|SECURITIES AND EXCHANGE COMMISSION                         
|-----------------------------------------------------------
|Washington, D.C.  20549                                    
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|FORM 10-K                                                  
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|[X]                                                        
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|[   ]                                                      
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|EVERTRUST FINANCIAL GROUP, INC.                            
|(Exact name of registrant as specified in its charter)     
|                                                           
|Washington                                                 
|(State or other jurisdiction of incorporation              
|or organization)                                           
|                                                           
|2707 Colby Avenue, Suite 600, Everett, Washington          
|(Address of principal executive offices)                   
|                                                           
|Registrant's telephone number, including area code:        
|                                                           
|Securities registered pursuant to Section 12(b) of the Act:
|                                                           
|Securities registered pursuant to Section 12(g) of the Act:
|                                                           

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.
__

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
YES X    NO __

As of May 31, 2003, there were issued and outstanding 4,838,279 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 May 30, 2003, the aggregate value of the Common Stock outstanding held by
nonaffiliates of the registrant was $120,715,061 (4,838,279 shares at $24.95 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.

****1.   Portions of Definitive Proxy Statement for the 2003 Annual Meeting of Stockholders (Part III).

<PAGE>



|              |                                                                                       | Page                                                                   
|------------- | ------------------------------------------------------------------------------------- | -----------------------------------------------------------------------
|**PART I**.   |                                                                                       |                                                                        
|              | **Item 1. Business**                                                                  |                                                                        
|              |                                                                                       | General                                                                
|              |                                                                                       | Market Area                                                            
|              |                                                                                       | Lending Activities                                                     
|              |                                                                                       | Investment Activities                                                  
|              |                                                                                       | Deposit Activities and Other Sources of Funds                          
|              |                                                                                       | Subsidiary Activities                                                  
|              |                                                                                       | Regulation                                                             
|              |                                                                                       | Taxation                                                               
|              |                                                                                       | Competition                                                            
|              |                                                                                       | Personnel                                                              
|              | **Item 2. Properties**                                                                | 35                                                                     
|              | **Item 3. Legal Proceedings**                                                         | 36                                                                     
|              | **Item 4. Submission of Matters to a Vote of Security Holders**                       | 36                                                                     
|**PART II.**  |                                                                                       |                                                                        
|              | **Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters** | 36                                                                     
|              | **Item 6. Selected Financial Data**                                                   | 37                                                                     
|              | **Item 7. Management's Discussion and Analysis of Financial Condition and Results**   |                                                                        
|              | **of Operations**                                                                     | 39                                                                     
|              |                                                                                       | General                                                                
|              |                                                                                       | Critical Accounting Policies                                           
|              |                                                                                       | Forward-Looking Statements                                             
|              |                                                                                       | Operating Strategy                                                     
|              |                                                                                       | Comparison of Financial Condition at March 31, 2003 and March 31, 2002 
|              |                                                                                       | Comparison of Operating Results for Years Ended March 31, 2003 and 2002
|              |                                                                                       | Comparison of Operating Results for Years Ended March 31, 2002 and 2001
|              |                                                                                       | Average Balances, Interest and Average Yields/Cost                     
|              |                                                                                       | Rate/Volume Analysis                                                   
|              |                                                                                       | Yields Earned and Rates Paid                                           
|              |                                                                                       | Asset and Liability Management and Market Risk                         
|              |                                                                                       | Liquidity and Capital Resources                                        
|              |                                                                                       | Impact of Accounting Pronouncements and Regulatory Policies            
|              |                                                                                       | Effect of Inflation and Changing Prices                                
|              | **Item 7A. Quantitative and Qualitative Disclosures About Market Risk**               | 51                                                                     
|              | **Item 8. Financial Statements and Supplementary Data**                               | 52                                                                     
|              | **Item 9. Changes in and Disagreements with Accountants on Accounting and**           |                                                                        
|              | **Financial Disclosure**                                                              | 94                                                                     
|**PART III.** |                                                                                       |                                                                        
|              | **Item 10. Directors and Executive Officers of the Registrant**                       | 94                                                                     
|              | **Item 11. Executive Compensation**                                                   | 95                                                                     
|              | **Item 12. Security Ownership of Certain Beneficial Owners and Management**           | 95                                                                     
|              | **Item 13. Certain Relationships and Related Transactions**                           | 96                                                                     
|              | **Item 14.  Controls and Procedures**                                                 | 96                                                                     
|              | **Item 15.  Principal Accountant Fees and Services**                                  | 96                                                                     
|**PART IV.**  |                                                                                       |                                                                        
|              | **Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8-K**         | 97                                                                     

<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 of Washington
("EverTrust  Bank" or the "Bank"), a Washington chartered stock savings bank; and Mutual Bancshares Capital Inc.
("MB Cap"), a Washington corporation.   In connection with the Conversion in September 1999, the Company issued
8,596,250 shares to the public.  Effective May 12, 2000, the Company became 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.  For further information regarding
the Company's financial holding company election, see "Regulation -- The Company."

At March 31, 2003, the Company had total assets of $706.2 million, total deposits of $508.3 million and total
equity of $91.7 million.  The Company's business activities are conducted primarily by EverTrust Bank.  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 regionally oriented bank dedicated to financing commercial real estate, residential related
properties, offering business and private banking services and providing quality customer service.  The Bank's principal
business is attracting deposits from the general public and using those funds to originate commercial real estate loans
as well as construction loans, business loans and residential (including multi-family) mortgage loans.  The Bank also
offers investment management and limited trust services through its wholly owned subsidiary, EverTrust Asset
Management ("ETAM").

**Market Area**

The Bank conducts business through its 12 full service offices located throughout Snohomish County,
Washington, and branch offices in Seattle and Bellevue, King County, Washington. EverTrust Bank considers
Snohomish County and King County in Washington as its primary market area for making loans and attracting deposits.
On a limited basis, EverTrust Bank also makes loans in other areas of the state. To a much lesser extent, EverTrust Bank
has also made loans in Oregon, Idaho, California, Nevada and Hawaii. Loans made in California, Nevada and Hawaii
have generally been to local borrowers of EverTrust Bank as an accommodation for financing second homes. The Bank's
principal business is attracting deposits from the general public and using those funds to originate multi-family,
commercial mortgage and construction loans, as well as commercial business loans, single family mortgages and
consumer loans.

For additional information regarding the Company's and the Bank's offices, see "Item 2.  Properties" and Notes
6 and 16 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

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**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 focused on the origination of loans secured by commercial real
estate, multi-family properties, business loans and construction and land development loans.****At March 31, 2003,
EverTrust Bank's total loans were $605.0 million, including approximately $4.8 million 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, 2003, the maximum amount which EverTrust Bank could have lent to any one borrower and the borrower's
related entities was approximately $10.6 million under its policy.  At March 31, 2003, EverTrust Bank had loans to six
builder/developers (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 $14.7 million committed, of which $13.5 million was outstanding, representing 21% and
19% of EverTrust Bank's total capital of $70.9 million, respectively.  All loans to the borrower were performing
according to their terms at March 31, 2003.  Loans in excess of 25% of EverTrust Bank's capital are participated to the
Company on a last-in, first-out basis.  There was one $4.0 million loan participation with the Company outstanding as
of March 31, 2003, which was performing in accordance with its terms.

**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,          
|---------------------------- | ----------------------
|                             | 2003                  
|                             | Amount                
|                             | (Dollars in thousands)
|Commercial construction      | $ 48,713              
|Commercial real estate       | 266,808               
|Multi-family construction    | 19,472                
|Multi-family residential     | 159,344               
|Business loans               | 58,800                
|One- to- four family         |                       
|construction and land        |                       
|development                  | 89,589                
|Consumer:                    |                       
|Home equity and other        |                       
|mortgages                    | 36,593                
|Credit cards                 | 5,343                 
|Other installment loans      | 5,930                 
|One- to- four family         |                       
|residential(1)               | 31,170                
|Total loans                  | 721,762               
|Less:                        |                       
|Undisbursed loan proceeds    | (103,281)             
|Deferred loan fees and other | (4,547)               
|Reserve for loan losses      | (8,979)               
|                             | 604,955               
|Loans receivable held        |                       
|for sale                     | (4,755)               
|Loans receivable, net        | $600,200              

|(1) | Includes owner/builder construction/permanent loans of $4.6 million, $8.3 million, $6.4 million, $6.0 million and $5.5 million at
March 31, 2003, 2002, 2001, 2000 and 1999, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**Commercial Real Estate Lending**.  Commercial real estate loans totaled $266.8 million, or 37.0% of total
loans receivable at March 31, 2003, and consisted of 283 loans.  EverTrust Bank originates commercial real estate loans
primarily secured by warehouses, mini-storage facilities, industrial use buildings, office and medical office buildings

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and retail shopping centers located in EverTrust Bank's market area.  Commercial real estate loans typically range in
principal amount from $500,000 to $7.5 million.  At March 31, 2003, the largest commercial real estate loan on one
property had an outstanding balance of $7.4 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, 2003.

