
                                              (Dollars in thousands)

Balance outstanding at end of period...... $80,344    $34,423   $18,949

Weighted average rate paid................    6.31%      6.25%     6.19%


Subsidiary Activities

     Subsidiaries of the Company.  The Company owns three subsidiaries:
EverTrust Bank, I-Pro, Inc. and Mutual Bancshares Capital, Inc.  The following
is a discussion of the business of  I-Pro, Inc. and Mutual Bancshares Capital,
Inc.

     Business of I-Pro, Inc.
     -----------------------

     I-Pro was formed in April 1997 to provide check processing and deposit
and loan account statement printing and mailing services to banking and
nonbanking companies.  I-Pro's objective is to provide these services for
EverTrust Bank, and to other financial institutions who are seeking to provide
a high level of service to their customers in response to requests for copies
of checks, account statements and other similar records.  I-Pro utilizes
electronic imaging technology, versus a traditional paper-based processing and
retrieval system, to deliver account research, check processing, and
customized account statements to its clients and their customers.  At March
31, 2001, the sole client of I-Pro was EverTrust Bank.

     Business of Mutual Bancshares Capital, Inc.
     -------------------------------------------

     Overview.  Mutual Bancshares Capital, Inc. was formed in October 1998.
Mutual Bancshares Capital, Inc. is a member of Bancshares Capital Management,
LLC, which serves as General Partner to Bancshares Capital, L.P., an early
stage venture fund providing equity to regionally based high technology and
health related companies.  Bancshares Capital, L.P. is licensed by the  U.S.
Small Business Administration as a small business investment company (SBIC).
Bancshares Capital, L.P. manages a fund of $3.4 million, $2.3 million of which
will be invested by Mutual Bancshares Capital, Inc.  A number of directors and
officers of Mutual Bancshares Capital, Inc. are also limited partners.  A
second fund is expected to be formed in the future.

     There are limitations on the amount the Company and EverTrust Bank may
invest in SBIC activities.  Federal regulations permit each bank to invest up
to 5% of its capital and surplus in SBICs.  The Company's investments in

                                     27

<PAGE>



SBICs may not exceed 5% of its proportionate interest in the capital and
surplus of the bank having an investment in a SBIC, less the bank's investment
in stock of SBICs.  Also, the Company may not acquire control of 50% or more
of the shares of any class of equity securities of an SBIC that have voting
rights.

     Investment Strategy.  Bancshares Capital, L.P. will provide equity to
regionally based high technology companies in the seed, start-up and early
stages of development.  Bancshares Capital, L.P. will closely monitor and, if
possible, add value to those investments, with successful ventures returning
cash to the fund over an anticipated three to seven year time frame.  It is
anticipated that liquidity of the investment will result from acquisition of
securities by a strategic partner, merger or acquisition of the subject
investment, or by sale of the subject investment in the public markets
following an initial public offering.  It is anticipated that the investment
in any single company will be in the range of $100,000 to $1.0 million and
Bancshares Capital, L.P. may co-invest with other entrepreneurs or venture
funds as needed or desired.  Given the nature of venture capital investing,
there can be no assurance that the stated investment strategy will be
successful.

     Subsidiaries of EverTrust Bank.  Sound Financial, Inc. is a wholly-owned
subsidiary of EverTrust Bank.  Sound Financial, Inc. has two principal
activities: it owns the Arlington Branch and leases the facility back to
EverTrust Bank; and through a turnkey contract with Invest Financial Services,
it sells annuities, stocks, bonds and mutual funds.  Sound Financial, Inc.
currently operates with two full time registered investment representatives.

     The Bank formed a Washington chartered trust company, EverTrust Asset
Management, in March 2001, which was capitalized on May 1, 2001.  EverTrust
Asset Management exercises personal trust powers, with the primary emphasis on
investment management.  In connection with the organization of EverTrust Asset
Management, the Bank  assembled a team of highly qualified individuals and
firms experienced in trust operations, trust related legal counsel and
regulatory compliance.

Charitable Foundation

     The EverTrust Foundation also is a charitable organization which was
established in 1999 in connection with the Conversion.  The EverTrust
Foundation was initially funded by the Company with cash and stock from the
Conversion.  On November 15, 2000 the Everett Mutual Foundation, a charitable
organization established in 1990 and funded by EverTrust Bank and the Company,
merged into the EverTrust Foundation.  At March 31, 2001, The EverTrust
Foundation had $9.3 million in assets.  The assets, liabilities, income and
expenses of the foundation are not included in the Consolidated Financial
Statements contained herein as they are not part of the Company.

                            REGULATION

The Bank

     General.  As a state-chartered, federally insured financial institution,
EverTrust Bank is subject to extensive regulation.  Lending activities and
other investments must comply with various statutory and regulatory
requirements, including prescribed minimum capital standards.  EverTrust Bank
is regularly examined by the FDIC and its state banking regulators and file
periodic reports concerning its activities and financial condition with its
regulators.  EverTrust Bank's relationship with depositors and borrowers also
is regulated to a great extent by both federal and state law, especially in
such matters as the ownership of savings accounts and the form and content of
mortgage documents.

     Federal and state banking laws and regulations govern all areas of the
operation of EverTrust Bank, including reserves, loans, mortgages, capital,
issuance of securities, payment of dividends and establishment of branches.
Federal and state bank regulatory agencies also have the general authority to
limit the dividends paid by insured banks and bank holding companies if such
payments should be deemed to constitute an unsafe and unsound practice.  The
respective primary federal regulators of the Company and EverTrust Bank have
authority to impose penalties, initiate civil and administrative actions and
take other steps intended to prevent banks from engaging in unsafe or unsound
practices.

                                   28

<PAGE>



     State Regulation and Supervision.  As a state-chartered savings bank,
EverTrust Bank is subject to applicable provisions of Washington law and
regulations.   State law and regulations govern EverTrust Bank's ability to
take deposits and pay interest thereon, to make loans on or invest in
residential and other real estate, to make consumer loans, to invest in
securities, to offer various banking services to its customers, and to
establish branch offices.  Under state law, savings banks in Washington also
generally have all of the powers that federal mutual savings banks have under
federal laws and regulations.  EverTrust Bank is subject to periodic
examination and reporting requirements by and of its state banking regulators.

     Deposit Insurance.  The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of depository
institutions.  The FDIC currently maintains two separate insurance funds: the
Bank Insurance Fund and the Savings Association Insurance Fund.  EverTrust
Bank's accounts are insured by the Bank Insurance Fund to the maximum extent
permitted by law.   As insurer of EverTrust Bank's deposits, the FDIC has
examination, supervisory and enforcement authority over EverTrust Bank.

     The FDIC has established a risk-based system for setting deposit
insurance assessments.  Under the risk-based assessment system, an
institution's insurance assessment varies according to the level of capital
the institution holds, the balance of insured deposits during the preceding
two quarters, and the degree to which it is the subject of supervisory
concern.  In addition, regardless of the potential risk to the insurance fund,
federal law requires the ratio of reserves to insured deposits at $1.25 per
$100.  Both funds currently meet this reserve ratio.  Since 1997, the
assessment rate for both SAIF and BIF deposits ranged from zero to 0.27% of
covered deposits.  As a well capitalized bank, EverTrust Bank qualified for
the lowest rate on its deposits for 2000.

     In addition to deposit insurance assessments, the FDIC is authorized to
collect assessments against insured deposits to be paid to the Financing
Corporation ("FICO") to service FICO debt incurred in the 1980s to help fund
the thrift industry cleanup.  The FICO assessment rate is adjusted quarterly.

     Prior to 2000, the FICO assessment rate for BIF-insured deposits was
one-fifth the rate applicable to deposits insured by the SAIF.  Beginning in
2000, SAIF- and BIF-insured deposits were assessed at the same rate by FICO.
As a result, BIF FICO assessments will be higher than in previous periods
while SAIF FICO assessments will be lower.  For the first quarter of 2001, the
annualized rate was 1.96 cents per $100 of insured deposits.  Because the Bank
is insured under the BIF fund, the FICO assessments have increased for 2000 as
compared to prior years.

     The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged
or is engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law,
regulation, order or any condition imposed by an agreement with the FDIC.  It
also may suspend deposit insurance temporarily during the hearing process for
the permanent termination of insurance, if the institution has no tangible
capital.  If insurance of accounts is terminated, the accounts at the
institution at the time of termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances that could
result in termination of the deposit insurance of EverTrust Bank.

     Prompt Corrective Action. The FDIC is required to take certain
supervisory actions against undercapitalized savings institutions, the
severity of which depends upon the institution's degree of
undercapitalization.  Generally, an institution that has a ratio of total
capital to risk-weighted assets of less than 8%, a ratio of Tier I (core)
capital to risk-weighted assets of less than 4%, or a ratio of core capital to
total assets of less than 4% (3% or less for institutions with the highest
examination rating) is considered to be undercapitalized.  An institution that
has a total risk-based capital ratio less than 6%, a Tier I capital ratio of
less than 3% or a leverage ratio that is less than 3% is considered to be
significantly undercapitalized and an institution that has a tangible capital
to assets ratio equal to or less than 2% is deemed to be critically
undercapitalized.  Subject to a narrow exception, the FDIC is required to
appoint a receiver or conservator for a savings institution that is critically
undercapitalized. FDIC regulations also require that a capital restoration
plan be filed with the FDIC within 45 days of the date a savings institution
receives notice that it is

                                   29

<PAGE>



undercapitalized, significantly undercapitalized or critically
undercapitalized.  Compliance with the plan must be guaranteed by any parent
holding company in an amount of up to the lesser of 5% of the institution's
assets or the amount which would bring the institution into compliance with
all capital standards.  In addition, numerous mandatory supervisory actions
become immediately applicable to an undercapitalized institution, including,
but not limited to, increased monitoring by regulators and restrictions on
growth, capital distributions and expansion.  The FDIC also could take any one
of a number of discretionary supervisory actions, including the issuance of a
capital directive and the replacement of senior executive officers and
directors.

     At March 31, 2001, EverTrust Bank was categorized as "well capitalized"
under the prompt corrective action regulations of the FDIC.

     Standards for Safety and Soundness.  The federal banking regulatory
agencies have prescribed, by regulation, guidelines for all insured depository
institutions relating to: internal controls, information systems and internal
audit systems;  loan documentation; credit underwriting;  interest rate risk
exposure; asset growth; asset quality;  earnings and compensation, fees and
benefits.  The guidelines set forth the safety and soundness standards that
the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired.  If the FDIC
determines that EverTrust Bank fails to meet any standard prescribed by the
guidelines, the agency may require the Bank to submit to the agency an
acceptable plan to achieve compliance with the standard.  FDIC regulations
establish deadlines for the submission and review of such safety and soundness
compliance plans.

     Capital Requirements. FDIC regulations recognize two types or tiers of
capital: core ("Tier 1") capital and supplementary ("Tier 2") capital.  Tier 1
capital generally includes common stockholders' equity and noncumulative
perpetual preferred stock, less most intangible assets.  Tier 2 capital, which
is limited to 100 percent of Tier 1 capital, includes such items as qualifying
general loan loss reserves, cumulative perpetual preferred stock, mandatory
convertible debt, term subordinated debt and limited life preferred stock;
however, the amount of term subordinated debt and intermediate term preferred
stock (original maturity of at least five years but less than 20 years) that
may be included in Tier 2 capital is limited to 50 percent of Tier 1 capital.

     The FDIC currently measures an institution's capital using a leverage
limit together with certain risk-based ratios.  The FDIC's minimum leverage
capital requirement specifies a minimum ratio of Tier 1 capital to average
total assets.  Most banks are required to maintain a minimum leverage ratio of
at least 4% to 5% of total assets.  The FDIC retains the right to require a
particular institution to maintain a higher capital level based on an
institution's particular risk profile.  EverTrust Bank calculated its leverage
ratio to be 14.1% as of March 31, 2001.

     FDIC regulations also establish a measure of capital adequacy based on
ratios of qualifying capital to risk-weighted assets.  Assets are placed in
one of four categories and given a percentage weight -- 0%, 20%, 50% or 100%
-- based on the relative risk of that category.  In addition, certain
off-balance-sheet items are converted to balance-sheet credit equivalent
amounts, and each amount is then assigned to one of the four categories.
Under the guidelines, the ratio of total capital (Tier 1 capital plus Tier 2
capital) to risk-weighted assets must be at least 8%, and the ratio of Tier 1
capital to risk-weighted assets must be at least 4%. EverTrust Bank has
calculated its total risk-based ratio to be 16.5% as of March 31, 2001, and
its Tier 1 risk-based capital ratio to be15.3%.   In evaluating the adequacy
of a bank's capital, the FDIC may also consider other factors that may affect
a bank's financial condition.  Such factors may include interest rate risk
exposure, liquidity, funding and market risks, the quality and level of
earnings, concentration of credit risk, risks arising from nontraditional
activities, loan and investment quality, the effectiveness of loan and
investment policies, and management's ability to monitor and control financial
operating risks.

     Federal statutes establish a supervisory framework based on five capital
categories:  well capitalized, adequately  capitalized,  undercapitalized,
significantly  undercapitalized  and  critically  undercapitalized.  An
institution's category depends upon where its capital levels are in relation
to relevant capital measure, which include a risk-based capital measure, a
leverage ratio capital measure, and certain other factors.  The federal
banking agencies have adopted regulations that implement this statutory
framework.  Under these regulations, an institution is treated as well
capitalized

                                   30

<PAGE>



if its ratio of total capital to risk-weighted assets is 10% or more, its
ratio of core capital to risk-weighted assets is 6% or more, its ratio of core
capital to adjusted total assets is 5% or more, and it is not subject to any
federal supervisory order or directive to meet a specific capital level.  In
order to be adequately capitalized, an institution must have a total
risk-based capital ratio of not less than 8%, a Tier 1 risk-based capital
ratio of not less than 4%, and a leverage ratio of not less than 4%.  Any
institution which is neither well capitalized nor adequately capitalized will
be considered undercapitalized.

     Undercapitalized  institutions are subject to certain prompt corrective
action requirements, regulatory controls and restrictions which become more
extensive as an institution becomes more severely undercapitalized.  Failure
by the Bank to comply with applicable capital requirements would, if
unremedied, result in restrictions on its activities and lead to enforcement
actions including, but not limited to, the issuance of a capital directive to
ensure the maintenance of required capital levels.  Banking regulators will
take prompt corrective action with respect to depository institutions that do
not meet minimum capital requirements.  Additionally, approval of any
regulatory application filed for their review may be dependent on compliance
with capital requirements.

     FDIC capital requirements are designated as the minimum acceptable
standards for banks whose overall financial condition is fundamentally sound,
which are well-managed and have no material or significant financial
weaknesses.  The FDIC capital regulations state that, where the FDIC
determines that the financial history or condition, including off-balance
sheet risk, managerial resources and/or the future earnings prospects of a
bank are not adequate and/or a bank has a significant volume of assets
classified substandard, doubtful or loss or otherwise criticized, the FDIC may
determine that the minimum adequate amount of capital for that bank is greater
than the minimum standards established in the regulation.

     The table below sets forth EverTrust Bank's capital position relative to
the FDIC capital requirements at March 31, 2001.  The definitions of the terms
used in the table are those provided in the capital regulations issued by the
FDIC.

                                                   At March 31, 2001
                                              ----------------------------
                                                       Percent of Adjusted
                                              Amount     Total Assets(1)
                                              ------     ---------------
                                          (In thousands)

Tier 1 (leverage) capital..................   $79,333         14.06%
Tier 1 (leverage) capital requirement......    22,570          4.00
                                              -------         -----
Excess.....................................   $56,763         10.06%
                                              =======         =====

Tier 1 risk adjusted capital...............   $79,333         15.26%
Tier 1 risk adjusted capital requirement...    20,795          4.00
                                              -------         -----
Excess.....................................   $58,538         11.26%
                                              =======         =====

Total risk-based capital...................   $85,843         16.51%
Total risk-based capital requirement.......    41,596          8.00
                                              -------         -----
Excess.....................................   $44,247          8.51%
                                              =======         =====

---------------
(1)  For the Tier 1 (leverage) capital and regulatory capital calculations,
     percent of total average assets of $607.6 million for EverTrust Bank.
     For the Tier 1 risk-based capital and total risk-based capital
     calculations, percent of total risk-weighted assets of $603.8 million
     for EverTrust Bank.

     The Company believes that, under the current regulations, EverTrust Bank
will continue to meet its minimum capital requirements in the foreseeable
future.  However, events beyond the control of EverTrust Bank, such as a

                                   31

<PAGE>



downturn in the economy in areas where EverTrust Bank has most of its loans,
could adversely affect future earnings and, consequently, the ability of
EverTrust Bank to meet its capital requirements.

     Activities and Investments of Insured State-Chartered Banks.  Federal law
generally limits the activities and equity investments of FDIC-insured,
state-chartered banks to those that are permissible for national banks.  Under
regulations dealing with equity investments, an insured state bank generally
may not directly or indirectly acquire or retain any equity investment of a
type, or in an amount, that is not permissible for a national bank.  An
insured state bank is not prohibited from, among other things, acquiring or
retaining a majority interest in a subsidiary,  investing as a limited partner
in a partnership the sole purpose of which is direct or indirect investment in
the acquisition, rehabilitation or new construction of a qualified housing
project, provided that such limited partnership investments may not exceed 2%
of the bank's total assets, acquiring up to 10% of the voting stock of a
company that solely provides or reinsures directors', trustees' and officers'
liability insurance coverage or bankers' blanket bond group insurance coverage
for insured depository institutions, and acquiring or retaining the voting
shares of a depository institution if certain requirements are met.

     Federal law provides that an insured state-chartered bank may not,
directly, or indirectly through a subsidiary, engage as "principal" in any
activity that is not permissible for a national bank unless the FDIC has
determined that such activities would pose no risk to the insurance fund of
which it is a member and the bank is in compliance with applicable regulatory
capital requirements.  Any insured state-chartered bank directly or indirectly
engaged in any activity that is not permitted for a national bank must cease
the impermissible activity.

      Federal Home Loan Bank System.  The FHLB of Seattle serves as a reserve
or central bank for the member institutions within its assigned region. It is
funded primarily from proceeds derived from the sale of consolidated
obligations of the FHLBs. It makes loans (i.e., advances) to members in
accordance with policies and procedures established by the Federal Housing
Finance Board and the Board of Directors of the FHLB of Seattle.  As a member,
EverTrust Bank is required to purchase and hold stock in the FHLB of Seattle
in an amount equal to the greater of 1% of its aggregate unpaid home loan
balances at the beginning of the year or an amount equal to 5% of FHLB
advances outstanding.  As of March 31, 2001, EverTrust Bank held stock in the
FHLB of Seattle in the amount of $4.7 million and  had advances totaling $66.6
million, which mature in 2001 through 2020 at interest rates ranging from 4.5%
to 7.4%.   See "Business -- Deposit Activities and Other Sources of Funds --
Borrowings."

      Federal Reserve System.  The Federal Reserve Board requires under
Regulation D that all depository institutions, including savings banks,
maintain reserves on transaction accounts or non-personal time deposits.
These reserves may be in the form of cash or non-interest-bearing deposits
with the regional Federal Reserve Bank.  Negotiable order of withdrawal
accounts and other types of accounts that permit payments or transfers to
third parties fall within the definition of transaction accounts and are
subject to Regulation D reserve requirements, as are any non-personal time
deposits at a savings bank.  Under Regulation D, a bank must maintain reserves
against net transaction accounts in the amount of 3% on amounts of $37.3
million or less, plus 10% on amounts in excess of $37.3 million.  In addition,
a bank may designate and exempt $5.0 million of certain reservable liabilities
from these reserve requirements.  These amounts and percentages are subject to
adjustment by the Federal Reserve.  The reserve requirement on non-personal
time deposits with original maturities of less than 1.5 years is 0%.  As of
March 31, 2001, EverTrust Bank's  deposit with the Federal Reserve Bank and
vault cash exceeded its reserve requirements.

      Affiliate Transactions.  The Company, EverTrust Bank, I-Pro, Inc. and
Mutual Bancshares Capital, Inc. are legal entities separate and distinct.
Various legal limitations restrict EverTrust Bank from lending or otherwise
supplying funds to the Company, which is an affiliate of its  financial
institution subsidiary.  These restrictions generally limit such transactions
with the affiliate to 10% of the bank's capital and surplus and limiting all
such transactions to 20% of the bank's capital and surplus. Such transactions,
including extensions of credit, sales of securities or assets and provision of
services, also must be on terms and conditions consistent with safe and sound
banking practices, including credit standards, that are substantially the same
or at least as favorable to EverTrust Bank as those prevailing at the time for
transactions with unaffiliated companies.

                                   32

<PAGE>




     Federally insured banks are subject, with certain exceptions, to certain
restrictions on extensions of credit to their parent holding companies or
other affiliates, on investments in the stock or other securities of
affiliates and on the taking of such stock or securities as collateral from
any borrower.  In addition, such banks are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit or the
providing of any property or service.