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 to four years ranging from 1% to 2%.

The Bank requires appraisals of all properties securing commercial real estate loans.  Appraisals are performed
by an independent appraiser designated by EverTrust Bank, which are reviewed by the Bank's review appraiser.
EverTrust Bank requires its commercial loan borrowers with loans in excess of $500,000, 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 1.25 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.

**Multi-Family Lending.**  At March 31, 2003, $159.3 million, or 22.1% 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 an overall limitation of 8%.  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 to four years.
Multi-family loans typically range in principal amount from $500,000 to $5.0 million.  At March 31, 2003, the largest
non-construction multi-family loan was on a 130 unit apartment building and two unit annex with an outstanding
principal balance of $7.7 million located in the Bank's market area.  At March 31, 2003, 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

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multi-family loan borrowers, with loans in excess of $500,000 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.

**Business Lending.** Through its business 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, marketable investments 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, 2003, the business loans amounted to $58.8 million, or 8.2%, of the Bank's total loans.
The increase in business loans since the year ending March 31, 2002 is attributable to increased market penetration, the
opening of the downtown Seattle office, the addition of new loan officers and growth in average loan amounts.

At March 31, 2003, the Bank's largest outstanding business loan was for $5.0 million and was secured by notes
receivable.  The loan was performing according to its terms at March 31, 2003.

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, 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, 2003, EverTrust Bank had one outstanding letter of credit in the
amount of $75,000. 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

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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.

**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's portfolio includes two types of one-to-four family residential construction loans:   speculative
construction loans, and owner/builder loans.  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
$63.3 million, $40.4 million and $56.4 million for the three years ended March 31, 2003, 2002 and 2001, respectively.
Subject to market conditions, EverTrust Bank intends to continue to emphasize its construction lending activities.

At March 31, 2003, 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            | $   13,182             | 10.0%     
|Owner/builder construction          | 4,612                  | 3.5       
|Multi-family construction           | 19,472                 | 14.8      
|Land development                    | 45,422                 | 34.6      
|Commercial real estate construction | 48,713                 | 37.1      
|Total                               | $ 131,401              | 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, 2003, speculative construction loans totaled $13.2 million, or 10.0%, of the total construction
loan portfolio. At March 31, 2003, the Bank had four 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 $1.8 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, 2003,
owner/builder construction loans totaled $4.6 million, or 3.5%, of the total construction loan portfolio.  At March 31,
2003, the largest outstanding owner/builder construction loan had an outstanding balance of approximately $500,000
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, 2003, subdivision development loans totaled $45.4 million, or 34.6% 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, 2003, 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 estimated or projected 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, 2003, such construction loans amounted to $68.2 million of which $50.2 million
was construction/permanent financing (*i.e.,* loans will roll 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, 2003, the largest multi-family construction loan was for $7.0 million secured
by a 250 unit apartment building located in EverTrust Bank's market area and was performing according to its terms.
At March 31, 2003, the largest commercial construction loan was for $6.5 million, secured by a shopping center 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.

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All construction loans in excess of $1.5 million 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 typically 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.

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, recent changes
in the local and state economies and real estate markets could adversely affect EverTrust Bank's construction loan
portfolio.

**Consumer Lending.**  Consumer lending has traditionally been a secondary, but recently growing part of the
Bank's business, especially providing for the credit needs of high net worth customers.  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, 2003, consumer loans, excluding credit card
loans, amounted to $42.5 million, or 5.9% of the total loan portfolio.

At March 31, 2003, 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 $36.6 million,
or 5.1%, 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 secured by a first or second mortgage on residential property.  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.

7

<PAGE>

Credit card loans 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, 2003, the combined credit card portfolio consisted of business
credit lines of $1.4 million and personal credit card lines of $5.3 million for a total of $6.7 million or 0.93% of total
loans.  Amounts disbursed under the credit lines were $869,200 at March 31, 2003 compared to $707,700 at March 31,
2002.  Credit card loans entail greater risk than do other loans 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, 2003, there were $1,000 of credit card loans 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, 2003, there were $24,000 of consumer loans delinquent in excess of 90 days or in nonaccrual
status.

**Residential One- to- Four Family Lending**.  At March 31, 2003, $31.2 million of the Bank's loan portfolio
consisted of permanent loans secured by one- to- four family residences, including approximately $4.8 million of loans
held for sale.  This amount represents 4.3% 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 the Bank's loan portfolio to meet its asset/liability management objectives.

At March 31, 2003, $14.3 million, or 59.8%, 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 3.0%.
Adjustable rate mortgage loans held in EverTrust Bank's portfolio do not permit negative amortization of principal and
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, 2003, $9.6 million, or 40.2%, of the Bank's one- to- four family loan
portfolio consisted of adjustable rate mortgage loans.

8

<PAGE>

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.

9

<PAGE>

**Loan Maturity and Repricing.**  The following table sets forth information at March 31, 2003 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   | 15 Years           | 15 Years          | Total    
|                                  | (In thousands)
|Commercial construction           | $  23,550      | $   3,176 | $   6,851 | $               -- | $              -- | $  33,577
|Commercial real estate            | 110,446        | 88,647    | 49,242    | 14,730             | 1,248             | 264,313  
|Multi-family construction         | 4,767          | 3,558     | --        | --                 | --                | 8,325    
|Multi-family residential          | 70,975         | 60,624    | 21,159    | 5,682              | 114               | 158,554  
|Business loans                    | 35,913         | 2,171     | 891       | 1,005              | 427               | 40,407   
|One- to- four family construction |                |           |           |                    |                   |          
|and land development              | 57,601         | --        | --        | --                 | --                | 57,601   
|Consumer:                         |                |           |           |                    |                   |          
|Home equity and other mortgages   | 18,761         | 1,067     | 850       | 2,327              | 1                 | 23,006   
|Credit cards                      | 712            | --        | --        | --                 | --                | 712      
|Other installment loans           | 1,967          | 770       | 323       | 203                | --                | 3,263    
|One- to- four family residential  | 7,250          | 3,315     | 2,271     | 4,035              | 7,097             | 23,968   
|                                  |                |           |           |                    |                   |          
|Total                             | $331,942       | $163,328  | $81,587   | $27,982            | $ 8,887           | $613,726 

The following table sets forth the dollar amount of all loans due after March 31, 2003, which have fixed interest
rates and have floating or adjustable interest rates.

|                                  | Fixed          | Variable    | Total      
|--------------------------------- | -------------- | ----------- | -----------
|                                  | Rates          | Rates       | Rates      
|                                  | (In thousands)
|Commercial construction           | $    6,744     | $    26,833 | $    33,577
|Commercial real estate            | 40,754         | 223,559     | 264,313    
|Multi-family construction         | --             | 8,325       | 8,325      
|Multi-family residential          | 14,632         | 143,922     | 158,554    
|Business loans                    | 5,478          | 34,929      | 40,407     
|One- to- four family construction |                |             |            
|and land development              | --             | 57,601      | 57,601     
|Consumer:                         |                |             |            
|Home equity and other mortgages   | 5,151          | 17,855      | 23,006     
|Credit cards                      | --             | 712         | 712        
|Other installment loans           | 2,059          | 1,204       | 3,263      
|One- to- four family residential  | 14,341         | 9,627       | 23,968     
|                                  |                |             |            
|Total                             | $ 89,159       | $524,567    | $613,726   

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

10

<PAGE>

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 real estate 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 Chief Lending Officer.  All loans up to and including $1.5 million
may be approved by the Management Loan Committee without Board approval; loans over $1.5 million 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, 2003, the Bank's total gross loan
originations were $435.6 million.  Periodically, EverTrust Bank purchases participation interests in commercial real
estate loans, 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."

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, 2003 EverTrust Bank's loan servicing
portfolio totaled $225.4 million.

The increase in the origination of commercial and multi-family loans from prior years resulted from the Bank's
increased marketing efforts for these types of loans along with increased refinancing activity due to lower interest rates.
The origination of one-to-four family residential loans increased significantly from prior years due primarily to loan
refinancing activity caused by the lower interest rate environment.