     Community Reinvestment Act.  Banks are also subject to the provisions of
the Community Reinvestment Act of 1977, which requires the appropriate federal
bank regulatory agency, in connection with its regular examination of a bank,
to assess the bank's record in meeting the credit needs of the community
serviced by the bank, including low and moderate income neighborhoods. The
regulatory agency's assessment of the bank's record is made available to the
public.  Further, such assessment is required of any bank which has applied,
among other things, to establish a new branch office that will accept
deposits, relocate an existing office or merge or consolidate with, or acquire
the assets or assume the liabilities of, a federally regulated financial
institution.

     Dividends.  Dividends from EverTrust Bank constitute the major source of
funds for dividends which are paid by the Company.  The amount of dividends
payable by EverTrust Bank to the Company will depend upon EverTrust Bank's
earnings and capital position, and is limited by federal and state laws,
regulations and policies.

     EverTrust Bank is subject to restrictions imposed by Federal law.
Federal law provides that no insured depository institution may make any
capital distribution, which would include a cash dividend, if, after making
the distribution, the institution would be "undercapitalized," as defined in
the prompt corrective action regulations.  Moreover, the federal bank
regulatory agencies also have the general authority to limit the dividends
paid by insured banks if such payments should be deemed to constitute an
unsafe and unsound practice.

The Company

     General.  The Company is a financial holding company registered with the
Federal Reserve.  Bank holding companies are subject to comprehensive
regulation by the Federal Reserve under the Bank Holding Company Act of 1956,
as amended, and the regulations of the Federal Reserve. The Company is
required to file with the Federal Reserve quarterly reports and such
additional information as the Federal Reserve may require and is subject to
regular examinations by the Federal Reserve.  The Federal Reserve also has
extensive enforcement authority over bank holding companies, including, among
other things, the ability to assess civil money penalties, to issue cease and
desist or removal orders and to require that a holding company divest
subsidiaries, including its bank subsidiaries.  In general, enforcement
actions may be initiated for violations of law and regulations and unsafe or
unsound practices.

     New Legislation.  On November 12, 1999, President Clinton signed into law
the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 ("GLB
Act"), federal legislation intended to modernize the financial services
industry by establishing a comprehensive framework to permit affiliations
among commercial banks, insurance companies, securities firms and other
financial service providers. Generally, the GLB ct:

     (1)  repeals the historical restrictions and eliminates many federal and
          state law barriers to affiliations among banks, securities firms,
          insurance companies and other financial service providers;

     (2)  provides a uniform framework for the functional regulation of the
          activities of banks, savings institutions and their holding
          companies;

     (3)  broadens the activities that may be conducted by national banks,
          banking subsidiaries of bank holding companies and their financial
          subsidiaries;

     (4)  provides an enhanced framework for protecting the privacy of
          consumer information;

                                   33

<PAGE>



     (5)  adopts a number of provisions related to the capitalization,
          membership, corporate governance and other measures designed to
          modernize the FHLB system;

     (6)  modifies the laws governing the implementation of the Community
          Reinvestment Act; and

     (7)  addresses a variety of other legal and regulatory issues affecting
          day-to-day operations and long-term activities of financial
          institutions.

     The enactment of the GLB Act expanded the structural options available to
bank holding companies, such as the Company, and other financial institutions,
to permit them to engage in banking and other financial activities.
Specifically, the GLB Act provides for the establishment of a new financial
holding company.

     The GLB Act permits qualifying companies that own a bank, "financial
holding companies," to also own companies that engage in securities
underwriting and dealing, insurance agency and underwriting, merchant banking
or venture capital activities, the distribution of mutual funds, and
securities lending. Financial holding companies may hold any type of
deposit-taking subsidiary, including a national bank, a state chartered bank,
or a thrift or savings bank. To qualify as a financial holding company,
however, each of the company's deposit-taking subsidiaries must be well
capitalized,  well managed and have at least a "satisfactory" rating under the
Community Reinvestment Act.

     In April 2000, the Company notified the Federal Reserve of its election
to become a financial holding company.  The Federal Reserve declared this
election to be effective May 12, 2000.

     Acquisitions.  Under the Bank Holding Company Act, a bank holding company
must obtain Federal Reserve approval before:  acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank
holding company if, after such acquisition, it would own or control more than
5% of such shares, unless it already owns or controls the majority of such
shares; acquiring all or substantially all of the assets of another bank or
bank holding company; or  merging or consolidating with another bank holding
company.

     The Bank Holding Company Act also prohibits a bank holding company, with
certain exceptions, from acquiring direct or indirect ownership or control of
more than 5% of the voting shares of any company that is not a bank or bank
holding company and from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or providing services
for its subsidiaries.  The principal exceptions to these prohibitions involve
certain nonbank activities which, by statute or by Federal Reserve regulation
or order, have been identified as activities closely related to the business
of banking or managing or controlling banks.  The list of activities permitted
by the Federal Reserve includes, among other things:  operating a savings
institution, mortgage company, finance company, credit card company or
factoring company; performing certain data processing operations; providing
certain investment and financial advice; underwriting and acting as an
insurance agent for certain types of credit-related insurance; leasing
property on a full-payout, non-operating basis; selling money orders,
travelers' checks and U.S. Savings Bonds; real estate and personal property
appraising; providing tax planning and preparation services; and, subject to
certain limitations, providing securities brokerage services for customers.

     Interstate Banking and Branching.  The Federal Reserve must approve an
application of an adequately capitalized and adequately managed bank holding
company to acquire control of, or acquire all or substantially all of the
assets of, a bank located in a state other than such holding company's home
state, without regard to whether the transaction is prohibited by the laws of
any state.  The Federal Reserve may not approve the acquisition of a bank that
has not been in existence for the minimum time period, not exceeding five
years, specified by the statutory law of the host state.  Nor may the Federal
Reserve approve an application if the applicant, and its depository
institution affiliates, controls or would control more than 10% of the insured
deposits in the United States or 30% or more of the deposits in the target
bank's home state or in any state in which the target bank maintains a branch.
Federal law does not affect the authority of states to limit the percentage of
total insured deposits in the state which may be held or controlled by

                                   34

<PAGE>



a bank holding company to the extent such limitation does not discriminate
against out-of-state banks or bank holding companies.  Individual states may
also waive the 30% state-wide concentration limit contained in the federal
law.

     The Federal banking agencies are authorized to approve interstate merger
transactions without regard to whether such transaction is prohibited by the
law of any state, unless the home state of one of the banks adopted a law
prior to June 1, 1997 which applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks.
Interstate acquisitions of branches will be permitted only if the law of the
state in which the branch is located permits such acquisitions.  Interstate
mergers and branch acquisitions will also be subject to the nationwide and
statewide insured deposit concentration amounts described above.

     Dividends.  The Federal Reserve has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the
Federal Reserve's view that a bank holding company should pay cash dividends
only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention
that is consistent with the company's capital needs, asset quality and overall
financial condition.  The Federal Reserve also indicated that it would be
inappropriate for a company experiencing serious financial problems to borrow
funds to pay dividends.

     Stock Repurchases.  Bank holding companies, except for certain
"well-capitalized" and highly rated bank holding companies, are required to
give the Federal Reserve prior written notice of any purchase or redemption of
its outstanding equity securities if the gross consideration for the purchase
or redemption, when combined with the net consideration paid for all such
purchases or redemptions during the preceding 12 months, is equal to 10% or
more of their consolidated net worth.  The Federal Reserve may disapprove such
a purchase or redemption if it determines that the proposal would constitute
an unsafe or unsound practice or would violate any law, regulation, Federal
Reserve order, or any condition imposed by, or written agreement with, the
Federal Reserve.

     Capital Requirements.  The Federal Reserve has established capital
adequacy guidelines for bank holding companies that generally parallel the
capital requirements of the FDIC for EverTrust Bank.  The Federal Reserve
regulations provide that capital standards will be applied on a consolidated
basis in the case of a bank holding company with $150 million or more in total
consolidated assets.

     The Company's total risk based capital must equal 8% of risk-weighted
assets and one half of the 8%, or  4%, must consist of Tier 1 (core) capital.
As of March 31, 2001, the Company's total risk based capital was 23.7% of
risk-weighted assets and its risk based capital of Tier 1 (core) capital was
22.5% of risk-weighted assets.

                                  TAXATION

Federal Taxation

     General.  The Company and its subsidiaries report their income on a
fiscal year basis using the accrual method of accounting and will be subject
to federal income taxation in the same manner as other corporations with some
exceptions, including particularly EverTrust Bank's reserve for bad debts
discussed below.  The following discussion of tax matters is intended only as
a summary and does not purport to be a comprehensive description of the tax
rules applicable to EverTrust Bank or the Company.

     Bad Debt Reserve.  Historically, savings institutions such as EverTrust
Bank which met certain definitional tests primarily related to its assets and
the nature of its business ("qualifying thrift") were permitted to establish a
reserve for bad debts and to make annual additions thereto, which may have
been deducted in arriving at its taxable income.  EverTrust Bank's deductions
with respect to "qualifying real property loans," which are generally loans
secured by certain interest in real property, were computed using an amount
based on EverTrust Bank's actual loss experience, or a percentage equal to 8%
of EverTrust Bank's taxable income, computed with certain modifications and
reduced by the amount of any permitted additions to the non-qualifying
reserve.  Due to EverTrust Bank's loss experience, EverTrust Bank generally
recognized a bad debt deduction equal to 8% of taxable income.

                                   35

<PAGE>



     The provisions repealing the current thrift bad debt rules were passed by
Congress as part of "The Small Business Job Protection Act of 1996."  The new
rules eliminate the 8% of taxable income method for deducting additions to the
tax bad debt reserves for all thrifts for tax years beginning after December
31, 1995.  These rules also require that all institutions recapture all or a
portion of their bad debt reserves added since the base year, which is the
last taxable year beginning before January 1, 1988.  EverTrust Bank has
previously recorded a deferred tax liability equal to the bad debt recapture
and as such the new rules will have no effect on the net income or federal
income tax expense.  For taxable years beginning after December 31, 1995,
EverTrust Bank's bad debt deduction will be determined under the experience
method using a formula based on actual bad debt experience over a period of
years or, if EverTrust Bank is a "large" association, with assets in excess of
$500 million, on the basis of net charge-offs during the taxable year.  The
new rules allow an institution to suspend bad debt reserve recapture for the
1996 and 1997 tax years if the institution's lending activity for those years
is equal to or greater than the institutions average mortgage lending activity
for the six taxable years preceding 1996 adjusted for inflation.  For this
purpose, only home purchase or home improvement loans are included and the
institution can elect to have the tax years with the highest and lowest
lending activity removed from the average calculation.  If an institution is
permitted to postpone the reserve recapture, it must begin its six year
recapture no later than the 1998 tax year.  The unrecaptured base year
reserves will not be subject to recapture as long as the institution continues
to carry on the business of banking.  In addition, the balance of the pre-1988
bad debt reserves continue to be subject to provisions of present law referred
to below that require recapture in the case of certain excess distributions to
shareholders.

     Distributions.  To the extent that EverTrust Bank makes "nondividend
distributions" to The Company, such distributions will be considered to result
in distributions from the balance of its bad debt reserve as of December 31,
1987, or a lesser amount if EverTrust Bank's loan portfolio decreased since
December 31, 1987, and then from the supplemental reserve for losses on loans
("Excess Distributions"), and an amount based on the Excess Distributions will
be included in EverTrust Bank's taxable income.  Nondividend distributions
include distributions in excess of EverTrust Bank's current and accumulated
earnings and profits, distributions in redemption of stock and distributions
in partial or complete liquidation.  However, dividends paid out of EverTrust
Bank's current or accumulated earnings and profits, as calculated for federal
income tax purposes, will not be considered to result in a distribution from
EverTrust Bank's bad debt reserve.  The amount of additional taxable income
created from an Excess Distribution is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution.  Thus,
if EverTrust Bank makes a "nondividend distribution," then approximately one
and one-half times the Excess Distribution would be includable in gross income
for federal income tax purposes, assuming a 34% corporate income tax rate,
exclusive of state and local taxes.  See "Regulation -- The Banks --
Dividends" for limits on the payment of dividends by EverTrust Bank.
EverTrust Bank does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.

     Corporate Alternative Minimum Tax.  The Internal Revenue Code imposes a
tax on alternative minimum taxable income at a rate of 20%.  In addition, only
90% of alternative minimum taxable income can be offset by net operating loss
carryovers.  Alternative minimum taxable income is increased by an amount
equal to 75% of the amount by which EverTrust Bank's adjusted current earnings
exceeds its alternative minimum taxable income, which is determined without
regard to this preference and prior to reduction for net operating losses.
For taxable years beginning after December 31, 1986, and before January 1,
1996, an environmental tax of 0.12% of the excess of alternative minimum
taxable income, with certain modification, over $2.0 million is imposed on
corporations, including EverTrust Bank, whether or not an alternative minimum
tax is paid.

     Dividends-Received Deduction.  The Company may exclude from its income
100% of dividends received from its subsidiaries as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction
is generally 70% in the case of dividends received from unaffiliated
corporations with which the Company and its subsidiaries will not file a
consolidated tax return, except that if the Company or its subsidiaries owns
more than 20% of the stock of a corporation distributing a dividend, then 80%
of any dividends received may be deducted.

                                   36

<PAGE>



     Audits.  The Company's federal income tax returns have not been audited
during the past five years.

Washington Taxation

     The Company is subject to a business and occupation tax imposed under
Washington law at the rate of 1.50% of gross receipts.  Interest received on
loans secured by mortgages or deeds of trust on residential properties and
certain investment securities are exempt from such tax.

Competition

     EverTrust Bank operates in an intensely competitive market for the
attraction of deposits, which is its primary source of funds, and in the
origination of loans.  Historically, its most direct competition for deposits
has come from credit unions, mutual funds and, to a lesser extent, community
banks, large commercial banks and thrift institutions in its primary market
area.  Particularly in times of extremely low or extremely high interest
rates, EverTrust Bank has faced additional significant competition for
investors' funds from short-term money market securities and other corporate
and government securities.  The Bank's competition for loans comes principally
from mortgage bankers, commercial banks, other thrift institutions and
insurance companies.  Such competition for deposits and the origination of
loans may limit the Bank's future growth and earnings prospects.

Personnel

     At March 31, 2001, the Company had five employees and EverTrust Bank had
135 employees.  On that date,  Sound Financial, Inc., I-Pro, Inc. and Mutual
Bancshares Capital, Inc. had two, eight and three employees, respectively.
The employees are not represented by a collective bargaining unit and all
companies believe that the relationship with their employees is good.

Item 2.  Properties
-------------------

     At March 31, 2001 EverTrust and EverTrust Bank operate 12 full-service
banking facilities, seven of which are owned and five of which are leased, and
one loan production office which is leased.  Management believes that the
premises occupied by EverTrust and EverTrust Bank are well-located and
suitably equipped to serve as financial services facilities.  EverTrust Bank
also operates ten proprietary automated teller machines that are part of a
nationwide cash exchange network, all of which are located at certain offices
of EverTrust Bank.   EverTrust and EverTrust Bank also occupy administrative,
subsidiary and operational support facilities located in Everett, Bothell and
Kent, Washington.  The Bank also leases a facility in Seattle, Washington for
its trust and wealth management operations.  See Note 6 of the Notes to
Consolidated Financial Statements included in Item 8 of this Form 10-K for
additional information related to EverTrust and EverTrust Bank's properties
and other fixed assets.

Item 3.  Legal Proceedings
--------------------------

     Periodically, there have been various claims and lawsuits involving
EverTrust Bank, such as claims to enforce liens, condemnation proceedings on
properties in which EverTrust Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to
EverTrust Bank's business.  EverTrust Bank  is not a party to any pending
legal proceedings that it believes would have a material adverse effect on the
financial condition or operations of EverTrust Bank.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 2001.

                                   37

<PAGE>



                                PART II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder
         Matters
--------------------------------------------------------------------------

     The Company's common stock is traded on the Nasdaq National Market under
the symbol "EVRT".  As of March 31, 2001, there were 7,258,243 shares of
common stock outstanding and approximately 2,154 shareholders of record,
excluding persons or entities who hold stock in nominee or "street name"
accounts with brokers.

    Dividend payments by the Company are dependent primarily on dividends
received by the Company from EverTrust Bank.  Under federal regulations, the
dollar amount of dividends the Bank may pay is dependent upon its capital
position and recent net income.  Generally, if the Bank satisfies its
regulatory capital requirements, it may make dividend payments up to the
limits prescribed in the FDIC regulations.  However, institutions that have
converted to a stock form of ownership may not declare or pay a dividend on,
or repurchase any of, its common stock if the effect thereof would cause the
regulatory capital of the institution to be reduced below the amount required
for the liquidation account which was established in connection with the
Bank's mutual to stock conversion in 1999.  Under Washington law, the Company
is prohibited from paying a dividend if, as a result of its payment, it would
be unable to pay its debts as they become due in the normal course of
business, or if the Company's total liabilities would exceed its total assets.

     On January 23, 2001, the Company announced that its Board of Directors
had authorized a third stock repurchase plan for the repurchase of up to 10%
(approximately 768,324 shares) of the Company's outstanding common stock.  At
March 31, 2001, the Company had repurchased 425,000 shares of its common
stock.

     The following table sets forth the market price range of the Company's
common stock for the years ended March 31, 2001 and 2000.  This information
was provided by the Nasdaq Stock Market.

          Year                       High           Low        Dividends
          ----                       ----           ---       ---------

          2001  First Quarter      $10.750       $ 8.875          $.075
                Second Quarter      13.000        10.188          0.080
                Third Quarter       13.000        11.188          0.090
                Fourth Quarter      14.000        12.625          0.095

          2000  First Quarter          N/A           N/A            N/A
                Second Quarter         N/A           N/A            N/A
                Third Quarter       10.938         9.344            N/A
                Fourth Quarter       9.813         8.938           0.05


                                   38

<PAGE>



Item 6.  Selected Financial Data
--------------------------------

     The following table sets forth certain information concerning the
consolidated financial position and results of operations of the Company and
its subsidiaries at and for the dates indicated.  Since the Company had not
commenced operations prior to the Conversion in September 1999, the financial
information presented for the periods prior to 1999 is that of the Company's
predecessor, Mutual Bancshares, and its subsidiaries only.  The consolidated
data is derived in part from, and should be read in conjunction with, the
Consolidated Financial Statements of the Company and its subsidiaries
contained in Item 8 of this Form 10-K.

                                            At March 31,
                          ------------------------------------------------
                          2001        2000      1999       1998       1997
                          ----        ----      ----       ----       ----
                                           (In thousands)
FINANCIAL CONDITION DATA:

Total assets............$602,403   $555,212   $452,089   $421,305   $399,158
Investment securities...  71,661    108,054     75,432     59,694     52,809
Loans receivable, net... 483,117    416,116    315,327    311,951    293,134
Deposit accounts........ 397,643    382,986    375,896    350,971    329,770
Borrowings..............  80,344     34,423     18,949     15,503     20,057
Total equity............ 120,146    133,529     52,263     51,096     46,143

                                        Year Ended March 31,
                          ------------------------------------------------
                          2001        2000      1999       1998       1997
                          ----        ----      ----       ----       ----
                                           (In thousands)
OPERATING DATA:

Interest income......... $46,472    $38,434    $33,894    $33,462    $31,049
Interest expense........  23,048     18,832     17,837     17,899     17,010
                         -------    -------    -------    -------    -------
Net interest income.....  23,424     19,602     16,057     15,563     14,039
Provision for loan
  losses................   1,005        810        780        420        420
                         -------    -------    -------    -------    -------
Net interest income
  after provision for
  loan losses...........  22,419     18,792     15,277     15,143     13,619
Other operating income..   2,632      1,290      1,927      1,792      1,074
Other operating
  expenses..............  17,403     19,696     15,532     10,287      9,796
                         -------    -------    -------    -------    -------
Income before income
  taxes.................   7,648        386      1,672      6,648      4,897
Provision for income
  taxes.................   2,291       (186)       261      2,114      1,387
                         -------    -------    -------    -------    -------
Net income.............. $ 5,357    $   572    $ 1,411    $ 4,534    $ 3,510
                         =======    =======    =======    =======    =======

                                        Year Ended March 31,
                          ------------------------------------------------
                          2001        2000      1999       1998       1997
                          ----        ----      ----       ----       ----

OTHER DATA:

Number of:
  Loans outstanding.....   4,352      4,119      3,505      3,645      3,762
  Deposit accounts......  30,176     30,404     30,221     29,846     29,751
  Full service banking
    offices.............      12         12         12         11         11
  Cash dividends
   declared on Common
   Stock................   2,595        448         --         --         --

                                     39

<PAGE>



                                             At or For
                                         Year Ended March 31,
                          ------------------------------------------------
                          2001        2000      1999       1998       1997
                          ----        ----      ----       ----       ----
KEY FINANCIAL RATIOS:

Performance Ratios:
 Return on assets(1).....   0.93%      0.11%      0.33%      1.11%      0.91%
 Return on
   equity(2)(7)(8).......   4.20         NM       2.71       9.54       8.07
 Equity-to-assets
   ratio(3)..............  22.25      18.47      12.18      11.66      11.26
 Interest rate
   spread (4)............   2.96       3.08       3.20       3.27       3.12
 Net interest margin(5)..   4.17       3.97       3.83       3.89       3.70
 Average interest-
   earning assets to
   average interest-
   bearing liabilities... 129.33     123.32     114.75     113.85     113.00
 Other operating expenses
   as a percent of
   average total assets..   3.03       3.89       3.64       2.53       2.54
 Efficiency
   ratio (6)(7)(8).......  66.29         NM      66.74      58.64      64.07
 Dividend payout
   ratio (9).............  48.44      78.32         --         --         --

Capital Ratios:

 Leverage................  19.70      24.90      11.80      12.20      11.70
 Tier 1 risk-based.......  22.50      27.90      13.70      14.90      14.90
 Total risk-based........  23.70      29.20      14.90      16.10      16.20

Asset Quality Ratios:
  Nonaccrual and 90 days
   or more past due loans
   as a percent of total
   loans, net............   0.27       0.10       0.12       0.27       0.35
 Nonperforming assets
   as a percent of
   total assets..........   0.23       0.07       0.08       0.20       0.48
 Allowance for losses
   as a percent of gross
   loans receivable......   1.51       1.53       1.62       1.48       1.45
 Allowance for loan
   losses as a percent of
   nonperforming loans... 572.23    1593.12    1500.53     582.28     440.33
 Net charge-offs to
   average outstanding
   loans.................   0.01         --         --       0.01       0.03

-----------
(1) Net earnings divided by average total assets.
(2) Net earnings divided by average equity.
(3) Average equity divided by average total assets.
(4) Difference between weighted average yield on interest-earning assets and
    weighted average rate on interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Total other operating expenses divided by total net interest income (on a
    tax-equivalent basis) before provision for loan losses plus total other
    operating income.
(7) Calculations are not meaningful for the year ended March 31, 2001 given
    the Company went public on September 30, 1999 and the one time charitable
    contribution expenses of $5.2 million made during the second quarter.
(8) The year ended March 31, 1999 includes a one time contribution expense of
    $3.2 million.
(9) Dividends paid as a percentage of net income.