11

<PAGE>

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

|                                            | Year Ended March 31,
|------------------------------------------- | --------------------
|                                            | 2003                
|                                            | (In thousands)      
|Loans originated:                          
|Commercial construction                     | $ 82,195            
|Commercial real estate                      | 104,877             
|Multi-family construction                   | 6,760               
|Multi-family residential                    | 51,869              
|Business loans                              | 40,049              
|One- to- four family construction and loan  |                     
|development                                 | 63,252              
|Consumer:                                   |                     
|Home equity and other mortgages             | 19,108              
|Credit cards                                | 2,287               
|Other installment loans                     | 1,545               
|One- to- four family residential            | 63,652              
|Total loans originated                      | 435,594             
|                                            |                     
|Loans purchased:                            |                     
|Commercial construction                     | 2,000               
|Commercial real estate                      | --                  
|Multi-family construction                   | --                  
|Multi-family residential                    | --                  
|Business loans                              | --                  
|One- to- four family construction and loan  |                     
|development                                 | --                  
|Consumer:                                   |                     
|Home equity and other mortgages             | --                  
|Credit cards                                | --                  
|Other installment loans                     | --                  
|One- to- four family residential            | --                  
|Total loans purchased                       | 2,000               
|                                            |                     
|Loans sold:                                 |                     
|Total whole loans sold                      | 55,349              
|Participation loans                         | 44,229              
|Total loans sold                            | 99,578              
|                                            |                     
|Principal repayments                        | 349,769             
|Loans securitized                           | --                  
|Transfer to real estate owned               | --                  
|Increase (decrease) in other items, net     | 41,662              
|Net increase (decrease) in loans receivable |                     
|and loans held for sale                     | $ 29,909            

**Loan Origination and Other Fees**.
    The Bank, in some instances, receives loan origination fees. Loan fees are
    generally 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

12

<PAGE>

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 unamortized deferred fees or costs associated
with loans that are prepaid are recognized as income at the time of prepayment.
The Bank had $4.5 million of net deferred mortgage loan fees at March 31, 2003.

**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 after the16th day of delinquency.
If a satisfactory response is not obtained, continuous follow-up contacts are attempted until the loan has been brought
current.

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, business 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.

|                                                     | As of  March 31,      
|---------------------------------------------------- | ----------------------
|                                                     | 2003                  
|                                                     | (Dollars in thousands)
|Loans accounted for on a nonaccrual basis:           |                       
|Commercial construction                              | $       --            
|Commercial real estate                               | --                    
|Multi-family construction                            | --                    
|Multi-family residential                             | --                    
|Business loans                                       | --                    
|One- to- four family construction and                |                       
|land development                                     | --                    
|Consumer:                                            |                       
|Home equity and other mortgages                      | --                    
|Credit cards                                         | --                    
|Other installment loans                              | 24                    
|One- to- four family residential                     | --                    
|Total                                                | 24                    
|                                                    
|                                                     |                       
|*(table continues on following page)*               
|13
  <PAGE>                                         
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     | Year Ended  March 31, 
|                                                     | 2003                  
|                                                     | (Dollars in thousands)
|                                                     |                       
|Accruing loans which are contractually past          |                       
|due 90 days or more:                                 |                       
|Commercial construction                              | --                    
|Commercial real estate                               | --                    
|Multi-family construction                            | --                    
|Multi-family residential                             | --                    
|Business loans                                       | 203                   
|                                                     |                       
|One- to- four family construction and                |                       
|land development                                     | --                    
|Consumer:                                            |                       
|Home equity and other mortgages                      | --                    
|Credit cards                                         | --                    
|Other installment loans                              | --                    
|One- to- four family residential                     | --                    
|Total                                                | 203                   
|                                                     |                       
|Total of nonaccrual and 90 days  past due loans      | 227                   
|                                                     |                       
|Real estate and other assets owned/acquired in       |                       
|satisfaction of debts previously contracted          | 6                     
|                                                     |                       
|Total nonperforming assets                           | $   233               
|                                                     |                       
|Restructured loans                                   | --                    
|                                                     |                       
|Nonaccrual and 90 days or more past due loans as a   |                       
|percentage of loans receivable, net                  | 0.04%                 
|                                                     |                       
|Nonaccrual and 90 days or more past due              |                       
|loans as a percentage of total assets                | 0.03%                 
|                                                     |                       
|Nonperforming assets as a percentage of total assets | 0.03%                 

**Real Estate and Other Assets 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, 2003, EverTrust Bank had no real estate owned and one repossessed vehicle
valued at $6,000.

**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,

14

<PAGE>

however, and troubled debt restructures do not necessarily result in nonaccrual loans.  EverTrust Bank had no
restructured loans as of March 31, 2003.

**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 potential 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, 2003, the
Bank had a general allowance for loan losses of $9.0 million, representing 1.46% of total loans, compared to $8.8
million, or 1.50% of total loans at March 31, 2002.

The Bank recorded a $390,000 provision for loan losses for the year ended March 31, 2003, compared to $1.5
million and $1.0 million for the years ended March 31, 2002 and 2001, 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 have been
consistent over the past several years.  The relatively low amount of nonperforming loans at March 31, 2003 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 business loans, unsecured lending, construction, land
development, multi-family and commercial real-estate loans at March 31, 2003.

15

<PAGE>

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: one-to-four family
permanent loans, 0.25%; one-to-four family permanent jumbo loans, 0.75%; multifamily loans, 1.00%; permanent
commercial real estate loans, 1.25%; construction and land development, 1.50%; consumer loans, 1.50% to 5.00% based
on collateral type; credit card loans, 6.00%; business loans, 1.25% to 1.75% based on general collateral type.  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, 
|--------------------------------------------------- | ----------------------
|                                                    | 2003                  
|                                                    | (Dollars in thousands)
|                                                    |                       
|Allowance at beginning of period                    | $ 8,754               
|Provision for loan losses                           | 390                   
|Charge-offs:                                        |                       
|Commercial construction                             | --                    
|Commercial real estate                              | --                    
|Multi-family construction                           | --                    
|Multi-family residential                            | --                    
|Business loans                                      | 46                    
|One- to- four family construction                   |                       
|and land development                                | --                    
|Consumer:                                           |                       
|Home equity and other mortgages                     | --                    
|Credit cards                                        | 20                    
|Automobiles                                         | 17                    
|Other installment loans                             | 82                    
|One- to- four family residential                    | --                    
|Total charge-offs                                   | 165                   
|                                                    |                       
|Recoveries:                                         |                       
|Commercial construction                             | --                    
|Commercial real estate                              | --                    
|Multi-family construction                           | --                    
|Multi-family residential                            | --                    
|Business loans                                      | --                    
|One- to- four family construction                   |                       
|and land development                                | --                    
|Consumer:                                           |                       
|Home equity and other mortgages                     | --                    
|Credit cards                                        | --                    
|Automobiles                                         | --                    
|Other installment loans                             | --                    
|One- to- four family residential                    | --                    
|Total recoveries                                    | --                    
|Net charge-offs                                     | 165                   
|Balance at end of period                            | $8,979                
|                                                    |                       
|Allowance for loan losses as a percentage of  total |                       
|loans outstanding at the end of the period          | 1.46%                 
|                                                    |                       
|Net charge-offs as a percentage of average loans    |                       
|outstanding during the period                       | 0.03%                 
|                                                    |                       
|Allowance for loan losses as a percentage of        |                       
|nonperforming loans at end of period                | 3,955.31%             

17

<PAGE>

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,          
|-------------------- | ----------------------
|                     | 2003                  
|                     |                       
|                     |                       
|                     |                       
|                     | Amount of             
|                     | Loan Loss             
|                     | Allowance             
|                     | (Dollars in thousands)
|                     |                       
|                     |                       
|Commercial           |                       
|construction         | $   880               
|Commercial           |                       
|real estate          | 3,139                 
|Multi-family         |                       
|construction         | 336                   
|Multi-family         |                       
|residential          | 1,525                 
|Business loans       | 1,002                 
|One- to- four family |                       
|construction         |                       
|and land             |                       
|development          | 1,344                 
|Consumer:            |                       
|Home equity and      |                       
|other mortgages      | 111                   
|Credit cards         | 70                    
|Other installment    |                       
|loans                | 464                   
|One- to- four family |                       
|residential          | 108                   
|Total allocated      | 8,979                 
|Unallocated          | --                    
|Total                | $ 8,979               

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, 2003, the Company's consolidated investment portfolio totaled $44.3 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, 2003, totaled
$15.0 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, 2003, totaled $4.8 million at estimated fair value, or $4.7 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, 2003, general obligation bonds and revenue
bonds had total estimated fair values of $1.8 million and $3.0 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, 2003, the Company's municipal bond portfolio had a weighted average maturity
of approximately five years and a weighted average coupon rate of 4.4%.

**Corporate Bonds**.  The Company's corporate bond portfolio, which totaled $501,000 at fair value ($500,000
at amortized cost) at March 31, 2003, was comprised of short term fixed-rate securities from issuers generally rated Baa
or higher by Moody's or BBB or higher 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, 2003, the portfolio had a weighted average maturity of less than one year 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 less than one year.

**Equity Securities**.  The Company's equity investments totaled $1.3 million at fair value, or $1.6 million at cost,
at March 31, 2003. The equity portfolio consists primarily of common stocks of companies included in the Standard
and Poor's Average and has typically included other mid to large cap companies.

19

<PAGE>

**U.S. Government and Agency Obligations**.  The Company's portfolio of U.S. Government and agency
obligations had a fair value of $16.6 million, or $16.2 million at amortized cost, at  March 31, 2003.  The longest term
bond has an amortized cost of $1.0 million and a term to maturity of 2.4 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.  Commitments to sell loans with a notional balance of $2,955,309 at March
31, 2003 have a carrying value of $64,000, representing the fair value of such commitments. Commitments of
$6,254,650 to originate loans at March 31, 2003, have a carrying value of  $102,000.   There were no commitments to
originate or sell loans at March 31, 2002.

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

|                           | At March 31,  
|-------------------------- | --------------
|                           | 2003          
|                           | Amortized     
|                           | Cost          
|                           | (In thousands)
|                           |               
|**Available for sale:**    |               
|Investment securities:     |               
|U.S. Government Agency     |               
|obligations                | $ 15,246      
|Corporate obligations      | 500           
|Municipal obligations      | 2,346         
|Equity securities          | 1,642         
|Certificates of deposit    | --            
|Mortgage-backed securities | 14,073        
|Total available for sale   | $ 33,807      
|                           |               
|**Held to maturity:**      |               
|Investment securities:     |               
|U.S. Government Agency     |               
|obligations                | $   1,002     
|Corporate obligations      | --            
|Municipal obligations      | 2,402         
|Certificates of deposit    | --            
|Mortgage-backed securities | 396           
|Total held to maturity     | $  3,800      
|                           |               
|Total                      | $ 37,607      

20

<PAGE>

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, 2003.

|                           | At March 31, 2003               
|-------------------------- | --------------------------------
|                           | Amount Due or Repricing within:*
|                           |                                 
|                           | One Year or Less                
|                           |                                 
|                           | Amortized                       
|                           | Cost                            
|                           | (Dollars in thousands)          
|**Available for sale:**   
|Investment securities:    
|U.S. Government Agency    
|obligations                | $ 1,984                         
|Corporate obligations      | 500                             
|Municipal obligations      | 415                             
|Equity securities          | 1,642                           
|Certificates of deposit    | --                              
|Mortgage-backed securities | --                              
|Total available for sale   | $ 4,541                         
|                          
|**Held to maturity:**     
|Investment securities:    
|U.S. Government Agency    
|obligations                | $        --                     
|Corporate obligations      | --                              
|Municipal obligations      | 280                             
|Equity securities          | --                              
|Certificates of deposit    | --                              
|Mortgage-backed securities | --                              
|Total held to maturity     | $    280                        
|                          
|Total                      | $ 4,821                         

|______________
|--------------
|*             

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 55.0%
of total deposits and negotiable order of withdrawal/checking accounts comprising a relatively modest 12.7% 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, 2003, the Bank had $94.5 million of jumbo certificates of deposit (balances of $100,000 or more),
including $11.0 million in public unit funds which represents 2.2% of total deposits at March 31, 2003.  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.

The following table sets forth information concerning the Bank's time deposits and other non-interest and interest-bearing deposits at March 31, 2003.

|Weighted |               |                               |                |               |           
|-------- | ------------- | ----------------------------- | -------------- | ------------- | ----------
|Average  |               |                               |                |               | Percentage
|Interest |               |                               |                | Minimum       | of Total  
|Rate     | Term          | Category                      | Amount         | Balance       | Deposits  
|         |               |                               | (In thousands) |               |           
|        
|--%      | N/A           | Non-interest bearing accounts | $   18,398     | $          -- | 3.6%      
|0.8      | N/A           | Savings accounts              | 12,426         | 300           | 2.4       
|1.2      | N/A           | Checking accounts             | 64,358         | 300           | 12.7      
|1.6      | N/A           | Money market deposit accounts | 133,586        | 1,000         | 26.3      
|         |               |                               |                |               |           
|         |               | Certificates of Deposit       |                |               |           
|         |               |                               |                |               |           
|2.2      | 1-11 months   | Fixed-term, fixed-rate        | 51,334         | 500           | 10.1      
|2.7      | 12-23 months  | Fixed-term, fixed-rate        | 118,362        | 500           | 23.3      
|3.7      | 24-35 months  | Fixed-term, fixed-rate        | 24,842         | 500           | 4.9       
|4.9      | 36-59 months  | Fixed-term, fixed-rate        | 22,292         | 500           | 4.4       
|5.7      | 60-156 months | Fixed-term, fixed rate        | 62,671         | 500           | 12.3      
|         |               |                               |                |               |           
|         |               | TOTAL                         | $ 508,269      |               | 100.0%    

22

<PAGE>

The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until maturity
as of March 31, 2003.  Jumbo certificates of deposit are certificates in amounts of $100,000 or more.

|                               | Certificates  
|------------------------------ | --------------
|Maturity Period                | of Deposit    
|                               | (In thousands)
|                              
|Three months or less           | $ 17,526      
|Over three through six months  | 14,844        
|Over six through twelve months | 26,813        
|Over twelve months             | 35,315        
|Total                          | $ 94,498      

**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,          
|------------------------------------- | ----------------------
|                                      | 2003                  
|                                      |                       
|                                      |                       
|                                      | Amount                
|                                      | (Dollars in thousands)
|                                      |                       
|                                      |                       
|Savings accounts                      | $ 12,426              
|Demand deposit accounts               | 82,756                
|Money market deposit accounts         | 133,586               
|Fixed-rate certificates which mature: |                       
|Within 1 year                         | 181,648               
|After 1 year, but within 2 years      | 50,817                
|After 2 years, but within 5 years     | 40,204                
|Certificates maturing  thereafter     | 6,832                 
|Total                                 | $508,269              

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

|                                | Weighted                 | At March 31,          
|------------------------------- | ------------------------ | ----------------------
|                                | Average Rateat March 31, | 2003                  
|                                | 2003                     | Amount                
|                                |                          | (Dollars in thousands)
|                                |                         
|Noninterest-bearing accounts    | --%                      | $ 18,398              
|Savings accounts                | 0.8                      | 12,426                
|Checking accounts               | 1.2                      | 64,358                
|Money market accounts           | 1.6                      | 133,586               
|Time deposits by original term: |                         
|1 to 11 months                  | 2.2                      | 51,334                
|12 to 23 months                 | 2.7                      | 118,362               
|24 to 35 months                 | 3.7                      | 24,842                
|36 to 59 months                 | 4.9                      | 22,292                
|60 to 156 months                | 5.7                      | 62,671                
|                                |                          | 279,501               
|                                |                          | $508,269              

23

<PAGE>

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

|                                                    | Year Ended March 31,
|--------------------------------------------------- | --------------------
|                                                    | 2003                
|                                                    | (In thousands)      
|                                                    |                     
|Beginning balance                                   | $449,611            
|Net deposits (withdrawals) before interest credited | 45,077              
|Interest credited                                   | 13,581              
|Net increase in deposits                            | 58,658              
|Ending balance                                      | $508,269            

**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 and to accomplish asset/liability management objectives.
The FHLB of Seattle functions as a wholesale 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, 2003,
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 the Bank's total assets, or $220.0 million, of which $101.0 million was outstanding.  In addition,
EverTrust Bank has a total of $47.0 million in unsecured lines of credit from three commercial banks at March 31, 2003, of
which none was outstanding at March 31, 2003.

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, 2003, average borrowings outstanding increased primarily to fund loan growth.

|                                           | For the Year Ended March 31,
|------------------------------------------ | ----------------------------
|                                           | 2003                        
|                                           | (Dollars in thousands)      
|                                           |                             
|Maximum amount of borrowings outstanding   |                             
|at any month end                           | $ 116,579                   
|                                           |                             
|Approximate average borrowings outstanding | $ 108,230                   
|                                           |                             
|Approximate weighted average rate paid     | 5.16%                       
|                                          
|                                           | At March 31,                
|                                           | 2003                        
|                                           | (Dollars in thousands)      
|                                           |                             
|Balance outstanding at end of period       | $ 100,984                   
|                                           |                             
|Weighted average rate paid                 | 5.19%                       

24

<PAGE>

**Subsidiary Activities**

**Subsidiaries of the Company.**   At March 31, 2003, the Company owned two subsidiaries: EverTrust Bank and MB
Cap (Mutual Bancshares Capital, Inc.).  In January 2003, the Company announced that it had reached a tentative agreement
to shift the day-to-day operations of the Investment Fund to a local venture capital firm.  As a result of the agreement, the sole
activity of MB Cap will be to hold its limited partnership investment and a non-managing interest in the General Partner of
the Fund.  The Fund will be managed by the former employees of MB Cap along with an additional venture capitalist.  The
agreement has been approved by the limited partners of the Fund and is subject to approval by the regulatory authorities.  The
investment in the Fund is recorded at fair value using the equity method, based on the percentage of ownership held in the
Fund.  MB Cap has committed to a total investment of $2.3 million.  As of March 31, 2003, MB Cap has invested $2.1 million.
The book value of the limited partnership investment, net of writedowns, at March 31, 2003 was $1.2 million compared to $1.4
million at March 31, 2002.  Additional capital calls remaining as of March 31, 2003 totaled $112,500.