                                  40

<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF  OPERATIONS

General

     The following discussion is intended to assist in understanding the
financial condition and results of operations of the Company and its
subsidiaries. The information contained in this section should be read in
conjunction with the Consolidated Financial Statements and the accompanying
Notes contained in Item 8 of this Form 10-K, as well as the other sections of
this Form 10-K.

     The Company's results of operations depend primarily on its net interest
income, which is the difference between the income earned on its
interest-earning assets, consisting of loans and investments, and the cost of
its interest-bearing liabilities, consisting of deposits and primarily FHLB of
Seattle borrowings.  The Company's net income is also affected by, among other
things, fee income, provisions for loan losses, operating expenses and income
tax provisions.  The Company's results of operations are also significantly
affected by general economic and competitive conditions, particularly changes
in market interest rates, government legislation and policies concerning
monetary and fiscal affairs, housing and financial institutions and the
attendant actions of the regulatory authorities.

Forward-Looking Statements

     This Form 10-K contains forward-looking statements which are based on
assumptions and describe future plans, strategies and expectations of the
Company.  These forward-looking statements are generally identified by use of
the word "believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar words.  The Company's ability to predict results of the actual
effect of future plans or strategies is uncertain.  Factors which could have a
material adverse effect on the Company's operations include, but are not
limited to, changes in interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services
in the Company's market areas and accounting principles and guidelines.  These
risks and uncertainties should be considered in evaluating forward-looking
statements and you should not rely too much on these statements.

Operating Strategy

     EverTrust is the successor to Mutual Bancshares, a mutual bank holding
company, which converted to stock form on September 30, 1999.  The Company
replaced Mutual Bancshares as the holding company for EverTrust Bank, a
Washington state chartered savings bank; I-Pro, Inc., a Washington
corporation, which is an item processing company; and Mutual Bancshares
Capital, Inc., a Washington corporation, which is a venture capital firm.

     EverTrust Bank's strategy is to operate as a community-based, retail
oriented financial institution offering a wide variety of  banking products,
delivered and distinguished by providing a superior level of customized
service to individuals.  EverTrust Bank attracts retail deposits and generates
real estate secured loans through its 12 full service banking offices and its
one loan production office using targeted marketing, customer cross-selling,
referrals and its longstanding reputation in its market area as a primary
means of meeting this strategy.  EverTrust Bank strives to serve a niche base
of higher balance transaction account customers by offering tiered,
interest-bearing products, versus a mass market strategy that seeks lower
balance/no interest/high fee transaction accounts.  In addition to offering
one-to- four family real estate loans, The Bank focuses on construction and
land development loans, as well as multi-family and commercial real estate
loans.  Since single family lending has become a commodity product, EverTrust
Bank has sought to diversify its lending activities by emphasizing real estate
construction, multi-family and commercial lending.  This diversification has
allowed for continued customization of its lending products in a highly
competitive environment.  To a lesser, but increasing extent, the Bank also
originates consumer loans and intends to continue to build the consumer

                                  41

<PAGE>



lending segment of its loan portfolio through a broadened product line with an
emphasis on quality service.  See Item 1, "Business -- Lending Activities."

     In connection with the merger of the Company's other bank subsidiary,
Commercial Bank of Everett, with and into EverTrust Bank in December 2000, the
Bank established a commercial banking group primarily focused on serving the
needs of the Bank's business banking customers with a high level of customer
service.  The commercial banking group provides banking services directly at
the customer's place of business, including lending and non-cash deposit
activities, to the greatest extent possible.  The Bank's commercial banking
group does not directly compete with the Bank's retail customer focus.
Rather, the commercial banking group's focus and the Bank's retail oriented
focus serve to complement each other through an organized referral network
that provides the opportunity for increased business.  The Bank's commercial
banking group's business consists primarily of attracting non-cash deposits
from business customers and, to a lesser extent, the general public, and using
those funds to originate commercial loans to a wide variety of small
businesses and professional service companies in the local market.  As an
accommodation to business customers and other contacts made during the normal
course of business, the commercial banking group originates consumer loans,
and refers one-to-four family residential loans, multi-family and commercial
real estate loans to EverTrust Bank.  See Item 1, "Lending Activities."

     The operating strategy of the Company's other minor subsidiaries, I-Pro,
Inc. and Mutual Bancshares Capital, Inc. is to complement and enhance the
efficiencies of EverTrust Bank through cross-marketing and referral
opportunities and by producing additional sources of noninterest income that
are not generally subject to the same cyclical influences of the banking
business.  I-Pro, Inc.'s operating strategy is to provide superior quality
backroom check processing and electronic imaging services for banks, with the
long-term objective of supplying this technology to non-financial businesses
for similar applications.  The company employs state of the art check and
statement imaging technology and customized services to accomplish this
objective.  At March 31, 2001, I-Pro, Inc.'s sole client was EverTrust Bank.
The operating strategy of Mutual Bancshares Capital, Inc. is to provide,
through an organizational structure more fully explained in "Business of
Mutual Bancshares Capital, Inc.," management services and limited partnership
venture capital investments under licensing by the Small Business
Administration as a Small Business Investment Company.  These management and
investment opportunities are expected to result in an additional source of
non-interest income to the consolidated operations of the Company and provide
for potential cross-selling opportunities with the other subsidiaries of the
Company as well.    See Item 1, "Business -- Subsidiary Activities -- Business
of I-Pro, Inc." and "-- Business of Mutual Bancshares Capital, Inc."

     The Company does not presently engage in any activities outside of
serving as a shell parent company for its subsidiaries.  The operating
strategy of the Company has been to invest dividends received from EverTrust
Bank into additional operating subsidiaries, which currently consist of
I-Pro, Inc. and Mutual Bancshares Capital, Inc., in an effort to expand and
diversify the consolidated operations of the Company across a variety of
companies that are engaged in complementary, but different, businesses and/or
operating strategies.  In connection with the Conversion and as a result of
the additional capital that was retained by the Company, this diversification
strategy is expected to continue and accelerate, although there are no
specific acquisitions or new business formations planned at this time.

Comparison of Financial Condition at March 31, 2001 and March 31, 2000

     Total assets increased 8.5% from $555.2 million at March 31, 2000 to
$602.4 million at March 31, 2001, primarily as a result of an increase in
loans receivable, net, which was funded by increased deposits and borrowings.

     Cash and cash equivalents increased 190.9% from $7.7 million at March 31,
2000 to $22.4 million at March 31, 2001, primarily as a result of an increase
in Federal Reserve Bank balances, overnight Fed Funds and FHLB  investments
that are used to fund anticipated growth in the securities available for sale
and loan portfolios.

     Securities available for sale decreased 51.6% from $96.0 million at March
31, 2000 to $63.3 million at March 31, 2001, as proceeds received were used to
fund temporary growth in cash and cash equivalents, and loans.  The growth

                                  42

<PAGE>



in cash and cash equivalents is ultimately expected to be reinvested in a
combination of high quality investments that can be pledged for use in future
borrowings and in loans.  Management intends to place most new investment
purchases in the available for sale category which allows for active
management of the securities portfolio to meet liquidity and asset/liability
management needs.  See Item 1, "Business  -- Investment Activities."

     Loans receivable, net, including loans held-for-sale, increased 16.1%
from $416.1 million at March 31, 2000 to $483.1 million at March 31, 2001,
primarily as a result of multi-family construction and commercial real estate
permanent loans which increased $69.1 million from March 31, 2000 to March 31,
2001.  Business loans increased from $16.5 million at March 31, 2000 to $31.7
million at March 31, 2001, the result of increased market penetration and a
growth to average loan amounts.  Total loans, before deducting undisbursed
loan proceeds, deferred loan fees, and reserves for loan losses, increased
17.4% from $475.6 million at March 31, 2000 to $558.3 million at March 31,
2001.

     Loans held for sale on the secondary market were approximately $794,000
at March 31, 2001.  The Company had no loans held for sale on the secondary
market at March 31, 2000.

     Premises and equipment, net, increased $465,000 from $9.1 million at
March 31, 2000 to $9.5 million at March 31, 2001, as a result of equipment
purchases largely related to EverTrust Bank's computer system conversion
partially offset by depreciation expense.  For the years ended March 31, 2000
and 2001, depreciation expense was $963,000 and $1.1 million, respectively.
See Item 2, "Properties."

     Deposits increased 3.8% from $383.0 million at March 31, 2000 to $397.6
million at March 31, 2001, primarily as a result of interest credited back to
accounts offset in part by withdrawals by customers.

     Borrowings increased 133.4% from $34.4 million at March 31, 2000 to $80.3
million at March 31, 2001, primarily to fund growth in the loan portfolio.
The Company will continue to use borrowings as needed to fund loan growth.
The type of borrowings, either short-term or long-term, will be based on the
interest rate environment and liquidity considerations.

     Total capital decreased 11.2% from $133.5 million at March 31, 2000 to
$120.1 million on March 21, 2001, primarily as a result of the repurchase of
shares of the Company's common stock.

Comparison of Operating Results for the Years Ended March 31, 2001 and 2000

     Net Income.  Net income increased from $572,000 for the year ended March
31, 2000 to $5.4 million for the year ended March 31, 2001.  Net income for
the year ended March 31, 2000 included $5.2 million of charitable
contributions made by the Company to the EverTrust Foundation.

     The following table sets forth all significant nonrecurring items
affecting net income for the periods reported:

                                                 Year Ended March 31,
                                              -------------------------
                                              2001      2000       1999
                                              ----      ----       ----
                                                (In thousands)

Net income as reported..................     $5,357    $   572    $ 1,411
Nonrecurring items (net of tax):
  Charitable contributions
    to foundations......................         --      3,432      1,980
  Termination of defined benefit plan...         --       (348)        --
                                             ------    -------    -------
Net income -- core......................     $5,357    $ 3,656    $ 3,391
                                             ======    =======    =======

                                  43

<PAGE>




     Net Interest Income.  Net interest income increased $3.6 million from
$18.8 million for the year ended March 31, 2000 to $22.4 million for the year
ended March 31, 2001. The change is due primarily to higher average balances
of interest-earning assets.

     Interest income increased $8.1 million from $38.4 million for the year
ended March 31, 2000 to $46.5 million for the same period in 2001.  During
this same period, the average balance of interest-earning assets increased
from $494.1 million for the twelve months ended March 30, 2000 to $562.1
million for the year ended March 31, 2001 resulting in increased income of
$6.3 million.  The yield on interest-earning assets increased from 7.78% for
the year ended March 31, 2000 to 8.27% for the same period in 2001 increasing
income $1.8 million.  Increased average balances are due primarily to the
overall growth of the loan portfolio.  This growth was funded by a decrease in
investment securities and increased borrowings.  The increase in yields is due
primarily to interest rate increases from period to period and a shift in
assets from short-term cash and cash equivalents to higher yielding loans and
investment securities

     Interest expense increased $4.2 million from $18.8 million for the year
ended March 31, 2000 to $23.0 million for the same period in 2001.  The
average balance of interest-bearing liabilities increased $34.0 million from
$400.6 million for the year ended March 31, 2000 to $434.6 million for the
same period in 2001.  This increase resulted in higher interest expense from
period to period of $2.5 million.  Interest expense increased an additional
$1.5 million due to an increase in the yield on interest-bearing liabilities
from 4.70% for the year ended March 31, 2000 to 5.30% for the same period in
2001.  The increased yield is due primarily to a change in the composition of
interest-bearing liabilities.  The average balance of borrowings comprised
13.5% of interest-bearing liabilities for the year ended March 31, 2001
compared to 4.8% for the same period in 2000.

     Provision for Loan Losses.  During the year ended March 31, 2001, the
provision for loan losses was $1.0 million, compared to $810,000 for the same
period in 2000, an increase of $195,000.  The increase resulted from continued
loan portfolio growth in the higher-risk lending categories of commercial and
multi-family loans, business loans and credit card loans during the period.
Net loan charge-offs for the year ended March 31, 2001 totaled $50,000
compared to $2,000, net of recoveries, for the same period in 2000, primarily
the result of net losses in business and credit card loans.

     The allowance for loan losses was $7.4 million, or 1.51% of total loans
at March 31, 2001, compared to $6.4 million, or 1.53% of total loans at March
31, 2000.

     Non-Interest Income.  Non-interest income increased $1.3 million from
$1.3 million for the year ended March 31, 2000 to $2.6 million for the same
period in 2001.  The change is due primarily to gains on the sale of mortgage
loans.  For the year ended March 31, 2000, the Company recognized a loss of
$407,000 on loan sales compared to gain of $431,000 for the same period in
2001.

     Non-interest Expense.  Non-interest expense decreased $2.3 million from
$19.7 million for the year ended March 31, 2000 to $17.4 million for the same
period in 2000.  The decrease was due primarily to a one-time charitable
contribution to the EverTrust Foundation of $5.2 million during the year ended
March 31, 2000.  This was partially offset by the $364,000 write down of an
investment made through Mutual Bancshares Capital and higher compensation
costs.  Salary and employee benefits increased $2.7 million from $6.7 million
for the year ended March 31, 2000 to $9.4 million for the year ended March 31,
2001.  Compensation expense increased as the result of the recognition of $1.3
million in costs associated with the MRP and increased staffing levels to
support the Company's growth.  The Company also incurred $396,000 in ESOP
expense during the current period.  During the same period last year, there
were no ESOP costs as the plan was not yet in place.  Occupancy and equipment
costs decreased approximately $735,000 from $3.4 million for the year ended
March 31, 2000 to $2.6 million for same period in 2001.  The decrease is
primarily the result of large expenditures in 2000 associated with the
renovation of many of the Bank's full service offices.  This decrease was
partially offset by increases in information processing costs of approximately
$221,000 from approximately $741,000 for the year ended March 31, 2000 to
approximately $962,000 for the year ended March 31,

                                  44

<PAGE>




2001.  The increase in information processing costs was primarily the result
of expenses associated with the Bank's conversion to a new software platform.

     Provision for Income Taxes.  Federal income taxes increased from a
benefit of $186,000 for the year ended March 31, 2000 to an expense of $2.3
million for the same period in 2001.  The change is due to increased taxable
earnings.

Comparison of Operating Results for the Years Ended March 31, 2000 and 1999

     Net Income.  Net income decreased 59.4% from $1.4 million for the year
ended March 31, 1999 to $572,000 for the year ended March 31, 2000 primarily
as a result of a $5.2 million, pre-tax, charitable contribution to the
EverTrust Foundation, increased noninterest expenses for salaries and
benefits, losses on the sale of mortgage loans and management consulting
costs. These costs were not fully offset by increased net interest income.

     Net Interest Income.  Net interest income increased 21.7% from $16.1
million for the year ended March 31, 1999 to $19.6 million for the same period
in 2000 as total interest income increased more than total interest expense.

     Total interest income increased 13.3% from $33.9 million for the year
ended March 31, 1999 to $38.4 million for the year ended March 31, 2000
primarily as a result of an increase in the average balance of loans
receivable, net, investment securities, and cash and cash equivalents.  The
increases in the average balances more than offset a decline in the average
yield.  The average balances of loans receivable, net, increased $40.9 million
from $334.9 million for the year ended March 31, 1999 to $375.8 million for
the same period in 2000 as a result of increased loan originations of
multifamily and commercial real estate loans.  The average yield on loans
declined from 8.62% for the year ended March 31, 1999 to 8.37% for the year
ended March 31, 2000 primarily as a result of the origination of adjustable
rate mortgages which usually start at a lower rates than fixed rate mortgage
loans.  The lower yield is also effected by prior year's refinancing activity
which lowered rates on many loans which are held in the Bank's portfolio.
Interest and dividends earned on investment securities increased from $5.0
million for the year ended March 31, 1999 to $7.0 million for the same period
in 2000 as average balances increased from $67.8 million for the year ended
March 31, 1999 to $94.7 million for the year ended March 31, 2000 as a result
of investing funds received in connection with the sale of the Company's
common stock.  Increases in the average balances of cash and cash equivalent
from $12.9 million for the year ended March 31, 1999 to $19.5 million for the
year ended March 31, 2000 were due primarily to higher cash balances
maintained during the subscription period prior to the closing of the initial
public offering.

     Total net interest expense increased 5.6% from $17.8 million for the year
ended March 31, 1999 to $18.8 million for the year ended March 31, 2000 as a
result of an increase in the average balance of deposits and borrowings.  The
average balance of total deposits increased $32.0 million from $349.2 million
for the year ended March 31, 1999 to $381.2 million for the same period in
2000, however, the weighted average cost of deposits decreased 19 basis points
due to shorter maturity periods on the certificate of deposits which in turn
lowered their overall cost.  Interest expense on FHLB advances and other
borrowings increased $170,000 from $1.0 million for the year ended March 31,
1999 to $1.2 million for the year ended March 31, 2000 primarily as a result
of increased average balances.

     The Company's interest rate spread was 3.20% for the year ended March 31,
1999 and 3.08% for the same period in 2000.  The net interest margin increased
from 3.83% for the year ended March 31, 1999 to 3.97% for the same period in
2000 as funds received from the public offering were invested in
interest-earning assets.

     Provision for Loan Losses.  Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered by
management as adequate to provide for known and inherent risk in the loan
portfolio, based on management's continuing analysis of factors underlying the
quality of the loan portfolio.  These factors include changes in portfolio
size and composition, actual loan loss experience, current economic
conditions, detailed analysis of individual loans for which collectibility may
not be assured, and determination of the existence and realizable value of the
collateral and guarantees securing the loan.  See Item 1, "Business -- Lending
Activities --

                                  45

<PAGE>



Nonperforming Assets and Delinquencies" and Note 1 to Consolidated Financial
Statements in Item 8 of this Form 10-K.

     The provision for loan losses was $810,000 for the year ended March 31,
2000 compared to $780,000 for the year ended March 31, 1999.  This resulted
from management's ongoing consistent application of its formula analysis
methodology which measures changes in loan portfolio composition by collateral
categories, including loan commitments and classified loans.  The formula
analysis is supplemented by management's ongoing assessment of overall credit
quality of the portfolio, including loan delinquencies and peer group
analysis, adjusted for current economic conditions.  In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses.  Such agencies may
require the Bank to provide additions to the allowance based on judgement
different from that of management.  Although management uses the best
information available, future adjustments to the allowance may be necessary
due to economic, operating, regulatory and other conditions beyond the Bank's
control.  The allowance for loan losses was $6.5 million, or 1.53% of total
loans at March 31, 2000, compared to $5.7 million, or 1.62% of total loans at
March 31, 1999.

     Non-interest Income.  Total non-interest income decreased 31.6% from $1.9
million for the year ended March 31, 1999 to $1.3 million for the year ended
March 31, 2000.  The decrease resulted primarily from $623,000 in losses
incurred on the sale of $33.9 million in one-to-four family mortgage loans.