**Subsidiaries of EverTrust Bank.**Sound Financial, Inc. is a wholly-owned subsidiary of EverTrust Bank.  Sound
Financial, Inc. has a turnkey contract with Linsco Private Ledger, to market annuities, stocks, bonds and mutual funds.  Sound
Financial, Inc. currently operates with one full time registered investment representative.

The Bank formed a Washington chartered trust company, EverTrust Asset Management ("ETAM"), in March 2001,
which was internally capitalized on May 1, 2001.  ETAM 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.
At March 31, 2003, assets under management totaled $111.9 million compared to $55.6 million at March 31, 2002.

**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.**

Sarbanes-Oxley Act of 2002.  The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") was signed into law by
President Bush on July 30, 2002 in response to public concerns regarding corporate accountability in connection with the recent
accounting scandals at *Enron* and *WorldCom*. The stated goals of the Sarbanes-Oxley Act are to increase corporate
responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and
to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

The Sarbanes-Oxley Act is the most far-reaching U.S. securities legislation enacted in some time. The Sarbanes-Oxley
Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the
Securities and Exchange Commission ("SEC"), under the Securities Exchange Act of 1934 ("Exchange Act").

The Sarbanes-Oxley Act includes very specific additional disclosure requirements
and new corporate governance rules, requires the SEC and securities exchanges to
adopt extensive additional disclosure, corporate governance and other related
rules and mandates further studies of certain issues by the SEC and the
Comptroller General. The Sarbanes-Oxley Act represents significant federal
involvement in matters traditionally left to state regulatory systems, such as
the regulation of the

25

<PAGE>

accounting profession, and to state
corporate law, such as the relationship between a board of directors and
management and between a board of directors and its committees.

The Sarbanes-Oxley Act addresses, among other matters:

- audit committees;
- certification of financial statements by the chief executive officer and the chief financial officer;
- the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer's securities by directors and senior officers in the twelve month period following initial publication of any financial statements
  that later require restatement;
- a prohibition on insider trading during pension plan black out periods;
- disclosure of off-balance sheet transactions;
- a prohibition on personal loans to directors and officers;
- expedited filing requirements for Form 4s;
- disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;
- "real time" filing of periodic reports;
- the formation of a public accounting oversight board;
- auditor independence; and
- various increased criminal penalties for violations of securities laws.

The Sarbanes-Oxley Act contains provisions which became effective upon enactment on July 30, 2002 and
provisions which will become effective from within 30 days to one year from enactment. The SEC has been delegated the task
of enacting rules to implement various of the provisions with respect to, among other matters, disclosure in periodic filings
pursuant to the Exchange Act.

Gramm-Leach-Bliley Act.  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 Act:

|            | (1) | repealed 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) | provided a uniform framework for the functional regulation of the activities of banks, savings
institutions and their holding companies;                                                         
|            |    
|            | (3) | broadened the activities that may be conducted by national banks, banking subsidiaries of bank holding
companies and their financial subsidiaries;                                               
|            |    
|            | (4) | provided an enhanced framework for protecting the privacy of consumer information;                                                                                                               
|26
  <PAGE>
|            | (5) | adopted a number of provisions related to the capitalization, membership, corporate governance and
other measures designed to modernize the FHLB system;                                         
|            |    
|            | (6) | modified the laws governing the implementation of the Community Reinvestment Act; and                                                                                                            
|            |     |                                                                                                                                                                                                  
|            | (7) | addressed 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.

**The USA Patriot Act.** In response to the events of September 11, 2001, President George W. Bush signed into law
the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, or the USA PATRIOT Act, on October 26, 2001. The USA PATRIOT Act gives the federal government new powers
to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information
sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the
USA PATRIOT Act takes measures intended to encourage information sharing among bank regulatory agencies and law
enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial
institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the
Commodity Exchange Act.

Among other requirements, Title III of the USA PATRIOT Act imposes the following requirements with respect to
financial institutions:

27

<PAGE>

- Pursuant to Section 352, all financial institutions must establish anti-money laundering programs that include, at
minimum: (i) internal policies, procedures, and controls, (ii) specific designation of an anti-money laundering compliance
officer, (iii) ongoing employee training programs, and (iv) an independent audit function to test the anti-money laundering
program.

- Section 326 of the Act authorizes the Secretary of the Department of Treasury, in conjunction with other bank
regulators, to issue regulations by October 26, 2002 that provide for minimum standards with respect to customer identification
at the time new accounts are opened.

- Section 312 of the Act requires financial institutions that establish, maintain, administer, or manage private banking
accounts or correspondent accounts in the United States for non-United States persons or their representatives (including
foreign individuals visiting the United States) to establish appropriate, specific, and, where necessary, enhanced due diligence
policies, procedures, and controls designed to detect and report money laundering.

- Effective December 25, 2001, financial institutions are prohibited from establishing, maintaining, administering or
managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country),
and will be subject to certain recordkeeping obligations with respect to correspondent accounts of foreign banks.

- Bank regulators are directed to consider a holding company's effectiveness in combating money laundering when
ruling on Federal Reserve Act and Bank Merger Act applications.

During the first quarter of 2002 the Federal Crimes Enforcement Network (FinCEN), a bureau of the Department
of Treasury, issued proposed and interim regulations to implement the provisions of Sections 312 and 352 of the USA
PATRIOT Act.   To date, it has not been possible to predict the impact the USA PATRIOT Act and its implementing
regulations may have on the Company and the Bank.

**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 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.

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**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, 2003, the Company's total risk based capital was 16.1% of risk-weighted
assets and its risk based capital of Tier 1 (core) capital was 14.8% of risk-weighted assets.

**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 files 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.

**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

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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 calendar 2002.

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 fourth quarter
of 2002, the annualized rate was 1.84 cents per $100 of insured deposits.

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 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, 2003, 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

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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 10.1% as of March 31, 2003.

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 12.9% as of March 31, 2003, and its Tier
1 risk-based capital ratio to be 11.7%.   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 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.

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The table below sets forth EverTrust Bank's capital position relative to the FDIC capital requirements at March 31,
2003.  The definitions of the terms used in the table are those provided in the capital regulations issued by the FDIC.

|                                         | At March 31, 2003
|---------------------------------------- | -----------------
|                                         |                  
|                                         | Amount           
|                                         | (In thousands)   
|                                        
|Tier 1 (leverage) capital                | $ 70,199         
|Tier 1 (leverage) capital requirement    | 27,802           
|Excess                                   | $ 42,397         
|                                        
|Tier 1 risk adjusted capital             | $ 70,199         
|Tier 1 risk adjusted capital requirement | 24,000           
|Excess                                   | $ 46,199         
|                                        
|Total risk-based capital                 | $ 77,744         
|Total risk-based capital requirement     | 48,213           
|Excess                                   | $ 29,531         

|(1) | For the Tier 1 (leverage) capital and regulatory capital calculations, percent of total average assets of $696.2
million for EverTrust Bank.  For the Tier 1 risk-based capital and total risk-based capital calculations, percent of
total risk-weighted assets of $602.1 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 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.

Washington State recently enacted a new law regarding financial institution
parity. Primarily, the law affords Washington-chartered commercial banks the
same powers as Washington-chartered savings banks. In order for a bank to
exercise these powers, it must provide 30 days notice to the Director of
Financial Institutions and the Director must authorize the requested activity.
In addition, the law provides that Washington-chartered commercial banks may
exercise any of the powers that the Federal Reserve has determined to be closely
related to the business of banking and the powers of national

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banks, subject to the approval of
the Director in certain situations. The law also provides that
Washington-chartered savings banks may exercise any of the powers of
Washington-chartered commercial banks, national banks and federally-chartered
savings banks, subject to the approval of the Director in certain situations.
Finally, the law provides additional flexibility for Washington-chartered
commercial and savings banks with respect to interest rates on loans and other
extensions of credit. Specifically, they may charge the maximum interest rate
allowable for loans and other extensions of credit by federally-chartered
financial institutions to Washington residents.

**Federal Home Loan Bank System.**  The FHLB of Seattle serves as a wholesale 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, 2003, EverTrust Bank held
stock in the FHLB of Seattle in the amount of $6.3 million and  had advances totaling $101.0 million, which mature in 2003
through 2020 at interest rates ranging from 2.8% to 8.2%.   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, 2003, EverTrust Bank's  deposit with the Federal Reserve Bank and vault cash exceeded its reserve requirements.

**Affiliate Transactions**.  The Company, EverTrust Bank 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.

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.

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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.

**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.

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

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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.