     Non-interest Expense.  Total non-interest expense increased 27.1% from
$15.5 million for the year ended March 31, 1999 to $19.7 million for the ended
March 31, 2000 primarily as a result of $5.2 million of charitable
contributions to the EverTrust Foundation, as compared to $3.4 million during
fiscal year 1999.  Management expects that the $5.2 million contribution will
be fully tax deductible for income tax purposes under Internal Revenue Service
provisions allowing corporations to carry over to the five succeeding tax
years contributions that exceed 10% of taxable income limitation.  As a
result, a deferred tax asset of $2.5 million relating to current and prior
year charitable contributions carry over is included in other assets in the
financial statements at March 31, 2000.  Also contributing to the increase in
non-interest expense were increases in salaries and employee benefits,
occupancy and equipment expense, and professional services costs.  Salaries
and employee benefits increased from $5.4 million for the year ended March 31,
1999 to $6.7 million for the year ended March 31, 2000 as a result of
increased staffing levels and general salary increases.  Increased staffing
levels reflect the Company's continued process of building the infrastructure
for future growth.  Also during this period, as part of EverTrust's conversion
from mutual to stock form, the Company terminated its defined pension plan,
which resulted in the reversal of accrued benefit costs of $547,000.  This was
partially offset by compensation expense of $329,000 related to the new ESOP.
The ESOP expense will be ongoing for the next four years and result in
additional compensation expense (dependent on the average price of common
stock throughout each period) each quarter.  Occupancy and equipment expense
increased from $3.1 million for the year ended March 31, 1999 to $3.4 million
for the same period in 2000 as a result of a company wide computer upgrade
resulting in additional costs of $347,000.  It is the Company's policy to
expense all computer equipment (with the exception of servers) when purchased.
Other non-interest expense increased $900,000 from $2.8 million for the year
ended March 31, 1999 to $3.7 million for the same period in 2000 primarily as
the result of professional services costs incurred related to the Company's
upcoming computer conversion which was completed during the third quarter of
the fiscal year ending March 31, 2001 and transition from a private to public
company.

     Provision for Income Taxes.  The provision for income taxes decreased
from $261,000 for the year ended March 31, 1999 to a tax benefit of $186,000
for the year ended March 31, 2000.  The change in the effective tax rate was
primarily the result of the effect of tax-exempt interest and federal low
income housing tax credits.  For the year ended March 31, 1999, tax-exempt
interest and federal low income housing tax credits lowered the effective tax
rate 770 basis points and 1,290 basis points, respectively.  For the year
ended March 31, 2000, these same items lowered the effective tax rate 3,030
basis points and 5,600 basis points, respectively.

     The deferred portion of the provision for income taxes was ($1.7) million
for the year ended March 31, 1999 and ($2.1) million for the year ended March
31, 2000.  The change in the deferred portion is primarily attributable to

                                  46

<PAGE>



expenses for bad debts, depreciation, equipment expense and charitable
contributions, that were not fully deductible in the current tax year, offset
by income deferred into future years comprised primarily of FHLB stock
dividends.

Average Balances, Interest and Average Yields/Cost

     The earnings of EverTrust Bank depend largely on the spread between the
yield on interest-earning assets, which consist primarily of loans and
investments, and the cost of interest-bearing liabilities, which consist
primarily of deposit accounts and borrowings, as well as the relative size of
EverTrust Bank's  interest-earning assets and interest-bearing liabilities.

     The following table sets forth, on a consolidated basis for the Company
for the periods indicated, information regarding average balances of assets
and liabilities as well as the total dollar amounts of interest income from
average interest-earning assets and interest expense on average
interest-bearing liabilities, resultant yields, interest rate spread, net
interest margin, and ratio of average interest-earning assets to average
interest-bearing liabilities.  Average balances have been calculated using the
average of daily balances during the period.

<TABLE>

                                                            Year Ended March 31,
                                ---------------------------------------------------------------------------
                                          2001                      2000                      1999
                                -----------------------   -----------------------   -----------------------
                                        Interest                  Interest                  Interest
                                Average    and    Yield/  Average    and    Yield/  Average    and    Yield/
                                Balance Dividends Cost    Balance Dividends Cost    Balance Dividends Cost
                                ------- --------- ----    ------- --------- ----    ------- --------- ----
                                                (Dollars in thousands)
<S>                            <C>       <C>      <C>    <C>       <C>      <C>    <C>       <C>      <C>
Interest-earning assets:
  Loans receivable, net (1)..  $461,957  $40,173  8.70%  $375,804  $31,464  8.37%  $334,896  $28,852  8.62%
  Investment securities......    91,572    5,718  6.24     94,651    5,674  5.99     67,771    4,058  5.99
  Federal Home Loan Bank
   stock.....................     4,451      290  6.52      4,105      290  7.06      3,787      291  7.68
  Cash and cash equivalents..     4,133      291  7.04     19,513    1,006  5.26     12,892      693  5.38
                               --------  -------  ----   --------  -------  ----   --------  -------  ----
    Total interest-earning
     assets..................   562,113   46,472  8.27    494,073   38,434  7.78    419,346   33,894  8.08
                                         -------  ----             -------  ----             -------  ----

Noninterest-earning assets...    11,732                    12,593                     7,580
                               --------                  --------                  --------
    Total average assets.....  $573,845                  $506,666                  $426,926
                               ========                  ========                  ========
Interest-bearing liabilities:
  Savings accounts...........  $ 10,107      288  2.85   $ 17,445      483  2.77   $ 11,454      316  2.76
  NOW accounts...............    35,845      907  2.53     34,942      907  2.60     32,227      845  2.62
  Money market deposit
   accounts..................   120,942    5,391  4.46    135,503    5,737  4.23    123,469    5,354  4.34
  Certificates of deposit....   209,173   12,583  6.02    193,342   10,514  5.44    182,016   10,301  5.66
                               --------  -------  ----   --------  -------  ----   --------  -------  ----
    Total deposits...........   376,067   19,169  5.10    381,232   17,641  4.63    349,216   16,816  4.82
  Borrowings.................    58,556    3,879  6.62     19,417    1,191  6.13     16,215    1,021  6.30
                               --------  -------  ----   --------  -------  ----   --------  -------  ----
    Total interest-bearing
     liabilities.............   434,623   23,048  5.30    400,649   18,832  4.70    365,431   17,837  4.88
                                         -------  ----             -------  ----             -------  ----
  Noninterest-bearing
   liabilities...............    11,567                    12,412                     9,449
                               --------                  --------                  --------
    Total average
     liabilities.............   446,190                   413,061                   374,880

Average equity...............   127,655                    93,605                    52,046
                               --------                  --------                  --------
    Total liabilities and
     equity..................  $573,845                  $506,666                  $426,926
                               ========                  ========                  ========

Net interest income..........            $23,424                   $19,602                   $16,057
                                         =======                   =======                   =======
Interest rate spread.........                     2.96%                     3.08%                     3.20%
                                                  ====                      ====                      ====
Net interest margin..........                     4.17%                     3.97%                     3.83%
                                                  ====                      ====                      ====
Ratio of average interest-
  earning assets to average
  interest-bearing
  liabilities................             129.33%                   123.32%                   114.75%
                                          ======                    ======                    ======

--------------
(1) Average loans includes non-performing loans and loans held for sale.  Interest income does not include
interest on loans 90 days or more past due.

</TABLE>

                                                   47

<PAGE>

Rate/Volume Analysis

     The following table sets forth the effects of changing rates and volumes
on net interest income of the Company.  Information is provided with respect
to effects on interest income attributable to changes in volume, which are
changes in volume multiplied by prior rate; effects on interest income
attributable to changes in rate, which are changes in rate multiplied by prior
volume; and changes in rate/volume, which are changes in rate multiplied by
change in volume.

                         Year Ended March 31,        Year Ended March 31,
                         2001 Compared to Year       2000 Compared to Year
                        Ended March 31, 2000          Ended March 31, 1999
                        Increase (Decrease)           Increase (Decrease)
                               Due to                         Due to
                     ---------------------------  --------------------------
                                   Rate/                        Rate/
                     Rate  Volume  Volume  Total  Rate  Volume  Volume Total
                     ----  ------  ------  -----  ----  ------  ------ -----
                                          (In thousands)

Interest-earning
assets:
 Loans
  receivable,
  net (1)..........$1,217  $7,213  $279  $7,492  $(813) $3,524 $ (99) $2,612
 Investment
  securities.......   236    (186)   (8)   (194)     5   1,609     2   1,616
 Federal Home Loan
  Bank stock.......   (23)     24    (2)     22    (23)     24    (2)     (1)
 Interest-bearing
  deposits.........   368    (793) (290) (1,083)   (28)    356   (15)    313
                   ------  ------  ----  ------  -----  ------ -----  ------
   Total net change
   in income on
   interest-earning
   assets..........$1,798  $6,258 $ (21)  6,237  $(859) $5,513 $(114)  4,540
                   ======  ======  ====  ------  =====  ====== =====  ------

Interest-bearing
liabilities:
 Savings accounts..$   14  $ (203)$  (6)   (209) $   1  $  165 $   1     167
 NOW accounts......   (23)     23    (1)     22     (7)     70    (1)     62
 Money market
  deposit accounts.   303    (616)  (33)   (649)  (127)    522   (12)    383
 Certificates of
  deposit.......... 1,117     861    91     952   (403)    641   (25)    213
                   ------  ------  ----  ------  -----  ------ -----  ------
   Total average
    deposits....... 1,411      65    51     116   (536)  1,398   (37)    825
Borrowings.........    95   2,400   192   2,592    (26)    201    (5)    170
                   ------  ------  ----  ------  -----  ------ -----  ------
   Total net change
    in expense on
    interest-bearing
    liabilities....$1,506  $2,465  $242   2,708  $(562) $1,599 $ (42)    995
                   ======  ======  ====  ------  =====  ====== =====  ------
Net change in net
 interest income...                      $3,529                       $3,545
                                         ======                       ======
------------
(1)  Average loans includes non-performing loans and loans held for sale.
     Interest income does not include interest on loans 90 days or more past
     due.
                                     48
<PAGE>


Yields Earned and Rates Paid

     The following table sets forth, on a consolidated basis, for the periods
and at the date indicated, the weighted average yields earned on the Company's
assets and the weighted average interest rates paid on the Company's
liabilities, together with the net yield on interest-earning assets.

                                                            For the Year
                                                           Ended March 31,
                                         At March 31,  ---------------------
                                            2001       2001    2000     1999
                                            ----       ----    ----     ----
Weighted average yield on
  Loans receivable, net (1).............    8.10%      8.70%   8.37%    8.62%
  Investment securities.................    7.98       6.24    5.99     5.99
  Federal Home Loan Bank stock..........    6.23       6.52    7.06     7.68
  Cash and cash equivalents.............    1.94       7.04    5.26     5.38
     Total interest-earning assets......    7.91       8.27    7.78     8.08

Weighted average rate paid on:
  Savings accounts......................    2.76       2.85    2.77     2.76
  NOW accounts..........................    2.23       2.53    2.60     2.62
  Money market deposit accounts.........    4.33       4.46    4.23     4.34
  Certificates of deposit...............    6.07       6.02    5.44     5.66
     Total average deposits.............    4.90       5.10    4.63     4.82
  Federal Home Loan Bank advances ......    4.83       6.62    6.13     6.30
     Total interest-bearing liabilities.    4.92       5.30    4.70     4.88

Interest rate spread (spread between
  weighted average rate on all
  interest-earning assets and all
  interest-bearing liabilities).........    3.00       2.96    3.08     3.20

Net interest margin (net interest
  income (expense) as a percentage
  of average interest-earning assets)...    3.99       4.17    3.97     3.83
----------
(1)  Weighted average rate earned on loans does not include earnings from
     deferred loan fees at March 31, 2001.  Earnings from the amortization of
     loan fees was included in the weighted average rate calculations for the
     years ended March 31, 2001, 2000 and 1999.

Asset and Liability Management and Market Risk

     Risks When Interest Rates Change.  The Company's profitability depends
primarily on its net interest income, which is the difference between the
income it receives on its loan and investment portfolio and its cost of funds,
which consists of interest paid on deposits and borrowings.  Net income is
further affected by gains and losses on loans held for sale, which can be
affected by changes in interest rates.  Net interest income is also affected
by the relative amounts of interest-earning assets and interest-bearing
liabilities. When interest-earning assets equal or exceed interest-bearing
liabilities, any positive interest rate spread will generate net interest
income.  The Company's profitability is also affected by the level of
non-interest income and expenses.  Non-interest income includes loan service
fees, service charges and fees on accounts and gains on sale of investments
and loans. Non-interest expenses primarily include compensation and benefits,
occupancy and equipment expenses, deposit insurance premiums and information
processing expenses. The Company's results of operations are also
significantly affected by general economic and

                                     49
<PAGE>



competitive conditions, particularly changes in market interest rates,
government legislation and regulation and monetary and fiscal policies.

     The following table sets forth at March 31, 2001, the estimated
percentage change in EverTrust Bank's net interest income over a four-quarter
period and market value of portfolio equity based on the indicated changes in
interest rates.

                                                 Estimated Change in
                                      ---------------------------------------
   Change (In Basis Points ("bp"))    Net Interest Income   Economic Value of
      in Interest Rates (1)           (next four quarters)  Portfolio Equity
   -------------------------------    --------------------  ----------------

             400  bp                          4.7%                (26.5)%
             300                              3.2                 (21.9)
             200                              1.5                 (16.7)
             100                             (0.4)                (11.2)
               0                               --                    --
            (100)                             1.2                  11.4
            (200)                             1.2                  18.2
            (300)                            (0.4)                 20.3
            (400)                            (3.1)                 19.6
-------------
(1) Assumes an instantaneous uniform change in interest rates at all
maturities.

     The assumptions used by management to evaluate the vulnerability of
EverTrust Bank's income and capital to changes in interest rates in the
preceding table are described below.  Although management believes these
assumptions are reasonable, the interest rate sensitivity of EverTrust Bank's
assets and liabilities and the estimated effects of changes in interest rates
on EverTrust Bank's (and hence the Company's) net interest income and market
value of portfolio equity indicated in the preceding table could vary
substantially if different assumptions were used or actual experience differs
from such assumptions.  Although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates.  The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types of assets and liabilities
lag behind changes in market interest rates.  Non-uniform changes and
fluctuations in market interest rates across various maturity horizons will
also affect the results presented.  In addition, certain assets, such as
adjustable rate mortgage loans, have features which restrict changes in
interest rates on a short-term basis and over the life of the asset.  In the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate from those assumed in calculating the table.

     The assumptions used by management were based upon proprietary data and
are reflective of historical results or current market conditions.  These
assumptions relate to interest rates, prepayments, and the market value of
certain assets under the various interest rate scenarios.

     Prepayments for mortgage loans and consumer loans were based on
management's evaluation of its current loan portfolio. Prepayments are assumed
to increase when market rates decline and decrease as market rates increase.
EverTrust Bank's loans are the only assets or liabilities which management
assumed possess optionality for the purpose of determining market value
changes.

     Management assumed the non-maturity deposits could be maintained with
rate adjustments not directly proportionate to the change in market interest
rate.  These assumptions are based upon management's analysis of its customer
base, competitive factors and historical review of EverTrust Bank's deposit
mix.

                                     50
<PAGE>



     The net interest income and net market value table presented above is
predicated upon a stable balance sheet with no growth or change in asset or
liability mix.  In addition, the net value is calculated based upon the
present value of discounted cash flows.  The net interest income table is
based upon a cash flow simulation of EverTrust Bank's existing assets and
liabilities.  It was also assumed that delinquency rates would not change as a
result of changes in interest rates although there can be no assurance that
this will be the case.  Even if interest rates change in the designated
amounts, there can be no assurance that EverTrust Bank's assets and
liabilities would perform as set forth above.  Also, changes in market rates
in the designated amounts accompanied by a change in the shape of the yield
curve would cause changes to the net market value and net interest income
other than those indicated above.

     How the Company Manages Its Risk of Interest Rate Changes.  The Company
does not maintain a trading account for any class of financial instrument nor
does it purchase high-risk derivative instruments.  EverTrust Bank is
authorized to engage in limited hedging activities for its saleable loan
pipeline, however, no such hedges were in place at March 31, 2001.
Furthermore, the Company has no commodity price risk, and only a limited
amount of foreign currency exchange rate risk as a result of holding Canadian
currency in the normal course of business.  For information regarding the
sensitivity to interest rate risk of the Company's interest-earning assets and
interest-bearing liabilities, see the tables under Item 1, "Business --
Lending Activities -- Loan Maturity and Repricing," "-- Investment Activities"
and "-- Deposit Activities and Other Sources of Funds -- Deposit Accounts --
Time Deposits by Maturities."

     The Company has sought to reduce the exposure of its earnings to changes
in market interest rates by emphasizing the origination of loans with interest
rates that adjust periodically with changes in market interest rates.  The
Company also buys FHLB borrowings with terms that match the terms of its loan
portfolio to manage exposure to interest rates.  The Company relies on retail
deposits as its primary source of funds, supplemented by FHLB borrowings.
Other approved funding sources include brokered deposits and repurchase
agreements.

     The only hedging activity currently authorized by the Board of EverTrust
Bank is related to the hedging of loans originated for resale to the secondary
market.  EverTrust Bank's hedging policy permits the forward sale of loans and
investments with a high correlation factor to the asset being hedged.
EverTrust Bank does not currently have any open hedges as secondary market
loan sale activity has been limited.  However, EverTrust Bank may use hedges
in the future if loan sale activity accelerates.

     Should the Company deem it necessary to engage in additional hedging
activities, management would authorize the development of necessary in-house
expertise and/or engage qualified outside consultants to implement appropriate
Board-approved policies and procedures, which would comply with all relevant
regulations.

Liquidity and Capital Resources

     The Company's primary sources of funds are deposits and proceeds from
principal and interest payments on loans and securities, and FHLB of Seattle
advances.  While maturities and scheduled amortization of loans and securities
are a predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.

     The primary investing activity of the Company is the origination of one-
to- four family loans and commercial and multi-family mortgage loans.  During
the years ended March 31, 2000 and 2001, the Company originated $187.3 million
and $166.2 million of these loans, respectively.

     A secondary, but increasing activity of the Company  is the origination
of business loans.  During the years ended March 31, 2000 and 2001, the
Company originated $11.8 million and $33.4 million of these loans,
respectively.  Other investing activities during these periods include the
purchase of investment securities to provide liquidity and yield.  These
activities were funded primarily by principal repayments on loans and
deposits.

                                     51
<PAGE>



     In addition, another investing activity of the Company has been the
repurchase of stock.  For information regarding the Company's repurchase of it
outstanding common stock, see "Regulation -- the Company -- Stock
Repurchases."

     EverTrust Bank must maintain adequate levels of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit
withdrawals, to satisfy financial commitments and to take advantage of
investment opportunities.  The sources of funds include deposits and principal
and interest payments from loans and investments and FHLB of Seattle advances.
During fiscal years 2000 and 2001, EverTrust Bank used these sources of funds
primarily to fund loan commitments and to pay maturing savings certificates
and deposit withdrawals.  At March 31, 2001, EverTrust Bank had loan
commitments, excluding loans in process, of $13.8 million.

     At March 31, 2001, the Company had $598,000 of unrealized gain on
securities classified as available for sale, which amount represented 1.0% of
the amortized cost basis, or $62.7 million, of the related securities.
Movements in market interest rates will affect the unrealized gains and losses
in these securities.  However, assuming that the securities are held to their
individual dates of maturity, even in periods of increasing market interest
rates, as the securities approach their dates of maturity, the unrealized gain
or loss will begin to decrease and eventually be eliminated.

     At March 31, 2001, certificates of deposit amounted to $213.4 million, or
53.7%, of the Bank's total deposits, including $140.7 million which were
scheduled to mature by March 31, 2002. Historically, the Bank has been able to
retain a significant amount of its deposits as they mature. Management of the
Bank believes it has adequate resources to fund all loan commitments by
deposits and, if necessary, FHLB of Seattle advances and sale of mortgage
loans and that it can adjust the offering rates of savings certificates to
retain deposits in changing interest rate environments.

Impact of Accounting Pronouncements and Regulatory Policies

     Accounting For Derivative Instruments And Hedging Activities. Statement
of Financial Accounting Standards No. 133 ("SFAS"), "Accounting for Derivative
Instruments and Hedging Activities," issued in June 1998, is effective for all
fiscal years beginning after June 15, 2000.  SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities.  Under SFAS No. 133, certain contracts that were not
formerly considered derivatives may now meet the definition of a derivative.
The Company has adopted SFAS No. 133 effective April 1, 2001.  The adoption of
SFAS No. 133 did not have a material impact on its financial position of the
Company.

     Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.  SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" was issued
September 2000 and replaces SFAS No. 125 of the same title.  This statement
revises the standards for accounting for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but
carries over most of SFAS No. 125's provisions without reconsideration.  This
statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001, and is
effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000.  The adoption of this statement by the
Company is not expected to materially affect the results of operations or
financial condition of the Company.

     See Note 1 of the Notes to Consolidated Financial Statements included in
Item 8 of this Form 10-K for further information.

                                     52
<PAGE>



Effect of Inflation and Changing Prices

     The Consolidated Financial Statements and related financial data
presented in Item 8 of this Form 10-K have been prepared in accordance with
generally accepted accounting principles, which generally require the
measurement of financial position and operating results in terms of historical
dollars, without considering the changes in relative purchasing power of money
over time due to inflation. The primary impact of inflation is reflected in
the increased cost of the Company's operations.  Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature.  As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation.  Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

     The information contained under Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Asset and
Liability Management and Market Risk" of this Form 10-K is incorporated herein
by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES

            Index to Consolidated Financial Statements


                                                                       Page
                                                                        ----

Independent Auditors Report.........................................     54
Consolidated Statements of Financial Condition as of
   March 31, 2001 and 2000..........................................     55
Consolidated Statements of Operations For the Years Ended
   March 31, 2001, 2000 and 1999....................................     56
Consolidated Statements of Comprehensive Income For the
   Years Ended March 31, 2001, 2000 and 1999........................     58
Consolidated Statements of Equity For the
   Years Ended March 31, 2001, 2000 and 1999........................     59
Consolidated Statements of Cash Flows For the Years Ended
   March 31, 2001, 2000 and 1999....................................     60

Notes to Consolidated Financial Statements..........................     62

                                     53
<PAGE>



                       [Letterhead of Deloitte & Touche]

INDEPENDENT AUDITORS' REPORT

Board of Directors
EverTrust Financial Group, Inc.
Everett, Washington

We have audited the accompanying consolidated statements of financial
condition of EverTrust Financial Group, Inc. and subsidiaries (the Company) as
of March 31, 2001 and 2000, and the related consolidated statements of
operations, comprehensive income (loss), equity, and cash flows for each of
the three years in the period ended March 31, 2001.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of March 31, 2001
and 2000, and the results of its operations and its cash flows for each of the
three years in the period ended March 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

/s/Deloitte & Touche

April 27, 2001

                                 54

<PAGE>



EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  (in thousands, except share amounts)
MARCH 31, 2001 AND 2000
-----------------------------------------------------------------------------

ASSETS                                                  2001        2000
------                                                  ----        ----
ASSETS:
  Cash and cash equivalents, including interest-
    bearing deposits of $14,993 and $1,790          $  22,383   $    7,652
  Securities available for sale, amortized
    cost of $62,701 and $97,710                        63,299       95,988
  Securities held to maturity, fair value of
    $8,613 and $12,136                                  8,362       12,066
  Federal Home Loan Bank stock, at cost                 4,652        4,288
  Loans receivable, net                               483,117      416,116
  Loans held for sale, fair value of $800 and $-0-        794
  Accrued interest receivable                           3,847        3,653
  Premises and equipment, net                           9,542        9,077
  Prepaid expenses and other assets                     6,407        6,372
                                                   ----------   ----------
TOTAL                                              $  602,403   $  555,212
                                                   ==========   ==========
LIABILITIES AND EQUITY
----------------------

LIABILITIES:
  Deposit accounts                                 $  397,643   $  382,986
  Federal Home Loan Bank advances and
    other borrowings                                   80,344       34,423
  Accounts payable and other liabilities                4,270        4,274
                                                   ----------   ----------
          Total liabilities                           482,257      421,683

COMMITMENTS AND CONTINGENCIES

EQUITY:
  Common stock, no par value - Authorized,
    49,000,000 shares; outstanding, 7,258,243
    and 8,536,937 shares                               68,940       83,978
  Employee Stock Ownership Plan (ESOP) debt            (1,188)      (1,584)
  Retained earnings                                    55,033       52,271
  Shares held in trust for stock-related
    compensation plans                                 (3,034)
  Accumulated other comprehensive income (loss)           395       (1,136)
                                                   ----------   ----------
          Total equity                                120,146      133,529
                                                   ----------   ----------
TOTAL                                              $  602,403   $  555,212
                                                   ==========   ==========

See notes to consolidated financial statements                            55

<PAGE>


EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------

                                           2001         2000         1999
                                           ----         ----         ----

INTEREST INCOME:
  Loans receivable                      $   40,173   $  31,464    $  28,852
  Investment securities:
    Taxable interest income                  5,279       5,994        4,204
    Tax-exempt interest income                 381         402          376
    Dividend income                            639         574          462
                                        ----------   ---------    ---------
      Total investment securities
        income                               6,299       6,970        5,042
                                        ----------   ---------    ---------

      Total interest income                 46,472      38,434       33,894

INTEREST EXPENSE:
  Deposit accounts                          19,169      17,641       16,816
  Federal Home Loan Bank advances
    and other borrowings                     3,879       1,191        1,021
                                        ----------   ---------    ---------
      Total interest expense                23,048      18,832       17,837
                                        ----------   ---------    ---------
      Net interest income before
        provision of loan losses            23,424      19,602       16,057

PROVISION FOR LOAN LOSSES                    1,005         810          780
                                        ----------   ---------    ---------

      Net interest income after
        provision for loan losses           22,419      18,792       15,277

NONINTEREST INCOME:
  Loan service fees                            742         636          781
  Gain (loss) on sale of securities
    and loans                                  431        (407)         313
  Other, net                                 1,459       1,061          833
                                        ----------   ---------    ---------

      Total noninterest income               2,632       1,290        1,927

NONINTEREST EXPENSES:
  Salaries and employee benefits             9,391       6,666        5,442
  Occupancy and equipment                    2,618       3,353        3,134
  Charitable contributions                               5,201        3,426
  Information processing costs                 962         741          777
  Other, net                                 4,432       3,735        2,753
                                         ----------   ---------    ---------
      Total noninterest expenses            17,403      19,696       15,532
                                         ----------   ---------    ---------

BALANCE, earnings before federal income
  taxes, carried forward                     7,648         386        1,672

See notes to consolidated financial statements                            56

<PAGE>




EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts)
(continued)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------


                                           2001         2000         1999
                                           ----         ----         ----

BALANCE, earnings before federal income
  taxes, brought forward                $    7,648   $     386    $   1,672

FEDERAL INCOME TAXES:
  Current                                    2,502       1,914        1,944
  Deferred                                    (211)     (2,100)      (1,683)
                                        ----------   ---------    ---------
         Total federal income taxes          2,291        (186)         261
                                        ----------   ---------    ---------
NET INCOME                              $    5,357   $     572    $   1,411
                                        ==========   =========    =========

NET INCOME PER COMMON SHARE - BASIC     $     0.70          nm (1)      n/a
                                        ==========

NET INCOME PER COMMON SHARE - DILUTED   $     0.70          nm (1)      n/a
                                        ==========

WEIGHTED AVERAGE SHARES OUTSTANDING
  - BASIC                                7,614,167          nm (1)      n/a
                                        ==========

WEIGHTED AVERAGE SHARES OUTSTANDING
  - DILUTED                              7,666,870          nm (1)      n/a
                                        ==========


(1) Earnings-per-share calculations are not meaningful as the Company
    converted from a mutual to a public company on September 30, 1999.


See notes to consolidated financial statements                            57

<PAGE>


EVERTRUST FINANCIAL GROUP, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------

                                           2001         2000         1999
                                           ----         ----         ----

NET INCOME                               $ 5,357      $   572      $ 1,411

OTHER COMPREHENSIVE INCOME (LOSS),
  net of income taxes
    Gross unrealized gain (loss) on
    securities:
      Unrealized holding gain (loss)
        during the period, net of
        deferred income tax expense
        (benefit) of $809, $(571),
        and $(54)                          1,556       (1,108)        (104)
      Less adjustment of gains included
        in net income, net of income
        tax benefit of $(13), $(74),
        and $(72)                            (25)        (144)        (140)
                                         -------      -------      -------
          Other comprehensive income
            (loss)                         1,531       (1,252)        (244)
                                         -------      -------      -------
COMPREHENSIVE INCOME (LOSS)              $ 6,888      $  (680)     $ 1,167
                                         =======      =======      =======


See notes to consolidated financial statements.                          58

<PAGE>


<TABLE>

EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share amounts)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------------------------------------
                                                                      Shares held
                                                                      in trust for    Accumulated
                            Common stock (1)                          stock-related      other
                          ------------------- Debt related  Retained  compensation   comprehensive
                          Shares       Amount    to ESOP    earnings      plans      income (loss)   Total
                          ------       ------    -------    --------      -----      -------------   -----

<S>                     <C>           <C>       <C>         <C>          <C>          <C>         <C>
BALANCE, April 1, 1998       --       $         $     --    $ 50,736     $    --      $    360    $  51,096
  Net income                                                   1,411                                  1,411
  Other comprehensive
   loss, net of income
   taxes                                                                                  (244)        (244)
                                                            --------                  --------    ---------

BALANCE, March 31, 1999                                       52,147                       116       52,263
  Common stock issued   8,986,250       88,213                                                       88,213
  Common stock
    repurchased          (449,313)      (4,167)                                                      (4,167)
  Loan to ESOP                                    (1,980)                                            (1,980)
  Repayment of ESOP debt                             396                                                396
  ESOP activity - Change
   in value of shares
   committed to be
   released                                (68)                                                         (68)
  Net income                                                     572                                    572
  Dividends paid                                                (448)                                  (448)
  Other comprehensive
    loss, net of
    income taxes                                                                        (1,252)      (1,252)
                        ---------     --------  --------    --------                  --------    ---------

BALANCE, March 31,
2000                    8,536,937       83,978    (1,584)     52,271                    (1,136)     133,529
  Common stock
    repurchased        (1,638,144)     (19,406)                                                     (19,406)
  Repayment of
    ESOP debt                                        396                                                396
  ESOP activity -
    Change in
    value of shares
    committed to be
    released                                33                                                           33
  Restricted stock
    issued to
    Management
    Recognition
    Plan (MRP)            359,450        4,335                            (4,335)
  Amortization of
    compensation
    related to MRP                                                         1,301                      1,301
  Net income                                                   5,357                                  5,357
  Dividends paid                                              (2,595)                                (2,595)
  Other comprehensive
    income, net of
    income taxes                                                                         1,531        1,531
                        ---------     --------  --------    --------    --------      --------    ---------
BALANCE, March 31,
2001                    7,258,243     $ 68,940  $ (1,188)   $ 55,033    $ (3,034)     $    395    $ 120,146
                        =========     ========  ========    ========    ========      ========    =========

(1) Stock offering completed on September 30, 1999.

</TABLE>


See notes to consolidated financial statements.
                                           59

<PAGE>



EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------

                                              2001       2000        1999
                                              ----       ----        ----

OPERATING ACTIVITIES:
  Net income                               $   5,357  $     572   $   1,411
  Adjustments to reconcile net income to
   net cash provided (used) by operating
   activities:
     Depreciation and amortization of
       premises and equipment                  1,116        963       1,474
     Dividends on Federal Home Loan Bank
       stock and accretion of investment
       security discounts                       (505)      (450)       (457)
     Gain on sale of premises and equipment
       and real estate owned                                (16)         (7)
     Loss on permanent impairment of
       investment security                       214
     Amortization of investment security
       premiums                                  172        301         244
     Loss on limited partnership                 108        107         125
     Provision for losses on loans             1,005        810         780
     Amortization of deferred loan fees
       and costs                              (1,290)    (1,412)     (1,184)
     Loan fees deferred                        1,672      1,666       1,145
     Proceeds from sale of loans              24,501     33,895       3,958
     Loans originated for sale               (24,529)    (9,142)    (34,485)
     Deferred taxes                             (211)    (2,100)     (1,683)
     Stock contributed to charitable
       foundation                                         3,900
     Amortization of compensation related
       to MRP                                  1,301
     Cash provided (used) by changes in
       operating assets and liabilities:
         Accrued interest receivable            (194)      (476)       (147)
         Prepaid expenses and other assets       580       (528)       (283)
         Accounts payable and other
           liabilities                            (4)      (707)      1,255
                                           ---------  ---------   ---------
  Net cash provided (used) by operating
    activities                                 9,293     27,383     (27,854)

INVESTING ACTIVITIES:
  Proceeds from maturities of securities
    available for sale                        34,477     67,876      19,952
  Proceeds from maturities of securities
    held to maturity                           3,723      1,843       7,106
  Proceeds from sale of securities available
    for sale                                  11,184      2,502       3,561
  Purchases of securities available for sale (10,841)  (106,882)    (46,647)
  Purchases of securities held to maturity                             (157)
  Purchases of Federal Home Loan Bank stock      (75)        (4)        (44)
  Loan principal payments                    123,545     92,780     113,624
  Loans originated or acquired              (192,784)  (189,745)   (103,275)
  Proceeds from sales of reacquired
    assets and real estate owned                                        130
  Investment in real estate owned                                        (9)
  Investment in limited partnership             (277)      (809)
  Net additions to premises and equipment     (2,520)    (1,132)       (664)
                                           ---------  ---------   ---------
  Net cash used by investing activities      (33,568)  (133,571)     (6,423)
                                           ---------  ---------   ---------
BALANCE, carried forward                     (24,275)  (106,188)    (34,277)


See notes to consolidated financial statements                           60

<PAGE>



EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (continued)
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------

                                              2001       2000        1999
                                              ----       ----        ----

BALANCE, brought forward                   $ (24,275) $(106,188)  $ (34,277)

FINANCING ACTIVITIES:
  Net increase in deposit accounts            14,657      7,090      24,925
  Proceeds from the sale of common stock                 84,245
  Repurchase shares of common stock          (19,373)    (4,167)
  Dividends paid on common stock              (2,595)      (448)
  Loan to ESOP                                           (1,980)
  Repayment of loan to ESOP                      396        396
  Proceeds from other borrowings              22,502      6,500
  Repayment of other borrowings              (12,950)    (1,500)
  Proceeds from Federal Home Loan Bank
    advances                                 173,107     50,708      16,000
  Repayments of Federal Home Loan Bank
    advances                                (136,738)   (40,234)    (12,554)
                                           ---------  ---------   ---------

  Net cash provided by financing
    activities                                39,006    100,610      28,371
                                           ---------  ---------   ---------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                            14,731     (5,578)     (5,906)

CASH AND CASH EQUIVALENTS:
  Beginning of year                            7,652     13,230      19,136
                                           ---------  ---------   ---------
  End of year                              $  22,383   $  7,652   $  13,230
                                           =========  =========   =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
 Cash paid during the year for:
   Interest on deposits                    $  19,027   $ 17,618   $  16,807
   Federal income taxes                        2,690      1,200       2,337
   Interest on borrowings                      3,699      1,200       1,000

SUPPLEMENTAL DISCLOSURES OF NONCASH
  INVESTING AND FINANCING ACTIVITIES:
 Real estate acquired through foreclosure  $      85   $   --     $     117

See notes to consolidated financial statements                           61

<PAGE>



EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2001, 2000, AND 1999
-----------------------------------------------------------------------------

NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES

Principles of consolidation and basis of presentation:  The consolidated
financial statements include EverTrust Financial Group, Inc. and subsidiaries
(the Company), Mutual Bancshares Capital (MB Cap), I-Pro Inc. (I-Pro),
EverTrust Bank (the Bank), formerly known as Everett Mutual Bank (EMB), and
the Bank's wholly owned subsidiary, Sound Financial, Inc.  On September 1,
1996 (inception), Commercial Bank of Everett (CBE) was formed as a wholly
owned subsidiary of the Company. Effective February 1, 2001, CBE merged into
EverTrust Bank.  All significant intercompany transactions and balances have
been eliminated.

Holding company formation:  In September 1993, Mutual Bancshares, a bank
holding company, was formed as the parent company for the Bank and
subsidiaries.  The Company is subject to regulation by the Federal Reserve
Board (FRB) and the Federal Deposit Insurance Corporation (FDIC).  On April 2,
1997, I-Pro was formed as a wholly owned subsidiary of the Company.  On
October 29, 1998, MB Cap was formed as a wholly owned subsidiary of the
Company.  The Company changed its name to EverTrust Financial Group, Inc. in
its conversion from mutual to stock form.

Evertrust Financial Group, Inc.'s conversion from a Washington-chartered
mutual holding company to a Washington-chartered capital stock holding company
was approved at a special meeting of members held on September 28, 1999.  On
September 30, 1999, the initial public offering of the Company's stock was
completed with the sale of 8,596,250 shares and the issuance of 390,000 shares
to EverTrust Foundation.  The stock began trading on the NASDAQ stock market
under the trading symbol of EVRT on October 4, 1999.

Nature of business:  Through its bank subsidiary, EverTrust Bank, the Company
is primarily engaged in attracting deposits from the general public through
its 12 offices in Snohomish County and one office in King County and using
those funds, together with borrowings, to originate loans secured by real
estate and to purchase investment securities.  The Company sells
nonproprietary mutual funds and annuities through Sound Financial, Inc., a
subsidiary of EverTrust Bank.  The Company also is engaged in providing loans
to customers, who are predominately local businesses and individuals, through
its commercial banking group office in Everett.  Through its subsidiary,
I-Pro, the Company is engaged in providing item processing and statement
rendering services.  Through its subsidiary, MB Cap, the Company provides
equity to high technology businesses in the seed, start-up, and early stage of
development.

Cash and cash equivalents:  For purposes of the statements of cash flows, cash
and cash equivalents includes cash on hand and in banks, overnight
investments, and highly liquid debt instruments with maturities at the time of
purchase of three months or less.  For those short-term investments, the
carrying value is a reasonable estimate of fair value.

FRB regulations require depository institutions to maintain certain minimum
reserve balances.  Included in cash were balances required to be maintained
under Federal Reserve Bank of San Francisco reserve calculations of $1,040,000
and $956,000 at March 31, 2001 and 2000, respectively.

                                                                          62
<PAGE>



Investment securities:

     Securities available for sale:  Securities available for sale are
     carried at fair value.  Unrealized holding gains and losses are excluded
     from earnings and reported net of tax in other comprehensive income.
     Gains and losses on the sale of investment securities are computed under
     the specific identification method.

     Securities held to maturity:  Securities held to maturity are stated at
     cost and are adjusted for amortization of premiums and accretion of
     discounts using the level yield method.  Securities held to maturity are
     designated as such at the date of purchase based on management's
     positive intent and ability to hold such investments to maturity.
     Unrealized losses resulting from market valuation differences deemed
     other than temporary are included in earnings.

Loans:  Loans held for investment are reported at the principal amount
outstanding, net of unamortized nonrefundable loan fees and related direct
loan origination costs.  Deferred net fees and costs are recognized in
interest income over the loan term using a method that generally produces a
level yield on the unpaid loan balance.  Interest is accrued primarily on a
simple interest basis.

Nonaccrual loans are those for which management has discontinued accrual of
interest because there exists significant uncertainty as to the full and
timely collection of either principal or interest, or such loans have become
contractually past due 90 days with respect to principal or interest.

When a loan is placed on nonaccrual, all previously accrued but uncollected
interest is reversed against current period interest income.  All subsequent
payments received are first applied to unpaid principal and then to unpaid
interest.  Interest income is accrued at such time as the loan is brought
fully current as to both principal and interest, and, in management's
judgment, such loans are considered to be fully collectible.  However, Company
policy also allows management to continue the recognition of interest income
on certain loans designated as nonaccrual.  This policy applies only to loans
that are well secured and in management's judgment are considered to be fully
collectible.  Although the accrual of interest income is suspended, any
payments received may be applied to the loan according to its contractual
terms and interest income recognized when cash is received.

Loans held for sale:  Loans originated and held for sale are carried at the
lower of cost or market value on an aggregate basis.  Nonrefundable fees and
direct loan origination costs related to loans held for sale are deferred and
recognized when the loans are sold.

Reserve for loan losses:  The Company maintains an allowance for credit losses
to absorb losses inherent in the loan portfolio.  The allowance is based on
ongoing quarterly assessments of the probable estimated losses inherent in the
loan portfolio.  The allowance is increased by the provision for credit
losses, which is charged against current period operating results and
decreased by the amount of chargeoffs, net of recoveries.

The Company's methodology for assessing the appropriateness of the allowance
consists of several key elements, which include the formula allowance,
specific allowance, and the unallocated allowance.  A loan is considered
impaired when, based on current information, management determines it is
probable that the Company will be unable to collect all amounts due according
to the terms of the loan agreement. Impairment is measured by the difference
between the recorded investment in the loan (including accrued interest and
net deferred loan fees or costs) and the estimated present value of total
expected future cash flows, discounted at the loan's effective rate, or the
fair value of the collateral, if the loan is collateral dependent.  The amount
by which the recorded investment in the loan exceeds either the present value
of expected future cash flows or the value of the impaired loan's collateral,
when applicable, would be a

                                                                         63

<PAGE>



specifically allocated reserve for loan losses.  Any portion of an impaired
loan classified as loss under regulatory guidelines is charged off.

The formula allowance is calculated by applying a loss percentage factor to
the various loan pool types based on past due ratios, historical loss
experience, the regulatory and internal credit grading and classification
system, and general economic, business, and regulatory conditions which could
affect the collectibility of the portfolio.  These factors may be adjusted for
events that are significant in management's judgment, as of the evaluation
date.  The Company derives the loss percentage factors for problem graded
loans using regulatory guidelines, and, for pass graded loans, by using
estimated credit losses over the upcoming 12 months based on the annual rate
of chargeoffs experienced over the previous three years on similar loans,
adjusted for current conditions and trends.

Specific allowances are established in cases where management has identified
significant conditions or circumstances related to a credit that management
believes indicate the probability that a loss has been incurred.

The unallocated allowance comprises two components.  The first component
recognizes the estimation risk associated with the formula and specific
allowances.  The second component is based upon management's evaluation of
various conditions that are not directly measured in the determination of the
formula and specific allowances.  The conditions evaluated in connection with
the unallocated allowance may include loan volumes and concentrations,
seasoning of the loan portfolio, specific industry conditions within portfolio
segments, governmental regulatory actions, recent loss experience in
particular segments of the portfolio, and the duration of the current business
cycle.