**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, 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, 2003, the Company had five employees and EverTrust Bank had 164 employees.  The employees are
not represented by a collective bargaining unit and management believes that the relationship with their employees is good.

**Item 2.  Properties**

At March 31, 2003 EverTrust and EverTrust Bank operate 13 full-service banking facilities, seven of which are
owned and six 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 and Kent, Washington.  The Bank also leases a facility in Seattle,

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Washington for its trust and wealth management operations and a loan production office in Tacoma, Washington.  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,
2003.

**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, 2003, there were 4,834,779 shares of common stock outstanding and approximately 1,942 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.

In January 2003, the Company announced that its Board of Directors had authorized an eighth stock repurchase plan
for the repurchase of up to 10% (approximately 490,000 shares) of the Company's outstanding common stock.  At March 31,
2003, the Company had repurchased 4.2 million 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,
2003 and 2002.  This information was provided by the Nasdaq National Market.

|Year |                | High    | Low     | Dividends
|---- | -------------- | ------- | ------- | ---------
|    
|2003 | First Quarter  | $19.160 | $17.500 | $0.115   
|     | Second Quarter | 20.490  | 16.550  | 0.115    
|     | Third Quarter  | 22.230  | 17.850  | 0.115    
|     | Fourth Quarter | 23.980  | 21.410  | 0.120    
|    
|2002 | First Quarter  | $15.100 | $14.450 | $0.100   
|     | Second Quarter | 15.650  | 11.600  | 0.105    
|     | Third Quarter  | 16.100  | 14.450  | 0.110    
|     | Fourth Quarter | 19.250  | 15.160  | 0.110    

36

<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,          
|-------------------------------------------------------------------------------------- | ----------------------
|                                                                                       | 2003                  
|                                                                                       | (In thousands)        
|FINANCIAL CONDITION DATA:                                                              |                       
|                                                                                       |                       
|Total assets                                                                           | $706,163              
|Investment securities                                                                  | 37,967                
|Loans receivable, net                                                                  | 600,200               
|Deposit accounts                                                                       | 508,269               
|Borrowings                                                                             | 100,984               
|Total equity                                                                           | 91,695                
|                                                                                      
|                                                                                       | Year Ended March 31,  
|                                                                                       | 2003                  
|                                                                                       | (In thousands)        
|OPERATING DATA:                                                                        |                       
|                                                                                       |                       
|Interest income                                                                        | $  45,936             
|Interest expense                                                                       | 19,283                
|Net interest income                                                                    | 26,653                
|Provision for loan losses                                                              | 390                   
|Net interest income after provision for
loan                                           |                       
|losses                                                                                 | 26,263                
|Other operating income                                                                 | 5,747                 
|Other operating expenses                                                               | 22,467                
|Income before income taxes                                                             | 9,543                 
|Provision for income taxes                                                             | 2,702                 
|Net income                                                                             | $ 6,841               
|                                                                                       |                       
|Net income per common share:                                                           |                       
|Basic                                                                                  | $   1.44              
|Diluted                                                                                | $   1.35              
|__________                                                                            
|(1) Earnings per share calculations are not meaningful as the Company converted from a
|mutual to a public company on September 30, 1999.                                     
|                                                                                       |                       
|                                                                                       |                       
|*(table continues on following page)**37*
  *<PAGE>*                                  
|                                                                                       |                       
|                                                                                       |                       
|                                                                                       | Year Ended March 31,  
|                                                                                       | 2003                  
|OTHER DATA:                                                                            | (Dollars in thousands)
|                                                                                       |                       
|Number of:                                                                             |                       
|Loans outstanding                                                                      | 4,250                 
|Deposit accounts                                                                       | 31,081                
|Full service banking offices                                                           | 13                    
|Dividends paid                                                                         | $   2,318             

|                                       | At or For           
|-------------------------------------- | --------------------
|                                       | Year Ended March 31,
|                                       | 2003                
|KEY FINANCIAL RATIOS:                  |                     
|                                       |                     
|*Performance Ratios*:                  |                     
|Return on assets(1)                    | 1.00%               
|Return on equity(2)(7)                 | 7.37                
|Equity-to-assets ratio(3)              | 13.53               
|Interest rate spread (4)               | 3.48                
|Net interest margin(5)                 | 3.97                
|Average interest-earning assets to     |                     
|average interest-bearing liabilities   | 117.08              
|Other operating expenses as a percent  |                     
|of average total assets                | 3.27                
|Efficiency ratio (6)(7)                | 69.12               
|Dividend payout ratio (8)              | 33.88               
|                                       |                     
|*Capital Ratios:*                      |                     
|Leverage                               | 12.80               
|Tier 1 risk-based                      | 14.80               
|Total risk-based                       | 16.10               
|                                       |                     
|*Asset Quality Ratios:*                |                     
|Nonaccrual and 90 days or more         |                     
|past due loans as a percent            |                     
|of total loans, net                    | 0.04                
|Nonperforming assets as a percent      |                     
|of total assets                        | 0.03                
|Allowance for losses as a percent      |                     
|of gross loans receivable              | 1.46                
|Allowance for loan losses as a percent |                     
|of nonperforming loans                 | 3,955.31            
|Net charge-offs to average             |                     
|outstanding loans                      | 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.                                                                                                                                                                        
|                                                  |                                                                                                                                                                                                                        
|*(footnotes continue on following page)*38
<PAGE>
|(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, 2000 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)                                               | Dividends paid as a percentage of net income.                                                                                                                                                                          

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.

**Critical Accounting Policies**

Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation
techniques, valuation assumptions and other subjective assessments.  In particular, management has identified several
accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an
understanding of the Company's financial statements.  These policies relate to the methodology for the determination of the
allowance for loan losses and the valuation of real estate owned.  These policies and the judgments, estimates and assumptions
are described in greater detail in subsequent sections of Management's Discussion and Analysis and in Note 1 of the Notes
to the Consolidated Financial Statements included herein.  Management believes that the judgments, estimates and assumptions
used in the preparation of the financial statements are appropriate given the factual circumstances at the time.  However, given
the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and
assumptions could result in material differences in the results of operations or financial condition.

**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

39

<PAGE>

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 financial holding company for EverTrust Bank, a Washington state chartered savings bank, and
Mutual Bancshares Capital, Inc., a Washington corporation, which holds venture capital investments via a limited partnership.

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 13 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 multi-family and commercial real estate loans, the
Bank focuses on  construction and land development loans, as well as one- to- four family 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 business loans
and consumer loans 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 former bank subsidiary, Commercial Bank of Everett, with and into
EverTrust Bank in February 2001, the Bank established a business and private banking group primarily focused on serving
the needs of the Bank's business banking clients with a high level of customer service. This group provides banking services
directly at the client's place of business, including lending and non-cash deposit activities, to the greatest extent possible. As
part of the Bank's internal referral system, business and private banking clients are seamlessly referred to appropriate staff
within the Bank that specialize in multi-family, commercial real estate and one-to-four family residential loans, as well as other
banking and investment products and services.  The business and private banking group generally targets business clients with
annual revenues between $1 million and $30 million, but will also consider relationships outside of this range.

The Bank significantly expanded its business banking group by opening a new business and private banking office
in Seattle, Washington in May 2002 and by increasing its business banking network throughout all of the Bank=s offices in
Snohomish County, Washington. See Item 1, "Business -- Lending Activities."  During the last quarter of fiscal 2003, the Bank
re-branded its business and private banking group as the private client group.  The private client group also includes EverTrust
Asset Management.

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 expand and diversify the consolidated operations of the
Company across a variety of companies and/or operating units 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 as opportunities arise, although there are no specific acquisitions
or new business formations planned at this time.

**Comparison of Financial Condition at March 31, 2003 and March 31, 2002**

Total assets increased 4.5% from $675.8 million at March 31, 2002 to $706.2 million at March 31, 2003, primarily
as a result of an increase in loans receivable, net, and cash and cash equivalents, partially offset by a decrease in the Company's
investment portfolio.

40

<PAGE>

Cash and cash equivalents increased 94.4% from $19.2 million at March 31, 2002 to $37.3 million at March 31, 2003,
primarily as a result of deposit growth and funds received from loan payoffs. The increase in cash will be used in the next
several months to purchase shorter-duration investments and to fund future growth in the loan portfolio.

Securities available for sale decreased 31.5% from $49.9 million at March 31, 2002 to $34.2 million at March 31,
2003. The decrease was due to sales and maturities, the proceeds of which will also be used to purchase shorter-duration
investments and to fund growth in the loan portfolio. The sale of corporate bonds, mortgage-backed securities and equity
securities was undertaken to improve the overall interest rate and credit risk of the portfolio.  The growth 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, increased 4.4% from $574.6 million at March 31, 2002 to $600.2 million at March 31, 2003,
primarily as a result of  commercial real estate permanent loans and one to four family construction and land development loans
which increased $54.2 million from March 31, 2002 to March 31, 2003. Business loans increased from $30.6 million at March
31, 2002 to $40.4 million at March 31, 2003, the result of increased market penetration and a growth in average loan amounts.
Total loans, before deducting undisbursed loan proceeds, deferred loan fees, and reserves for loan losses, increased 8.8% from
$658.8 million at March 31, 2002 to $717.0 million at March 31, 2003.