Mortgage servicing rights:  Originated servicing rights, reported within
prepaid expenses and other assets, are recorded when mortgage loans are
originated and subsequently sold or securitized (and held as
available-for-sale securities) with the servicing rights retained.  The total
costs of the mortgage loans are allocated between servicing rights and the
loans (without the servicing rights) based on their relative fair values.  The
cost relating to the mortgage servicing rights is capitalized and amortized in
proportion to, and over the period of, estimated future net servicing income.
Amounts capitalized are recorded at cost, net of accumulated amortization and
valuation allowance.

In order to determine the fair market value of servicing rights, the Bank uses
a valuation model that evaluates the estimated discounted future cash flows of
the servicing rights.  Assumptions used in the valuation model include the
cost of servicing the loan, discount rate, and anticipated prepayment speeds.

The Bank assesses impairment of the capitalized mortgage servicing rights
based on recalculation of the current market price of servicing rights
discounted for changes in actual prepayment speeds of the loans.  Impairment
is assessed on a pool-by-pool basis with any impairment recognized through a
valuation allowance for the combined pools.  The pools are combined as they
all have similar interest rates, terms, and risk characteristics.

Real estate owned:  Real estate owned (REO), reported within prepaid expenses
and other assets, includes properties acquired through foreclosure that are
transferred to REO.  These properties are initially recorded at the lower of
cost or fair value. Write-downs that result from the ongoing periodic
valuation of the foreclosed properties are charged to other expenses in the
period in which they are identified. Gains or losses at the time the property
is sold are charged or credited to other income in the period in which they
are realized.  The amounts the Company will ultimately recover from real
estate owned may differ substantially from the carrying value of the assets
because of future market factors beyond the control of the Company or because
of changes in the Company's strategy for recovering its investments.

                                                                         64

<PAGE>



Real estate held for investment:  Real estate held for investment, reported
within prepaid expenses and other assets, represents the Company's investment
in two real estate partnerships of which the principal activity is the
development of low income housing.  The Company's investment has been recorded
using the equity method of accounting.  The Company earns low-income housing
tax credits on these real estate partnerships which reduce the Company's
federal income tax provision and liability.

Premises and equipment:  Premises and equipment are stated at cost, less
accumulated depreciation and amortization.  The depreciation and amortization
are computed on the straight-line method.  Estimated useful lives are as
follows:

      Buildings and improvements             Up to 27.5 years
      Furniture, fixtures, and automobiles       3 - 15 years

The Company capitalizes expenditures for betterments and major renewals, and
charges ordinary maintenance and repairs to operations as incurred.

The Company periodically reviews buildings and improvements for impairment.
If identified, an impairment loss is recognized through a charge to earnings
based on the fair value of the property.

Income taxes:  Income taxes are accounted for using the asset and liability
method.  Under this method, a deferred tax asset or liability is determined
based on the enacted tax rates which will be in effect when the differences
between the financial statement carrying amounts and tax bases of existing
assets and liabilities are expected to be reported in the Company's income tax
returns.  The deferred tax provision for the year is equal to the change in
the deferred tax liability from the beginning to the end of the year.  The
effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.

The Company reports income and expenses using the accrual method of accounting
and files a consolidated tax return that includes all of its subsidiaries.

Earnings per share:  Earnings per share (EPS) is computed using the weighted
average number of common and diluted shares outstanding during the period.
Basic EPS is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock.  The only reconciling items affecting the calculation of EPS are the
inclusion of stock options and restricted stock awards, which increase the
shares outstanding in diluted EPS by 52,702 for the year ended March 31, 2001.

Employee Stock Ownership Plan:  The Company sponsors a leveraged Employee
Stock Ownership Plan (ESOP).  As shares are released from collateral,
compensation expense is recorded equal to the then current market price of the
shares, and the shares become outstanding for purposes of earnings- per-share
calculations.  Stock and cash dividends on allocated shares are recorded as a
reduction of retained earnings and paid directly to plan participants or
distributed directly to participants' accounts.  Cash dividends on unallocated
shares are recorded as a reduction of debt and accrued interest.

Use of estimates:  The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect amounts
reported in the financial statements.  Changes in these estimates and
assumptions are considered reasonably possible and may have a material impact
on the financial statements.  The Company uses significant estimates in
determining reported reserves and allowances for loan losses, tax liabilities,
and other contingencies.

                                                                          65

<PAGE>



Recently issued accounting standards adopted in these financial statements:
On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements.  SAB No. 101 provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements.  The Company adopted the
guidance in SAB No. 101 effective December 31, 2000.  The adoption of SAB No.
101 did not have a material impact on the Company's consolidated results of
operations, financial position, or cash flows.

Recently issued accounting standards not yet adopted:  Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, is effective for all fiscal years beginning after June 15,
2000.  SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities.  Under SFAS No. 133,
certain contracts that were not formerly considered derivatives may now meet
the definition of a derivative.  The Company has adopted SFAS No. 133
effective April 1, 2001.  The adoption of SFAS No. 133 did not have a material
impact on its financial position as the Company did not have any derivative
instruments as of March 31, 2000.

SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, was issued September 2000 and replaces SFAS
No. 125 of the same title.  This statement revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but carries over most of SFAS No.
125's provisions without reconsideration.  This statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001, and is effective for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
The adoption of this statement by the Company is not expected to materially
affect the results of operations or financial condition of the Company.

Reclassifications:  Certain reclassifications have been made in the 2000 and
1999 consolidated financial statements to conform with the classifications
used in 2001.

                                                                     66

<PAGE>



NOTE 2:  SECURITIES AVAILABLE FOR SALE

Securities available for sale classified by type and contractual maturity date
consisted of the following at March 31 (in thousands):

                                          Gross       Gross
                             Amortized  unrealized  unrealized
                                cost      gains       losses     Fair value
                                ----      -----       ------     ----------
2001:
   Debt securities:
     U.S. government agency
      securities due:
        Within one year       $ 2,498    $    25     $     --     $ 2,523
        After one year
          through five years    2,487        114                    2,601
                              -------     ------                  -------
                               4,985        139                    5,124
     Municipal obligations
      due:
        Within one year           794                                 794
        After one year
          through five years    2,501         24                    2,525
        After 10 years          1,941                               1,941
                              -------     ------                  -------
                                5,236         24                    5,260

     Obligations of corpor-
      ations due:
        Within one year         9,540         26          (12)      9,554
        After one year
          through five years   10,632        124           (4)     10,752
        After 10 years            500                      (5)        495
                              -------     ------      -------     -------
                               20,672        150          (21)     20,801

     Mortgage-backed
       securities due:
        After one year
          through five years    8,537        165                    8,702
        After five years
          through 10 years      8,781        229                    9,010
        After 10 years          7,645        150                    7,795
                              -------     ------                  -------
                               24,963        544                   25,507
     Certificates of
       deposit due:
        Within one year           195          5                      200

     Equity securities:
        Mutual funds            2,874                               2,874
     Other stock                3,776         17         (260)      3,533
                              -------     ------      -------     -------
                                6,650         17         (260)      6,407
                              -------     ------      -------     -------
                              $62,701     $  879      $  (281)    $63,299
                              =======     ======      =======     =======

                                                                          67

<PAGE>


                                          Gross       Gross
                             Amortized  unrealized  unrealized
                                cost      gains       losses     Fair value
                                ----      -----       ------     ----------
2000:
   Debt securities:
     U.S. government agency
      securities due:
        Within one year       $ 5,749    $           $    (29)    $ 5,720
        After one year
          through five years    6,449           1         (51)      6,399
                              -------     -------     -------     -------
                               12,198           1         (80)     12,119
     Municipal obligations
      due:
        Within one year           165                                 165
        After one year
          through five years    3,344                     (93)      3,251
        After five years
          through 10 years        431                     (23)        408
        After 10 years          1,721                      (8)      1,713
                              -------                 -------     -------
                                5,661                    (124)      5,537
     Obligations of corpor-
      ations due:
        Within one year        19,587                    (165)     19,422
        After one year
          through five years   21,772           4        (548)     21,228
                              -------     -------     -------     -------
                               41,359           4        (713)     40,650
     Mortgage-backed
      securities due:
        After one year
          through five years   10,749                    (181)     10,568
        After five years
          through 10 years      7,541                    (136)      7,405
        After 10 years          7,794           7         (98)      7,703
                              -------     -------     -------     -------
                               26,084           7        (415)     25,676

     Certificates of
      deposit due:
        After one year
          through five years      185                                 185

     Equity securities:
        Mutual funds            6,653                               6,653
        Other stock             5,570          49        (451)      5,168
                              -------     -------     -------     -------
                               12,223          49        (451)     11,821
                              -------     -------     -------     -------
                              $97,710     $    61     $(1,783)    $95,988
                              =======     =======     =======     =======

Fair value equals quoted market price, if available.  If a quoted market price
is not available, fair value is estimated using quoted market prices for
similar securities.

Gross realized gains on the sale of securities available for sale were
$252,801, $220,639, and $322,535 for the years ended March 31, 2001, 2000, and
1999, respectively.  Gross realized losses on the sale of securities available
for sale were $214,375 and $2,796, and $7,282 for the years ended March 31,
2001, 2000, and 1999, respectively.

                                                                          68
<PAGE>



The expected maturities of mortgage-backed securities will differ from
contractual maturities because borrowers may have the right to prepay
obligations with or without penalties.

NOTE 3: SECURITIES HELD TO MATURITY

Securities held to maturity classified by type and contractual maturity date
consisted of the following at March 31 (in thousands):

                                          Gross       Gross
                             Amortized  unrealized  unrealized
                                cost      gains       losses     Fair value
                                ----      -----       ------     ----------
2001:
   Debt securities:
     U.S. government agency
      securities due:
        Within one year       $ 1,503    $    23     $    --      $ 1,526
        After one year
          through five years    1,004         81                    1,085
                              -------    -------                  -------
                                2,507        104                    2,611
     Municipal obligations
      due:
        Within one year           546          5                      551
        After one year
          through five years    1,447         44                    1,491
        After five years
          through 10 years        650          7                      657
        After 10 years            991         19                    1,010
                              -------    -------                  -------
                                3,634         75                    3,709

     Obligations of corpor-
      ations due:
        Within one year           500         11                      511
        After one year
          through five years      492         21                      513
                              -------    -------                  -------
                                  992         32                    1,024

   Mortgage-backed
     securities due:
       Within one year              1                                   1
       After 10 years           1,228         40                    1,268
                              -------    -------                  -------
                                1,229         40                    1,269
                              -------    -------     -------      -------
                              $ 8,362    $   251     $    --      $ 8,613
                              =======    =======     =======      =======

                                                                         69
<PAGE>



                                          Gross       Gross
                             Amortized  unrealized  unrealized
                                cost      gains       losses     Fair value
                                ----      -----       ------     ----------
2000:
   Debt securities:
     U.S. government agency
      securities due:
        After one year
          through five years  $ 2,514    $    24     $    --      $ 2,538

     Municipal obligations
      due:
        Within one year           465                                 465
        After one year
          through five years    2,094          2          (9)       2,087
        After five years
          through 10 years        650                     (1)         649
        After 10 years          2,787         15                    2,802
                              -------    -------      -------     -------
                                5,996         17         (10)       6,003

     Obligations of corpor-
      ations due:
        Within one year           500                                 500
        After one year
          through five years      986         19                    1,005
                              -------    -------                  -------
                                1,486         19                    1,505

    Mortgage-backed
     securities due:
       After one year
         through five years         3                                   3
       After 10 years           1,586         20                    1,606
                              -------    -------                  -------
                                1,589         20                    1,609

    Certificates of
     deposit due:
       Within one year            481                                 481
                              -------    -------     -------     -------
                              $12,066    $    80     $   (10)    $12,136
                              =======    =======     =======     =======

Fair value equals quoted market price, if available.  If a quoted market price
is not available, fair value is estimated using quoted market prices for
similar securities.

Investment securities with a par value of $2,705,000 and $2,350,000 and a
market value of $2,765,400 and $2,353,154 were pledged to secure public
deposits at March 31, 2001 and 2000, respectively.

The expected maturities of mortgage-backed securities will differ from
contractual maturities because borrowers may have the right to prepay
obligations with or without penalties.

                                                                          70
<PAGE>



NOTE 4: LOANS RECEIVABLE

Loans receivable consisted of the following at March 31 (in thousands):

                                                         2001       2000
                                                         ----       ----
      Real estate:
        One to four family residential                $ 66,911    $ 70,042
        One to four family construction and
          land development                              40,729      37,266
        Income property:
          Commercial construction                       25,475      23,871
          Commercial real estate                       168,199     128,892
          Multifamily construction                      62,055      32,304
          Multifamily residential                      128,846     136,727
      Consumer:
        Home equity and second mortgages                25,756      23,301
        Credit cards                                     2,426       1,375
        Other installment loans                          6,219       5,281
      Business loans                                    31,707      16,494
                                                      --------    --------
                                                       558,323     475,553

      Less:
        Undisbursed loan proceeds                      (63,888)    (49,460)
        Deferred loan fees and other                    (3,879)     (3,493)
        Reserve for loan losses                         (7,439)     (6,484)
                                                      --------    --------
                                                       (75,206)    (59,437)
                                                      --------    --------
      Loans receivable, net                           $483,117    $416,116
                                                      ========    ========
      Loans held for sale                             $    794    $     --
                                                      ========    ========

The Bank originates commercial, real estate mortgage, construction and land
development, and installment loans primarily in Snohomish and King counties,
and to a lesser extent, in Skagit, Island, Jefferson, Clallam, Kitsap,
Whatcom, and Pierce counties.  Although the Bank has a geographically
diversified loan portfolio, economic conditions in the market area may affect
borrowers' ability to meet the stated repayment terms.  Collateral for each
loan is based on a credit evaluation of the customer, and such collateral may,
depending on the loan, include accounts receivable, inventory, equipment, real
estate, or other collateral.

                                                                         71
<PAGE>



The Bank originates both adjustable and fixed interest rate loans.  At March
31, 2001, the composition of the loan portfolio was as follows (in thousands):

                                               Fixed   Adjustable
 Term to maturity or rate adjustment            rate      rate       Total
 -----------------------------------            ----      ----       -----

   Due within one year                       $  8,164   $257,979    $266,143
   After one year through three years          29,246     50,226      79,472
   After three years through five years        16,872     40,705      57,577
   After five years through 15 years           64,398     11,145      75,645
   After 15 years                              15,597        102      15,597
                                             --------   --------    --------
                                             $134,277   $360,157    $494,434
                                             ========   ========    ========

The adjustable rate loans have various interest rate adjustment limitations
and are generally indexed to U.S. Treasury rates.  Future market factors may
affect the correlation of the interest rate adjustment with the rate the Bank
pays on the short-term deposits and Federal Home Loan Bank of Seattle (FHLB)
advances that have been primarily utilized to fund these loans.

Outstanding commitments to borrowers for loans totaled $13,752,900 and
$9,631,100 at March 31, 2001 and 2000, respectively.

The Bank serviced loans for others totaling $104,543,253 and $95,349,775 as of
March 31, 2001 and 2000, respectively.

NOTE 5: ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses was as follows for the years
ended March 31 (in thousands):

                                             2001     2000    1999
                                             ----     ----    ----

  Balance, beginning of year               $ 6,484  $ 5,672  $ 4,897
  Provision for loan losses                  1,005      810      780
  Loans charged off, net of recoveries
    of $20, $18, and $-0-                      (50)       2       (5)
                                           -------  -------  -------
  Balance, end of year                     $ 7,439  $ 6,484  $ 5,672
                                           =======  =======  =======

The average balance of impaired loans during 2001, 2000, and 1999 was
$2,926,000, $2,954,000, and $3,137,000, respectively, and the Company
recognized $421,000, $251,000, and $283,000 of related interest income during
2001, 2000, and 1999, respectively. Interest income is normally recognized on
the accrual basis; however, if the impaired loan is nonperforming, interest
income is recorded on the receipt of cash.

                                                                         72
<PAGE>





Impaired loans consist of the following at March 31 (in thousands):

                                                         2001      2000
                                                         ----      ----

  Loans with allocated reserves of $-0- and $175       $         $ 2,590
  Loans without allocated reserves                       1,300       407
                                                       -------   -------
                                                       $ 1,300   $ 2,997
                                                       =======   =======
  Loans on nonaccrual status                           $ 1,300   $   315
  Loans under foreclosure                                             92
  Performing loans judged to be impaired                           2,590
                                                       -------   -------
                                                       $ 1,300   $ 2,997
                                                       =======   =======

NOTE 6: PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at March 31 (in thousands):

                                                    2001     2000
                                                    ----     ----

  Land                                            $ 1,491  $ 1,491
  Buildings (including leasehold improvements)      7,366    7,025
  Furniture, fixtures, and automobiles              8,398    7,432
                                                  -------  -------
                                                   17,255   15,948
  Less accumulated depreciation and amortization   (7,713)  (6,871)
                                                  -------  -------
                                                  $ 9,542  $ 9,077
                                                  =======  =======

The Company has noncancellable operating leases for office facilities,
branches, and equipment.  Future inimum rental commitments for all
noncancellable leases are as follows (in thousands):

               2002                      $  989
               2003                         968
               2004                         930
               2005                         827
               2006                         816
            Thereafter                    5,179
                                         ------
                                         $9,709
                                         ======

Rent expense for the years ended March 31, 2001, 2000, and 1999, totaled
$842,000, $794,000, and $710,000, respectively.


                                                                          73
<PAGE>



NOTE 7: DEPOSIT ACCOUNTS

Deposit accounts, with respective interest rate ranges, consisted of the
following at March 31 (in thousands):

                                   2001                     2000
                       ------------------------     -----------------------
                       Weighted                     Weighted
                       average                      average
                         rate     Amount     %       rate     Amount     %
                         ----     ------   ----      ----     ------   ----

Noninterest-bearing
  accounts                --%   $  8,462    2.1 %     --%   $  7,902    2.1%
Savings accounts         2.8      10,867    2.7      2.8      10,523    2.7
Checking accounts        2.2      37,942    9.5      2.6      36,712    9.6
Money market accounts    4.3     127,010   31.9      4.3     129,522   33.8
Time deposits by
  original term:
   One to 11 months      5.7      36,041    9.1      5.4      32,200    8.4
   12 to 23 months       6.2      83,641   21.1      5.5      77,273   20.2
   24 to 35 months       5.9      23,601    5.9      5.5      22,827    6.0
   36 to 59 months       5.9      17,500    4.4      5.7      17,899    4.7
   60 to 84 months       6.3      52,579   13.3      6.1      48,128   12.5
                                --------  -----             --------  -----
                         6.1     213,362   53.8      5.6     198,327   51.8
                                --------  -----             --------  -----
                         4.9%   $397,643  100.0%     4.7%   $382,986  100.0%
                         ===    ========  =====      ===    ========  =====

Time deposits are scheduled to mature as follows (in thousands):

     Year ending March 31,
     ---------------------
             2002                        $140,734
             2003                          26,500
             2004                          13,695
             2005                          16,328
             2006                           6,633
           Thereafter                       9,472
                                         --------
                                         $213,362
                                         ========

Included in deposits are time deposits greater than or equal to $100,000 of
$60,652,000 and $46,747,000 at March 31, 2001 and 2000, respectively.
Interest on time deposits greater than or equal to $100,000 totaled
$2,576,000, $2,439,000, and $2,157,000 for the years ended March 31, 2001,
2000, and 1999, respectively.

                                                                          74
<PAGE>





NOTE 8: FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Scheduled maturities of advances from the FHLB and other borrowings were as
follows at March 31 (in thousands):

                                        2001                    2000
                                 ---------------------  ---------------------
                                         Interest rate          Interest rate
                                 Amount     ranges      Amount      ranges
                                 ------     ------      ------      ------
Nonamortizing:
  Due within 1 year              $35,002  4.57 - 7.05%  $20,028  5.98 - 6.51%
  After 1 year through 2 years    10,000  4.67 - 6.92     1,000      6.03
  After 2 years through 3 years    5,650  5.00 - 7.26     3,000      6.31
  After 3 years through 5 years   11,650  5.03 - 7.27     3,600  5.39 - 6.40
  After 5 years through 10 years  13,000  5.46 - 7.39     4,600  5.48 - 6.69
  After 10 years                   4,300  6.14 - 6.93     1,400  6.70 - 6.93
Amortizing:
  After 10 years                     742     8.19           795      8.19
                                 -------                -------
                                 $80,344                $34,423
                                 =======                =======

Advances and other borrowings are collateralized by securities and mortgage
pool securities of the U.S. government and agencies thereof.

At March 31, 2001 and 2000, the Bank had available unsecured lines of credit
with commercial banks totaling $25,000,000 and $10,550,000, respectively, and
a revolving line of credit with the FHLB of up to 35% and 20%, respectively,
of total assets.  There were no advances outstanding as of March 31, 2001 on
the lines of credit with the commercial banks.

At March 31, 2001, the Bank had outstanding a repurchase agreement, reported
within Federal Home Loan Bank advances and other borrowings, with a securities
dealer in the amount of $13,052,000, maturing April 2001.  At March 31, 2000,
the Bank had outstanding a repurchase agreement with a securities dealer in
the amount of $5,000,000, maturing April 2000.

NOTE 9: FEDERAL TAXES ON INCOME

Under prior law, the Bank qualified under a provision of the Internal Revenue
Code to deduct from taxable income an allowance for bad debts based on a
percentage of taxable income before such deduction or based on the experience
method.  The experience method provided financial institutions the ability to
add to the reserve for losses on loans the greater of two computational
alternates:  (1) the base-year amount, or (2) the six-year moving average
amount.

In August 1996, the President of the United States signed the Small Business
Job Protection Act of 1996 (the Act).  Under the Act, the percentage taxable
income method of accounting for tax-basis bad debts is no longer available
effective for the years ended after December 31, 1995.  As a result, the Bank
is required to use the experience method of accounting for tax-basis bad debts
for 1997 and later years.  In addition, the Bank is also required to recapture
its post-1987 additions to its bad debt reserves made pursuant to the
percentage taxable income method.  As of March 31, 1996, these additions were
$3,766,000 which, pursuant to the Act, are being included in taxable income
ratably over a six-taxable-year period beginning with the year ended March 31,
1997.  The recapture of the post-1987 additions to tax-basis bad debt reserves
does not result in a charge to earnings as these amounts are included in the
deferred tax liability at March 31, 1997.

                                                                          75
<PAGE>



Retained earnings at March 31, 2001, 2000, and 1999, includes approximately
$3,691,000 in tax-basis bad debt reserves for which no income tax liability
has been recorded.  In the future, if this tax-basis bad debt reserve is used
for purposes other than to absorb bad debts or if legislation is enacted
requiring recapture of all tax-basis bad debt reserves, the Bank will incur a
federal tax liability at the then prevailing corporate tax rate.

A reconciliation of the statutory federal income tax to the effective income
tax follows:

                                                2001       2000      1999
                                                ----       ----      ----

  Income tax expense at statutory rate        $ 2,600    $   131   $   568
  Income tax effect of:
    Tax-exempt interest                          (103)      (117)     (128)
    Low income housing tax credit                (216)      (216)     (216)
    Other, net                                     10         16        37
                                              -------    -------   -------
  Income tax expense (benefit) at
    effective rate                            $ 2,291    $  (186)  $   261
                                              =======    =======   =======

The net deferred tax asset (liability), reported within prepaid expenses and
other assets, consists of the following at March 31 (in thousands):

                                                        2001       2000
                                                        ----       ----
  Deferred tax liabilities:
    Loan origination fees and costs                   $  (41)     $   (43)
    Prepaid expenses                                    (103)         (81)
    FHLB dividends                                      (576)        (477)
    Other, net                                          (169)        (149)
    Unrealized gain on securities                       (203)
                                                      (1,092)        (750)

  Deferred tax assets:
    Deferred compensation                                448          456
    Bad debt deduction                                 2,355        1,809
    Accrued vacation                                      84           75
    Depreciation                                         413          313
    Charitable contribution                            2,171        2,468
    Unrealized loss on securities                                     645
                                                       5,471        5,766
                                                     -------      -------
                                                     $ 4,379      $ 5,016
                                                     =======      =======

NOTE 10: EMPLOYEE BENEFIT PLANS

401(k) plan:  The Company maintains a 401(k) plan.  All employees of the
Company are eligible to participate in the 401(k) plan once certain service
and age requirements are achieved.  Employees may contribute up to 15% of
their salary to the plan.  The Company matches 100% of the first 2% and 50% of
the next 4% of the employees' contributions.  Participants will vest in the
employer-matched 401(k) contributions at the rate of 20% per year, beginning
upon the completion of two years of service.  The

                                                                          76
<PAGE>



Company's cost for the 401(k) plan was $152,771, $122,674, and $94,010 for
2001, 2000, and 1999, respectively.

Defined benefit plan:  With the establishment of the ESOP, the Company's
noncontributory defined benefit plan was terminated effective December 31,
1999.  As a result of terminating the Company's noncontributory defined
benefit plan, the unused portion of the pension liability was reversed against
compensation expense resulting in a curtailment gain of $547,000.  Prior to
termination on December 31, 1999, the Company's funding policy was to
contribute amounts to its pension plan sufficient to meet the minimum funding
requirements of the Employee Retirement Income Security Act of 1974.  The
actuarial cost method used to compute the pension contribution is the
projected unit cost method.  Information presented below reflects a
measurement date of December 31, 2000, 1999, and 1998.

Weighted average assumptions used in accounting for the defined benefit
pension plan were as follows for the years ended December 31:

                                                  2000      1999      1998
                                                  ----      ----      ----

  Assumed discount rate                           8.0%      6.9%      6.9%

  Rate of compensation increase                   N/A       6.0       6.0

  Expected return on assets                       8.0       8.0       8.0

Changes in the benefit obligation were as follows for the years ended December
31 (in thousands):

                                                  2000      1999      1998
                                                  ----      ----      ----

  Benefit obligation, beginning of year         $1,493    $1,869    $1,448
    Actuarial loss                                  51        43       258
    Interest cost                                  129       125       107
    Service cost                                             146       105
    Benefits paid                                  (15)     (133)      (39)
    Expenses                                        (8)      (10)      (10)
    Curtailment gain                                        (547)
                                                ------    ------    ------
  Benefit obligation, end of year               $1,650    $1,493    $1,869
                                                ======    ======    ======
Changes in defined benefit pension plan assets were as follows for the years
ended December 31 (in thousands):

                                                  2000      1999      1998
                                                  ----      ----      ----

  Fair value of assets, beginning of year       $1,615    $1,555    $1,538
    Actual return on assets                         58       165        66
    Benefits paid                                  (15)     (133)      (39)
    Expenses                                        (8)      (10)      (10)
    Contribution                                              38
                                                ------    ------    ------
  Fair value of assets, end of year             $1,650    $1,615    $1,555
                                                ======    ======    ======

Reconciliations of funded status were as follows as of December 31 (in
thousands):

                                                                          77
<PAGE>



                                                  2000      1999      1998
                                                  ----      ----      ----

  Funded status                                 $   --    $ (425)   $ (314)
  Unrecognized net loss                                     (122)     (122)
  Curtailment gain recognized                                547
                                                ------    ------    ------
  Accrued benefit cost                          $   --    $   --    $ (436)
                                                ======    ======    ======

Net periodic expense for the defined benefit pension plan was as follows for
the years ended December 31 (in thousands):

                                                  2000      1999      1998
                                                  ----      ----      ----

  Interest cost                                 $  129    $  125    $  107
  Service cost                                               146       105
  Expected return on assets                       (129)     (122)     (121)
  Amortization of gains or losses                                      (41)
                                                ------    ------    ------
  Net periodic expense                          $   --    $  149    $   50
                                                ======    ======    ======

Subsequent to March 31, 2001, the Company's noncontributory defined benefit
plan was settled.

Employee Stock Ownership Plan:  On April 1, 1999, an ESOP was established and
became effective.  In 1999, the Company established an ESOP to provide
benefits to all employees who have been credited with at least 1,000 hours of
service during the year and who have attained age 18.  Participants will vest
in their accrued benefits under the ESOP at the rate of 20% per year,
beginning upon the completion of two years of service.  The plan is
noncontributory on the part of the participants.  The benefits are
distributable upon a participant's normal retirement, early retirement, death,
disability, or termination of employment.  The Company loaned the ESOP's
trustee $1,979,786 for purchase of the Company's common stock in the open
market.  Shares of stock are allocated to employees as the loan is repaid.
The outstanding loan balance was $1,187,872 and $1,583,829 at March 31, 2001
and 2000, respectively.

Shares held by the ESOP at March 31, 2001, were as follows:

                                                                   Average
                                         Number     Price range     price
                                       of shares     per share    per share
                                       ---------     ---------    ---------

  Allocated:
    Vested                               59,299    $         --    $    --
    Nonvested                            14,158
                                       --------
                                         73,457
  Nonallocated                          105,959     10.88 - 11.06    11.02
                                       --------
                                        179,416
                                       ========

                                                                          78
<PAGE>


Shares held by the ESOP at March 31, 2000, were as follows:
                                                                   Average
                                         Number     Price range     price
                                       of shares     per share    per share
                                       ---------     ---------    ---------

  Allocated:
    Vested                               24,640    $         --    $    --
    Nonvested                             8,804
                                       --------
                                         33,444
  Nonallocated                          146,281     10.88   11.06    11.02
                                       --------
                                        179,725
                                       ========

Shares held by the ESOP decreased by 309 as a result of employment
terminations.  Contributions to the ESOP, recorded as compensation expense for
the years ended March 31, 2001 and 2000, were $429,228 and $328,000
respectively.

Deferred Compensation Plan:  The Company also maintains a nonqualified
deferred compensation plan for certain key management personnel, for which the
cost is accrued but unfunded.  Participants may elect to defer all or a
specific portion of their compensation.  The Company does not provide a
matching contribution on amounts deferred. However, the Company does provide
interest quarterly on amounts contributed by participants.  At March 31, 2001
and 2000, the liability for accumulated deferred compensation was $1,316,000
and $1,340,000, respectively, and is included in the consolidated statements
of financial condition.  Annual expense for the Company related to this plan
totaled $82,000, $120,000, and $148,000 in 2001, 2000, and 1999, respectively.

Management Recognition Plan:  In July 2000, the shareholders approved the 2000
Management Recognition Plan (MRP).  The purpose of the plan is to promote the
long-term interests of the Company and its shareholders by providing
restricted stock as a means for attracting and retaining directors and certain
employees.  The Company granted restricted stock awards of 359,450 to its
directors and certain employees in August 2000.  The fair value of the
restricted stock awards are amortized over a five-year period.  Amortization
expense was approximately $1,301,000 for the year ended March 31, 2001.

NOTE 11: STOCK OPTION PLAN

In July 2000, the shareholders approved the 2000 Stock Option Plan (the Plan).
On August 29, 2000, the Compensation Committee granted nonqualified stock
options (NQSO) and incentive stock options (ISO) to certain employees and
directors of the Company or of an affiliate, totaling 698,566 shares of the
capital stock of the Company.  The Company implemented the Plan to promote the
best interests of the Company, its subsidiaries, and its shareholders by
providing an incentive to those key employees who contribute to the operating
success of the Company.  The maximum number of shares that may be issued under
the Plan is 898,625 common shares of the Company.  Options issued and
outstanding are adjusted to reflect any future common stock dividends, splits,
recapitalization, or reorganization.  The Board of Directors make available
sufficient shares for each option granted, subject to the remaining number of
shares.  Options are granted at the then fair market value and vest over five
years.  Options expire 10 years from the date of grant and are subject to
certain restrictions and limitations.
                                                                          79
<PAGE>



The following represents the stock option activity and option price
information:

                                                Weighted         Weighted
                               Number of      average price    average issue
                            option shares of  option shares   date fair value
                            ----------------  -------------   ---------------

 Balance at Plan inception        --            $    --           $   --
   Granted                      698,566           12.06            12.06
   Exercised
   Canceled
                               --------         -------
 Balance at March 31, 2001      698,566         $ 12.06
                               ========         =======

 Options exercisable at
   March 31, 2001               139,713         $ 12.06
                               ========         =======

Financial data pertaining to outstanding stock options was as follows:

                                                                Weighted
                                                                 average
                          Weighted     Weighted                 exercise
                           average     exercise    Number of      price
 Ranges of   Number of    remaining    price of   exercisable  exercisable
 exercise     option    contractural    option      option       option
  prices      shares        life        Shares      Shares       Shares
  ------      ------        ----        ------      ------       ------

 $ 12.06      698,566     9.9 years     $ 12.06     139,713     $ 12.06

At March 31, 2001, the Company had an aggregate of 200,059 shares of common
stock available for future issuance under its stock option plan.

The Company applies Accounting Principles Board (APB) Opinion No. 25 and
related interpretations in accounting for the Plan.  Accordingly, no
compensation cost has been recognized for the Plan since the exercise price of
all options has been equal to the fair value of the Company's stock at the
grant date.  Had compensation costs for the Company's compensation plan been
determined consistent with SFAS No. 123, the Company's net income attributable
to common stock would have been reduced by $1,738,000 for 2001.  Net income
per share would have decreased by $.22 per share in 2001.

The fair value of options granted under the Company's stock option plan is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:  annual dividend yield of
2.98% for 2001; expected volatility of 29% for 2001; risk-free interest rate
of 4.86% for 2001; and an expected life of seven years.

                                                                          80
<PAGE>



Had compensation cost for the Company's stock option plan been determined
based on the fair value at the option grant dates, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below (in thousands):

      Net income:
        As reported                        $   5,357
        Pro forma                              3,619

      Diluted earnings per share:
        As reported                             0.70
        Pro forma                               0.48

NOTE 12: INTEREST RATE RISK

The Bank is engaged principally in providing first mortgage permanent and
construction loans for both residential and commercial property.  Thirty-year,
fixed rate residential home mortgages are originated primarily for sale in the
secondary market, and the Bank is authorized to hedge against interest rate
fluctuations with financial futures contracts, option contracts, and forward
commitments.  There were no open forward commitments to hedge interest rate
fluctuations at March 31, 2001 and 2000.  Forward commitments have little
credit risk because established exchanges are the counterparties.

The Bank also originates adjustable and fixed rate residential and commercial
property home mortgages, which are held for investment, and commercial loans
that are adjustable to the prime lending rate index to customers who are
predominately local businesses and individuals, funded through short-term
deposits and borrowings.  Adjustable loans have various interest rate
adjustment limitations and are generally indexed to U.S. Treasury rates.  As
of March 31, 2001 and 2000, adjustable rate mortgages held for investment
totaled $360,157,000 and $293,757,757, respectively.  Fixed rate mortgages
held for investment totaled $134,277,000 and $113,947,320 at March 31, 2001
and 2000, respectively.

The Bank originates both fixed and variable rate residential and commercial
property construction loans.  Variable rate adjustments are tied to the prime
interest rate.  The maturities on these loans range from six to 18 months.

The Bank's adjustable and fixed rate home mortgages and residential and
commercial construction loans are funded by short-term deposits and FHLB
advances.

The Bank manages interest rate risk by matching assets and liabilities within
reasonable limits.  This has been accomplished through producing primarily
variable rate loans, and if appropriate, hedging techniques can be employed
through the use of financial futures contracts, option contracts, interest
rate swaps, and forward commitments.  There were none outstanding during 2001,
2000, and 1999.

NOTE 13: REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies.  Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the Company's financial statements.  Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Company and the Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors. Prompt corrective action provisions are not applicable to
bank holding companies.

                                                                          81
<PAGE>



Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined).  Management believes, as of March 31, 2001, that
the Company and the Bank meet all capital adequacy requirements to which they
are subject.

As of March 31, 2001 and 2000, the most recent notifications from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action.  To be categorized as well capitalized, the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table.  There are no conditions or events since
that notification that management believes have changed the institution's
categories.




<TABLE>

Actual capital amounts and ratios for the Company and the Bank are also presented in the table below:

                                                                                        To be categorized
                                                                                            as well
                                                                                        capitalized under
                                                                   For capital          prompt corrective
                                              Actual            adequacy purposes       action provision
                                        ----------------        -----------------       -----------------
                                        Amount     Ratio        Amount      Ratio       Amount      Ratio
                                        ------     -----        ------      -----       ------      -----
<S>                                    <C>          <C>        <C>          <C>         <C>         <C>
As of March 31, 2001 (in thousands):
 Total capital (to risk-weighted
  assets):
    The Company                        $126,234     23.7 %  >  $42,593   >   8.0 %   >  $53,241  >  10.0 %
    The Bank                             85,843     16.5    -   41,596   -   8.0     -   51,995  -  10.0

 Tier I capital (to risk-weighted
  assets):
    The Company                         119,724     22.5    >   21,303   >   4.0     >      N/A  >   N/A
    The Bank                             79,333     15.3    -   20,795   -   4.0     -   31,193  -   6.0

 Tier I capital (to average assets):
    The Company                         119,724     19.7    >   24,309   >   4.0     >      N/A  >   N/A
    The Bank                             79,333     14.1    -   22,570   -   4.0     -   28,212  -   6.0

 As of March 31, 2000 (in thousands):
  Total capital (to risk-weighted
   assets):
     The Company                       $140,327     29.2 %  >  $38,460   >   8.0 %   >  $48,075  >  10.0 %
     EMB (1)                             91,594     21.2    -   34,508   -   8.0     -   43,136  -  10.0
     CBE (2)                              5,453     24.3         1,798       8.0          2,247     10.0

  Tier I capital (to risk-weighted
   assets):
     The Company                        134,312     27.9    >   19,230   >   4.0     >      N/A  >   N/A
     EMB (1)                             86,192     20.0    -   17,254   -   4.0     -   28,882  -   6.0
     CBE (2)                              5,192     23.1           899       4.0          1,348      6.0

  Tier I capital (to average assets):
     The Company                        134,312     24.9    >   21,569   >   4.0     >      N/A  >   N/A
     EMB (1)                             86,192     17.5    -   19,675   -   4.0     -   24,593  -   5.0
     CBE (2)                              5,192     21.2           982       4.0          1,227      5.0

(1) Effective January 1, 2001, EMB changed its name to EverTrust Bank.
(2) Effective February 1, 2001, CBE merged into EverTrust Bank.

</TABLE>




NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market data to develop
the estimates of fair value.  Accordingly, the estimates presented herein are

                                                                         82
<PAGE>



not necessarily indicative of the amounts the Company could realize in a
current market exchange.  The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.

The fair values of financial instruments were as follows at March 31 (in
thousands):

                                       2001                      2000
                                ---------------------   ---------------------
                                Carrying                Carrying
                                 amount    Fair value    amount    Fair value
                                 ------    ----------    ------    ----------
Financial assets:
 Cash and cash equivalents     $ 22,383     $ 22,383    $  7,652    $  7,652
 Securities available for sale   63,299       63,299      95,988      95,988
 Securities held to maturity      8,362        8,613      12,066      12,136
 Loans held for sale                794          800
 Loans receivable               483,117      493,644     416,116     410,571
 Federal Home Loan Bank stock     4,652        4,652       4,288       4,288
                               --------     --------    --------    --------
                                582,607      593,391     536,110     530,635
Financial liabilities:
 Deposit accounts               397,643      401,372     382,986     382,652
 Federal Home Loan Bank
  advances and other
  borrowings                     80,344       83,000      34,423      33,786
                               --------     --------    --------    --------
                                477,987      484,372     417,409     416,438
                               --------     --------    --------    --------
Net financial instruments      $104,620     $109,019    $118,701    $114,197
                               ========     ========    ========    ========

Commitments to extend credit represent the principal categories of
off-balance-sheet financial instruments (Note 4).  The fair value of these
commitments is not material since they are for a short period of time and are
subject to customary credit terms.

The following methods and assumptions were used to estimate the fair value of
each class of financial instrument as of March 31, 2001 and 2000:

   Cash and cash equivalents:  The carrying amount represented fair value.

   Securities available for sale and held to maturity:  Fair values were
   based on quoted market prices, if available.  If a quoted market price was
   not available, fair value was estimated using quoted market prices for
   similar securities.

   Loans held for sale:  Fair values were based on quoted market prices.

   Loans receivable:  Loans were priced using the discounted cash flow
   method.  The discount rate used was the rate currently offered on similar
   products.

   Federal Home Loan Bank stock:  The fair value is based upon the redemption
   value of the stock which equates to its carrying value.

                                                                          83
<PAGE>



   Deposit accounts:  The fair value of checking accounts, savings accounts,
   and money market accounts was the amount payable on demand at the
   reporting date.  For time deposit accounts, the fair value was determined
   using the discounted cash flow method.  The discount rate was equal to the
   rate currently offered on similar products.

   Federal Home Loan Bank advances:  Borrowings were priced using the
   discounted cash flow method.  The discount rate used was the rate
   currently offered on similar products.