Loans held for sale on the secondary market were approximately $4.8 million at March 31, 2003 an increase of $4.1
million from $625,000 at March 31, 2002. The increase in loans held for sale is the result of the Bank's decision to sell $3.8
million of one to four family residential loans classified as jumbo loans for interest rate risk management purposes.

Premises and equipment, net, decreased approximately $1.1 million  from $10.2 million at March 31, 2002 to $9.1
million at March 31, 2003, as a result of depreciation expense associated with prior year purchases partially offset by additions.
For the years ended March 31, 2002 and 2003, depreciation expense was $1.5 million and $1.7 million, respectively. See Item
2, "Properties."

Total deposits of EverTrust increased by approximately $58.7 million, or 13.0%, from $449.6 million at March 31,
2002 to $508.3 million at March 31, 2003. The change is primarily the result of increases in time deposit accounts of $38.1
million from $241.4 million at March 31, 2002 to $279.5 million at March 31, 2003 and a $17.3 million increase in transaction
accounts from $65.5 million at March 31, 2002 to $82.8 million at March 31, 2003. The increase in deposits from March 31,
2002 to March 31, 2003 is generally attributable to EverTrust Bank's targeted deposit growth marketing, an increased emphasis
in attracting business deposits and an increased customer preference for FDIC insured deposits in the current volatile equities
market.

Federal Home Loan Bank advances and other borrowings decreased $28.3 million or 21.9% from $129.3 million at
March 31, 2002 to $101.0 million at March  31, 2003. The need for borrowings since March 31, 2002 has decreased due to
an increase in deposit balances and cash received from loan repayments.

Total equity decreased approximately $1.1 million at March 31, 2003 to $91.7 million compared to $92.8 million at
March 31, 2002. Earnings of  $6.8 million for the year ended March 31, 2003 were more than offset by the repurchase of
shares of the Company's common stock for $7.7 million and dividends paid of $2.3 million.

**Comparison of Operating Results for the Years Ended March 31, 2003 and 2002**

**Net Income.**Net income increased approximately $1.2 million from $5.6 million for the year ended March 31, 2002
to $6.8 million for the year ended March 31, 2003. The increase is due primarily to a $2.4 million increase in non-interest
income and a $2.1 million increase in net interest income after provision for loan losses, offset in part by a $3.1 million increase
in non-interest expenses due primarily to the addition of the client contact center, the new business and private banking office
located in Seattle, Washington, and the MB Cap investment write-down to market value.

41

<PAGE>

**Net Interest Income.** Net interest income before provision for loan losses increased 3.7% from $25.7 million for
the year ended March 31, 2002 to $26.7 million for the year ended March 31, 2003. The change is due primarily to the lower
cost of interest bearing liabilities.

Interest income decreased approximately $1.1 million from $47.0 million for the year ended March 31, 2002 to $45.9
million for the same period in 2003. During this same time period, the average balance of interest-earning assets increased from
$605.4 million for the year ended March 31, 2002 to $671.4 million for the year ended  March 31, 2003 resulting in an increase
of approximately $5.0 million in income. The yield on interest-earning assets decreased from 7.77% for the year ended March
31, 2002 to 6.84% for the same period in 2003 resulting in a decrease to income of $5.3 million. Increased balances were due
to increased loan volumes, which were funded by the proceeds received from sales and maturities of securities and increased
deposit.  The decrease in the yield on interest-earning assets is due primarily to the lower interest rate environment resulting
in the payoff of higher rate loans, downward interest rate adjustments on variable rate loans and new loans made at lower
market interest rates.

Interest expense decreased $2.1 million for the year ended March 31, 2003 compared to the same period in 2002.
The average balance of interest-bearing liabilities increased 17.6% or $85.7 million from $487.8 million at March 31, 2002
to $573.5 million for the year ended March 31, 2003 resulting in an increase of $3.8 million in expense. This increase was
offset by a $5.0 million decrease in expense as a result of a decrease in the rates on interest-bearing liabilities from 4.37% for
the year ended March 31, 2002 to 3.36% for the same period  in 2003. The reduction is due to market interest rate decreases.
The average balance of borrowings comprised 19.7% of interest-bearing liabilities for the year ended March 31, 2003 compared
to 19.1% for the same period in  2002.

**Provision for Loan Losses.** For the year ended March 31, 2003, the provision for loan losses was $390,000,
compared to $1.5 million for the same period in 2002, a decrease of $1.1 million. The decrease is attributable to management's
quarterly analysis of  loan reserve adequacy that indicated that only a slight dollar amount increase was necessary during the
year ended March 31, 2003. The allowance for loan losses increased $225,000 from $8.8 million at March 31, 2002 to $9.0
million at March 31, 2003. Net loan charge-offs for the year ended March 31, 2003 totaled $165,000 compared to $185,000
for the year earlier.

The allowance for loan losses as a percentage of net loans (loans receivable excluding allowance for losses) was
1.46% at March 31, 2003 compared to 1.50% at March 31, 2002.

**Non-interest Income.**Non-interest income increased $2.4 million to $5.7 million for the year ended March 31, 2003
compared to the same period in 2002. The large growth in non-interest income was primarily the result of brokered loan fees
from the Bank's commercial mortgage banking group, management fees from ETAM, loan modification fees and gain on loan
sales totaling $3.1 million for the year ended March 31, 2003 compared to $1.1 million for the year ended  March 31, 2002.
The increase from the prior period in ETAM management fees and brokered loan fees from the Company's commercial
mortgage banking group were due to increased assets under management and transaction volume. The units started operations
in May and June 2001, respectively.

Loan modification fees increased due to additional activity for the renewal and extension of loans and the re-negotiation of loan terms, some of which were triggered by the decline in market interest rates. Service fees and other non-interest income increased due to volume.  Gain on sale of loans increased $714,000 to $1.2 million for the year ended March
31, 2003 compared to $445,000 for the year ended  March 31, 2002. The large increase is due to the additional volume of one
to  four family loans generated by the decline in market interest rates.

42

<PAGE>

|                                  | Year Ended March 31,
|--------------------------------- | --------------------
|                                  | 2003                
|                                  | (In thousands)      
|                                  |                     
|Brokered loan fees                | $    716            
|ETAM management fees              | 586                 
|Loan modification fees            | 627                 
|Gain (loss) on sale of securities | (84)                
|Gain on sale of loans             | 1,159               
|Service fees and other, net       | 2,743               
|Total noninterest income          | $ 5,747             

**Non-interest Expense.**Non-interest expense increased $3.1 million from $19.4 million for the year ended March
31, 2002 to $22.5 million for the same period in 2003. The increase is due primarily to additional salary and employee benefits
of $1.4 million from $11.0 million for the year ended March 31, 2002 to $12.4 million for the year ended March 31, 2003.
Compensation expense increased as a result of higher staffing levels primarily due to the addition of the contact center and the
new business and private banking office located in Seattle, Washington.  Occupancy and equipment expenses increased
$178,000 from $2.9 million for the year ended March 31, 2002 to $3.1 million for the year ended March 31, 2003. The increase
is primarily due to expenses associated with the new Seattle office.

Other expenses increased $1.1 million from $4.4  million for the year ended March 31, 2002 to $5.5 million for the
same period in 2003. The increase is primarily the result of additional marketing and operating expenses associated with the
new Seattle office, the opening of the client contact center along with the MB Cap investment write-down of $414,000 to
market value.

**Provision for Income Taxes.** Federal income taxes increased $107,000 from $2.6 million for the year ended March
31, 2002 to $2.7 million for the year ended March 31, 2003. The change is due to increased taxable earnings offset in part by
a lower effective tax rate. The Company's benefit from low-income housing tax credits has expired, and as a result it is
anticipate that the tax rate for the year ended March 31, 2004 will be closer to the statutory rate.

**Comparison of Operating Results for the Years Ended March 31, 2002 and 2001**

**Net Income.**Net income increased from $5.4 million for the year ended March 31, 2001 to $5.6 million for the year
ended March 31, 2002.

**Net Interest Income**.  Net interest income increased $1.8 million from $22.4 million for the year ended March 31,
2001 to $24.2 million for the year ended March 31, 2002. The change was due primarily to higher average balances of interest-earning assets and lower cost of average interest-bearing liabilities.