NOTE 15:  EVERTRUST FINANCIAL GROUP, INC. (PARENT COMPANY ONLY)

Summary financial information as of March 31 is as follows (in thousands):

STATEMENTS OF FINANCIAL CONDITION
---------------------------------

  ASSETS                                            2001         2000
  ------                                            ----         ----

  ASSETS:
    Cash and cash equivalents, including
      interest bearing deposits of $24,314
      and $10,707                                $  24,676    $  10,755
    Securities available for sale, amortized
      cost of $9,549 and $24,472                     9,686       24,623
    Accrued interest receivable                        102          268
    Premises and equipment, net                         90          418
    Investment in subsidiaries:
      Bank subsidiary                               80,487       90,822
      Other subsidiaries                             3,164        3,656
    Prepaid expenses and other assets                3,647        4,719
                                                 ---------    ---------
  TOTAL                                          $ 121,852    $ 135,261
                                                 =========    =========
  LIABILITIES AND EQUITY
  ----------------------

  LIABILITIES:
    Accounts payable and other liabilities       $   1,706    $   1,732

  EQUITY:
    Common stock                                    68,940       83,978
    ESOP debt                                       (1,188)      (1,584)
    Retained earnings                               55,033       52,271
    Shares held in trust for stock-related
      compensation plans                            (3,034)
    Accumulated other comprehensive income (loss)      395       (1,136)
                                                 ---------    ---------
       Total equity                                120,146      133,529
                                                 ---------    ---------
   TOTAL                                         $ 121,852    $ 135,261
                                                 =========    =========

                                                                          84
<PAGE>






STATEMENTS OF OPERATIONS
------------------------
                                                  2001       2000      1999
                                                  ----       ----      ----
  INCOME:
   Interest from investment securities         $  2,313   $  1,084  $    417
   Dividend from bank subsidiary                 18,106      2,041     4,257
   Other income                                     184                    9
                                               --------   --------  --------
       Total income                              20,603      3,125     4,683

  OTHER EXPENSE:
   Salary and employee benefits                   2,390      1,197       349
   Occupancy and equipment                          205        196         8
   Charitable contributions                                  5,200     3,255
   Information processing costs                      52         23       111
   Other, net                                       727      1,002       393
                                               --------   --------  --------
                                                  3,374      7,618     4,116
                                               --------   --------  --------
       Income (loss) before federal income
        taxes and equity in undistributed
        net income in undistributed net income
        of subsidiary                            17,229     (4,493)      567

  FEDERAL INCOME TAXES                             (296)    (2,224)   (1,252)
                                               --------   --------  --------
       Income (loss) before equity in
        undistributed net income of subsidiary   17,525     (2,269)    1,819

  EQUITY IN UNDISTRIBUTED NET INCOME
   OF SUBSIDIARY                                (12,168)     2,841      (408)
                                               --------   --------  --------
  NET INCOME                                   $  5,357   $    572  $  1,411
                                               ========   ========  ========

                                                                          85
<PAGE>



STATEMENTS OF CASH FLOWS
------------------------
                                                  2001       2000      1999
                                                  ----       ----      ----
  OPERATING ACTIVITIES:
   Net income                                  $  5,357   $    572  $  1,411
   Adjustments to reconcile net income to
    net cash provided (used) by operating
    activities:
     Accretion of investment security
       discounts                                    (77)       (75)      (38)
     Amortization of investment security
       premiums                                      49         30        53
     Depreciation and amortization of premises
       and equipment                                112         74
    Equity in undistributed income of
       subsidiaries                              12,168     (2,841)      408
     Common stock contributed to charitable
       foundation                                            3,900
     Amortization of compensation related
       to MRP                                     1,301
     Cash provided (used) by changes in
       operating assets and liabilities:
         Accrued interest receivable                166       (244)       73
         Prepaid expenses and other assets        1,029     (2,952)   (1,145)
         Accounts payable and other liabilities     (25)      (569)    1,747
                                               --------   --------  --------
   Net cash provided (used) by operating
    activities                                   20,080     (2,105)    2,509

INVESTING ACTIVITIES:
   Proceeds from maturities of securities
    available for sale                           17,199     27,731     6,525
   Proceeds from sale of securities available
    for sale                                      1,941      1,000     4,116
   Purchases of securities available for sale    (3,886)   (48,718)   (9,547)
   Contribution from (to) MB Cap                     (6)              (3,250)
  Contribution from (to) I-Pro                      (1)      (750)
   Contribution from (to) EverTrust Bank            (50)   (44,456)
   Net additions to premises and equipment          216       (492)
                                               --------   --------  --------
   Net cash provided (used) by investing
    activities                                   15,413    (65,685)   (2,156)

FINANCING ACTIVITIES:
   Proceeds from the sale of common stock                   84,245
   Repurchase shares of common stock            (19,373)    (4,167)
   Dividends paid on common stock                (2,595)      (448)
   Loan to ESOP                                             (1,980)
   Repayment of loan to ESOP                        396        396
   Proceeds from other borrowings                            1,000
   Repayment of other borrowings                            (1,000)
                                               --------   --------
   Net cash provided (used) by financing
    activities                                  (21,572)    78,046
                                               --------   --------  --------

NET INCREASE IN CASH AND CASH EQUIVALENTS        13,921     10,256       353

CASH AND CASH EQUIVALENTS:
   Beginning of year                             10,755        499       146
                                               --------   --------  --------
   End of year                                 $ 24,676   $ 10,755  $    499
                                               ========   ========  ========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
   Cash paid during the year for federal
    income taxes                               $     27   $    112  $    135

                                                                          86
<PAGE>



The amount of dividends payable by the Bank to the Company is limited by
federal and state laws, regulations, and policies.

NOTE 16:  CONTINGENCIES

In the normal course of business, the Company has various legal claims and
other contingent matters outstanding.  The Company believes that any liability
ultimately arising from these actions would not have a material adverse effect
on its results of operations or consolidated financial position at March 31,
2001.

NOTE 17:  LINES OF BUSINESS

The Company is managed by legal entities.  The entities are the Bank's retail
division, the Bank's commercial banking group, MB Cap, and I-Pro.  MB Cap,
I-Pro, and the holding company, which includes earnings from subsidiaries and
investment in subsidiaries, have been included in all others as their
operating results are not significant when taken on an individual basis.

The principal activities of each legal entity are described in Note 1.  Each
entity is managed by an executive team responsible for sales, marketing,
operations, and certain administrative functions.  Back office support is
provided to each entity for credit administration, information systems,
finance, and human resources.

The costs of these functions are allocated based on actual time spent
conducting business for each entity.

Financial highlights by lines of business are as follows as of and for the
years ended March 31 (in thousands):

                                                  2001
                         --------------------------------------------------
                                    The Bank's
                        The Bank's  commercial
                          retail     banking              Elimin-
                         division    group(1)    Other    ations      Total
                         --------    --------    -----    ------      -----

Condensed income
 statement:
  Net interest income
   after provision for
   loan losses           $ 18,880  $  1,110   $  2,428  $       1   $ 22,419
  Other income              2,222       245      6,675     (6,510)     2,632
  Other expense            11,895     1,292      4,787       (571)    17,403
                         --------  --------   --------  ---------   --------
  Income before income
   taxes                    9,207        63      4,316     (5,938)     7,648
  Income taxes              2,815        25       (549)                2,291
                         --------  --------   --------  ---------   --------
  Net income             $  6,392  $     38   $  4,865  $  (5,938)  $  5,357
                         ========  ========   ========  =========   ========
  Total assets           $546,059  $ 39,781   $125,197  $(108,634)  $602,403
                         ========  ========   ========  =========   ========

(1) Formerly Commercial Bank of Everett
                                                                          87
<PAGE>



                                                  2000
                         --------------------------------------------------
                                    The Bank's
                        The Bank's  commercial
                          retail     banking              Elimin-
                         division    group(1)    Other    ations      Total
                         --------    --------    -----    ------      -----

Condensed income
 statement:
  Net interest income
   after provision for
   loan losses           $ 16,637  $    950   $  1,205  $      --   $ 18,792
  Other income              1,250       168      5,169     (5,297)     1,290
  Other expense            10,568     1,024      8,518       (414)    19,696
                         --------  --------   --------  ---------   --------
  Income before income
   taxes                    7,319        94     (2,144)    (4,883)       386
  Income taxes              2,172        33     (2,391)        --       (186)
                         --------  --------   --------  ---------   --------
  Net income             $  5,147  $     61   $    247  $  (4,883)  $    572
                         ========  ========   ========  =========   ========
Total assets             $496,681  $ 25,290   $139,307  $(106,066)  $555,212
                         ========  ========   ========  =========   ========

(1) Formerly Commercial Bank of Everett

                                                  1999
                         --------------------------------------------------
                                    The Bank's
                        The Bank's  commercial
                          retail     banking              Elimin-
                         division    group(1)    Other    ations      Total
                         --------    --------    -----    ------      -----

Condensed income
 statement:
  Net interest income
   after provision for
   loan losses           $ 14,317  $    530   $    430  $      --   $ 15,277
  Other income              1,916        91      4,104     (4,184)     1,927
  Other expense             9,953       928      4,986       (335)    15,532
                         --------  --------   --------  ---------   --------
  Income before income
   taxes                    6,280      (307)      (452)    (3,849)     1,672
  Income taxes              1,823      (103)    (1,459)                  261
                         --------  --------   --------  ---------   --------
  Net income             $  4,457  $   (204)  $  1,007  $  (3,849)  $  1,411
                         ========  ========   ========  =========   ========

Total assets             $426,538  $ 19,806   $ 56,900  $ (51,155)  $452,089
                         ========  ========   ========  =========   ========

(1) Formerly Commercial Bank of Everett

                                                                          88
<PAGE>




NOTE 18:  SELECTED QUARTERLY FINANCIAL DATA (unaudited)

Results of operations on a quarterly basis were as follows for the years ended
March 31(in thousands):

                                                  2001
                               --------------------------------------------
                                First      Second       Third       Fourth
                               quarter     quarter     quarter      quarter
                               -------     -------     --------     -------

  Interest income             $ 10,864    $ 11,820     $ 11,809    $ 11,980
  Interest expense               5,229       5,985        5,981       5,853
                              --------    --------     --------    --------
      Net interest income
        before provision
        for loan losses          5,635       5,835        5,828       6,127

  Provision for loan losses        300         375          120         210
                              --------    --------     --------    --------
      Net interest income
        after provision
        for loans losses         5,335       5,460        5,708       5,917

  Noninterest income               638         718          588         687
  Noninterest expense            3,821       4,728        4,330       4,523
                              --------    --------     --------    --------
      Income before provision
        for income taxes         2,152       1,450        1,966       2,081

  Provision for income taxes       654         414          593         630
                              --------    --------     --------    --------
  Net income                  $  1,498    $  1,036     $  1,373    $  1,451
                              ========    ========     ========    ========
  Basic earnings per share    $   0.18    $   0.13     $   0.19    $   0.20
                              ========    ========     ========    ========

                                                                          89
<PAGE>




                                                  2000
                               --------------------------------------------
                                First      Second       Third       Fourth
                               quarter     quarter     quarter      quarter
                               -------     -------     --------     -------

  Interest income             $  8,787    $  9,408     $  9,970    $ 10,269
  Interest expense               4,614       4,948        4,623       4,647
                              --------    --------     --------    --------
      Net interest income
        before provision
        for loan losses          4,173       4,460        5,347       5,622

  Provision for loan losses        275         135          243         157
                              --------    --------     --------    --------
      Net interest income
        after provision
        for loans losses         3,898       4,325        5,104       5,465

  Noninterest income               108         240          472         470
  Noninterest expense            3,157       9,315 (1)    3,354       3,870
                              --------    --------     --------    --------
      Income (loss) before
        provision (benefit)
        for income taxes           849      (4,750)       2,222       2,065

  Provision (benefit) for
   income taxes                    208      (1,695)         673         628
                              --------    --------     --------    --------

  Net income (loss)           $    641    $ (3,055)    $  1,549    $  1,437
                              ========    ========     ========    ========

  Earnings per share             n/a          n/a      $    .18    $    .17
                                                       ========    ========

(1) The second quarter increase in noninterest expense is due primarily to
    $5,200,000 in charitable contributions provided to the EverTrust
    Foundation.

                                                                          90
<PAGE>




                                                  1999
                               --------------------------------------------
                                First      Second       Third       Fourth
                               quarter     quarter     quarter      quarter
                               -------     -------     --------     -------

  Interest income             $  8,471    $  8,367     $  8,496    $  8,560
  Interest expense               4,445       4,517        4,478       4,397
                              --------    --------     --------    --------

      Net interest income
        before provision
        for loan losses          4,026       3,850        4,018       4,163

  Provision for loan losses        105         105          120         450
                              --------    --------     --------    --------

      Net interest income
        after provision
        for loan losses          3,921       3,745        3,898       3,713

   Noninterest income              552         435          471         469
   Noninterest expense           3,036       2,648        2,785       7,063
                              --------    --------     --------    --------

     Income (loss) before
       provision (benefit)
       for income taxes         1,437        1,532        1,584      (2,881)

  Provision (benefit) for
   income taxes                   415          442          462      (1,058)
                              --------    --------     --------    --------

  Net income (loss)           $  1,022    $  1,090     $  1,122    $ (1,823)
                              ========    ========     ========    ========

                                                                          91
<PAGE>

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
------------------------------------------------------------------------

     Not applicable.

                               PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     The information contained under the section captioned "Proposal I --
Election of Directors" is included in the Company's Definitive Proxy Statement
for the 2000 Annual Meeting of Stockholders ("Proxy Statement") and is
incorporated herein by reference.

     The following table sets forth certain information with respect to the
executive officers of the Company and EverTrust Bank.

<TABLE>
                       Age at                      Position
                      March 31,  --------------------------------------------------------------------------
Name                    2001     EverTrust                          EverTrust Bank
----                    ----     ---------                          --------------
<S>                      <C>     <C>                                <C>
Michael B. Hansen        59      Chairman of the Board, President   Chairman of the Board, Chief
                                 and Chief Executive Officer        Executive Officer

Michael R. Deller        50      Executive Vice President           President and Chief Operating Officer

Jeffrey R. Mitchell      42      Senior Vice President, Chief       Senior Vice President, Chief Financial
                                 Financial Officer                  Officer

Dale A. Lyski            63                                         *

Lorelei Christenson      47      Senior Vice President and          Senior Vice President, Chief
                                 Corporate Secretary                Information Officer and Corporate
                                                                    Secretary

Terry Cullom             58                                         Vice President and Credit
                                                                    Administrator

John E. Thoresen         50      **

Philip Mitterling        43      Treasurer and Portfolio Manager    Treasurer and Portfolio Manager

Robert L. Nall           45                                         Vice President, Branch
                                                                    Administrator

------------
*    President of the Bank's commercial banking group.  Former President and
     Chief Operating Officer of Commercial Bank of Everett.
**   President of the Company's subsidiary, Mutual Bancshares Capital, Inc.

</TABLE>

                                                        92

<PAGE>




Biographical Information

     Michael B. Hansen is Chairman of the Board, President and Chief Executive
Officer of the Company and Chairman of the Board and Chief Executive Officer
of EverTrust Bank.  Mr. Hansen has been employed by EverTrust Bank for over 21
years.

     Michael R. Deller has been President and Chief Operating Officer of
EverTrust Bank since April 2000.  From 1997 until April 2000 he was Executive
Vice President and Chief Operating Officer of EverTrust Bank.  From 1994 to
1997, Mr. Deller was the Executive Director of the Port of Everett.  Mr.
Deller is the brother-in-law of Director Thomas R. Collins.

     Jeffrey R. Mitchell is Senior Vice President and Chief Financial Officer
of the Company and EverTrust Bank.  He has held this position with EverTrust
Bank since joining EverTrust Bank in 1988.

     Dale A. Lyski is President of the Bank's commercial banking group
established in connection with the merger of Commercial Bank of Everett with
and into EverTrust Bank in December 2000.  Prior to that he was President and
Chief Operating Officer of Commercial Bank of Everett, positions he has held
since 1996.  From 1989 to 1986, Mr. Lyski was Executive Vice President of
EverTrust Bank.  Mr. Lyski has served EverTrust Bank in various capacities
since 1986.

     Lorelei Christenson is  Senior Vice President and Corporate Secretary of
the Company and Senior Vice President, Chief Information Officer and Corporate
Secretary of EverTrust Bank.  She has held this position with EverTrust Bank
since 1984.  Ms. Christenson has served EverTrust Bank in various capacities
since 1973.

     Terry L. Cullom has been Vice President and Credit Administrator of
EverTrust Bank since 1992.  Mr. Cullom has over 30 years of experience in
lending and credit administration.

     John E. Thoresen is President of Mutual Bancshares Capital, Inc., a
position he has held since September 1998.  From 1986 to September 1998, Mr.
Thoresen was employed by the Economic Development Council of Snohomish County,
Inc., a regional nonprofit business development organization.

     Philip Mitterling joined the Company as Treasurer and Portfolio Manager
in October 1999.  Prior to joining the Company he was with Bank of America
from 1986 to 1999, most recently as Vice President and Senior Manager of the
Seattle office for Corporate Treasury.

     Robert L. Nall is Vice President and Branch Administrator of EverTrust
Bank, a position he has held since November 1999.  From 1995 to 1999 he served
as a branch manager of EverTrust Bank.

Item 11.  Executive Compensation
--------------------------------

     The information contained under the section captioned "Proposal I --
Election of Directors" is included in the Company's Proxy Statement and is
incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

     (a)  Security Ownership of Certain Beneficial Owners.

     The information contained under the section captioned "Security Ownership
of Certain Beneficial Owners and Management" is included in the Company's
Proxy Statement and is incorporated herein by reference.

                                     93
<PAGE>



    (b)  Security Ownership of Management.

     The information contained under the sections captioned "Security
Ownership of Certain Beneficial Owners and Management" and "Proposal I --
Election of Directors" is included in the Company's Proxy Statement and are
incorporated herein by reference.

     (c)  Changes In Control

     The Company is not aware of any arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a
subsequent date result in a change in control of the Company.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information contained under the section captioned "Proposal I --
Election of Directors -- Transactions with Management" is included in the
Company's Proxy Statement and is incorporated herein by reference.

                                PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

     (a)  Exhibits

          3.1   Articles of Incorporation of the Registrant(1)
          3.2   Bylaws of the Registrant(1)
         10.1   401(k) Employee Savings and Profit Sharing Plan and Trust(1)
         10.2   Employee Severance Compensation Plan(2)
         10.3   Employee Stock Ownership Plan(1)
         10.4   2000 Stock Option Plan (3)
         10.5   2000 Management Recognition Plan (3)
         10.6   Employment Agreement with Michael B. Hansen(2)
         10.7   Employment Agreement with Michael R. Deller(2)
         10.8   Employment Agreement with Jeffrey R. Mitchell(2)
         (21)   Subsidiaries of the Registrant
         (23)   Consent of Auditors

-------------
(1)  Filed as an exhibit to the Registrant's Registration Statement on Form
     S-1 (333-81125).
(2)  Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
     the year ended March 31, 2000.
(3)  Filed as an exhibit to the Registrant's annual meeting proxy statement
     dated June 19, 2000.

     (b)  Reports on Form 8-K

          None.


                                     94
<PAGE>


                               SIGNATURES

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

                                  EVERTRUST FINANCIAL GROUP, INC.

                                      /s/Michael B. Hansen
Date:  June 25, 2001              By:----------------------------------------
                                      Michael B. Hansen
                                      Chairman of the Board, President and
                                      Chief Executive Officer

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

SIGNATURES                TITLE                                     DATE
----------                -----                                     ----

/s/Michael B. Hansen
----------------------  Chairman of the Board, President,       June 25, 2001
Michael B. Hansen       Chief Executive Officer and
                        Director (Principal Executive
                        Officer)

/s/Jeffrey R. Mitchell
----------------------  Senior Vice President, Chief Financial  June 25, 2001
Jeffrey R. Mitchell     Officer and Treasurer (Principal
                        Financial and Accounting Officer)

/s/Margaret B. Bavasi
----------------------  Director                                June 25, 2001
Margaret B. Bavasi


/s/Thomas R. Collins
----------------------  Director                                June 25, 2001
Thomas R. Collins


/s/Michael R. Deller
----------------------  Director                                June 25, 2001
Michael R. Deller


/s/Thomas J. Gaffney
----------------------  Director                                June 25, 2001
Thomas J. Gaffney


/s/R. Michael Kight
----------------------  Director                                June 25, 2001
R. Michael Kight


/s/Robert A. Leach, Jr.
----------------------  Director                                June 25, 2001
Robert A. Leach, Jr.

                                    95
<PAGE>



/s/George S. Newland
----------------------  Director                                June 25, 2001
George S. Newland


/s/William J. Rucker
----------------------  Director                                June 25, 2001
William J. Rucker

                                      96

<PAGE>



                               Exhibit 21

                     Subsidiaries of the Registrant

Parent
------

EverTrust Financial Group, Inc.

                                      Percentage       Jurisdiction or
Subsidiaries                         of Ownership   State of Incorporation
------------                         ------------   ----------------------

EverTrust Bank                           100%            Washington

Commercial Bank of Everett(1)            100%            Washington

EverTrust Asset Management(2)            100%            Washington

I-Pro, Inc.                              100%            Washington

Mutual Bancshares Capital, Inc.          100%            Washington

Sound Financial, Inc. (3)                100%            Washington

------------
(1)  Merged into EverTrust Bank effective February 1, 2001.
(2)  This corporation is a wholly owned subsidiary of EverTrust Bank.
     Articles of Incorporation were filed with the Secretary of State on
     March 23, 2001, and capitalization of EverTrust Asset Management
     occurred effective May 1, 2001.
(3)  This corporation is a wholly owned subsidiary of EverTrust Bank.

<PAGE>




                              Exhibit 23
                     Independent Auditors Consent

<PAGE>



INDEPENDENT AUDITORS' CONSENT
==============================================================================

We consent to the incorporation by reference in Registration Statements No.
333-89285 and 333-48884 of EverTrust Financial Group, Inc. on Forms S-8 of our
report dated April 27, 2001, incorporated by reference in the Annual Report on
Form 10-K of EverTrust Financial Group, Inc. for the year ended March 31,
2001.

/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Seattle, Washington
June 21, 2001

<PAGE>