Interest income increased $561,000 from $46.5 million for the year ended March 31, 2001 to $47.0 million for the
same period in 2002.  During this same period, the average balance of interest-earning assets increased from $562.1 million
for the twelve months ended March 30, 2001 to $605.4 million for the year ended March 31, 2002 resulting in increased
income of $4.4 million.  The yield on interest-earning assets decreased from 8.27% for the year ended March 31, 2001 to
7.77% for the same period in 2002 decreasing income $3.6 million.  Increased average balances are due primarily to the overall
growth of the loan portfolio.  This growth was funded by proceeds received from the public offering, loan sales and increased
borrowings.  The decrease in yields is due primarily to market interest rate decreases from period to period.

Interest expense decreased $1.7 million from $23.0 million for the year ended
March 31, 2001 to $21.3 million for the same period in 2002. The average balance
of interest-bearing liabilities increased $53.2 million from $434.6 million for
the year ended March 31, 2001 to $487.8 million for the same period in 2002.
This increase in volume resulted in higher interest expense from period to
period of $3.3 million. This increase was offset by a $4.4 million decrease in
the yield on

43

<PAGE>

interest-bearing liabilities from
5.3% for the year ended March 31, 2001 to 4.4% for the same period in 2002. The
decreased yield is due primarily to the lowering of rates paid on deposits in
line with the decline in market interest rates. The average balance of
borrowings comprised 19.1% of interest-bearing liabilities for the year ended
March 31, 2002 compared to 13.5% for the same period in 2001.

**Provision for Loan Losses**.  During the year ended March 31, 2002, the provision for loan losses was $1.5 million,
compared to $1.0 million for the same period in 2001, an increase of $500,000.  The increase resulted from continued loan
portfolio growth in the higher-risk lending categories of commercial and multifamily loans, business loans and credit card loans
during the period.  Net loan charge-offs for the year ended March 31, 2002 totaled $185,000 compared to $50,000 for the same
period in 2001. One to four family construction accounted for $116,000 of the increase.

The allowance for loan losses was $8.8 million, or 1.50% of total loans at March 31, 2002, compared to $7.4 million,
or 1.51% of total loans at March 31, 2001.

**Non-Interest Income**.  Non-interest income increased $711,000 from $2.6 million for the year ended March 31, 2001
to $3.3 million for the same period in 2002.  The change is due primarily to increased loan service fees.  For the year ended
March 31, 2002, the Company recognized loan service fees of $1.3 million compared to $742,000 of fees for the same period
in 2001.

**Non-Interest Expense**.  Non-interest expense increased $2.0 million from $17.4 million for the year ended March
31, 2001 to $19.4 million for the same period in 2002. The increase was due primarily to additional salary and employee
benefits for production and support related positions.  Compensation expense increased as a result of increased staffing levels
primarily due to the start up of ETAM, the commercial mortgage banking group in Tacoma, and the customer care center in
Everett, Washington. Occupancy and equipment expenses increased approximately $307,000 from $2.6 million for the year
months ended March 31, 2001 to $2.9 million for the year ended March 31, 2002. The increase is attributable to expenses
associated with the two new offices (ETAM, Tacoma) and the customer care center.  Other expenses decreased $56,000 to
$4.4 million for the year ended March 31, 2002 from $4.4 million for the same period in 2001.  The decrease was attributable
to a writedown of an investment made through Mutual Bancshares in 2001 partially offset by additional advertising and
marketing expenses associated with the ETAM opening in 2002.

**Provision for Income Taxes**.  Federal income expense increased $304,000 from $2.3 million for the year ended
March 31, 2001 to an expense of $2.6 million for the same period in 2002.  The change is due to increased taxable earnings
and the effective tax  rate.

**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.

44

<PAGE>

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.

|                                  | Year Ended March 31,  
|--------------------------------- | ----------------------
|                                  | 2003                  
|                                  |                       
|                                  | Average               
|                                  | Balance               
|                                  | (Dollars in thousands)
|Interest-earning assets:          |                       
|Loans receivable, net  (1)        | $598,963              
|Investment securities             | 45,608                
|Federal Home Loan Bank stock      | 6,085                 
|Cash and cash equivalents         | 20,723                
|Total interest-earning assets     | 671,379               
|                                  |                       
|Noninterest-earning assets        | 14,671                
|                                  |                       
|Total average assets              | $686,050              
|                                  |                       
|Interest-bearing liabilities:     |                       
|Savings accounts                  | $  11,721             
|Checking accounts                 | 58,088                
|Money market deposit accounts     | 129,717               
|Time deposits                     | 261,243               
|Total deposits                    | 460,769               
|Borrowings                        | 112,685               
|Total interest-bearing            |                       
|liabilities                       | 573,454               
|                                  |                       
|Noninterest-bearing liabilities   | 19,755                
|                                  |                       
|Total average liabilities         | 593,209               
|                                  |                       
|Average equity                    | 92,841                
|                                  |                       
|Total liabilities and equity      | $686,050              
|                                  |                       
|Net interest income               |                       
|Interest rate spread              |                       
|Net interest margin               |                       
|Ratio of average interest-earning |                       
|assets to average interest-       |                       
|bearing liabilities               |                       

|(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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

45

<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, 
|---------------------------------------------------- | --------------------- | ---------------------
|                                                     | 2003 Compared to Year | 2002 Compared to Year
|                                                     | Ended March 31, 2002  | Ended March 31, 2001 
|                                                     | Increase (Decrease)   | Increase (Decrease)  
|                                                     | Due to                | Due to               
|                                                     |                       |                      
|                                                     | Rate                  | Volume               
|                                                     | (In thousands)       
|Interest-earning assets:                            
|Loans receivable, net (1)                            | $ (5,000)             | $ 5,405              
|Investment securities                                | (174)                 | (943)                
|Federal Home Loan Bank stock                         | (22)                  | 83                   
|Interest-bearing deposits                            | (81)                  | 418                  
|                                                     |                      
|Total net change in income oninterest-earning assets | $ (5,277)             | $ 4,963              
|                                                     |                      
|Interest-bearing liabilities:                        |                      
|Savings accounts                                     | $    (100)            | $     21             
|Checking accounts                                    | (227)                 | 452                  
|Money market deposit accounts                        | (1,394)               | (4)                  
|Time deposits                                        | (2,906)               | 2,245                
|Total average deposits                               | (4,627)               | 2,714                
|Federal Home Loan Bank advances                      | (389)                 | 1,058                
|                                                     |                      
|Total net change in expense on                       |                      
|interest-bearing liabilities                         | $ (5,016)             | $ 3,772              
|                                                     |                      
|Net change in net interest                           |                      
|income                                               |                       |                      

|(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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

46

<PAGE>

**Yields Earned and Rates Paid**

The following table sets forth, on a consolidated basis, for the periods and at the dates 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   
|---------------------------------- | ------------ | ---------------
|                                   | At March 31, | Ended March 31,
|                                   | 2003         | 2003           
|Weighted average yield on         
|Loans receivable, net (1)          | 6.87%        | 7.15%          
|Investment securities              | 6.42         | 5.34           
|Federal Home Loan Bank stock       | 6.13         | 6.38           
|Cash and cash equivalents          | 1.14         | 1.51           
|Total interest-earning assets      | 6.61         | 6.84           
|                                   |             
|Weighted average rate paid on:     |             
|Savings accounts                   | 0.75         | 1.21           
|Checking accounts                  | 1.19         | 1.38           
|Money market deposit accounts      | 1.64         | 1.93           
|Time deposits                      | 3.55         | 3.88           
|Total average deposits             | 2.55         | 2.95           
|Federal Home Loan Bank advances    | 5.65         | 5.06           
|Total interest-bearing liabilities | 3.26         | 3.36           
|                                   |             
|Interest rate spread               | 3.35         | 3.48           
|                                   |             
|Net interest margin                | 3.84         | 3.97           

|(1) | Weighted average rate earned on loans does not include earnings from deferred loan fees at March 31, 2003.
Earnings from the amortization of loan fees was included in the weighted average rate calculations for the years
ended March 31, 2003, 2002 and 2001.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**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 brokerage fees, asset management fees, 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 competitive conditions, particularly
changes in market interest rates, government legislation and regulation and monetary and fiscal policies.

47

<PAGE>

The following table sets forth at March 31, 2003, 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 
|in Interest Rates (1)           | (next four quarters)
|                                |                     
|300 bp                          | (2.3)%              
|200                             | (2.7)               
|100                             | (1.9)               
|0                               | --                  
|(100)                           | 3.3                 

|(1) | Assumes an instantaneous uniform change in interest rates at all maturities.
|--- | ----------------------------------------------------------------------------

The assumptions used by management to evaluate the vulnerability of EverTrust'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's assets and liabilities and the estimated effects of changes in interest rates on
EverTrust'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's
loans and mortgage backed investment securities are the only assets or liabilities which are assumed to have prepayments 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's deposit mix.

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

48

<PAGE>

authorized to engage in limited hedging activities for its saleable loan pipeline.  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
utilizes 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, fed funds, brokered deposits and repurchase agreements.

Should the Company deem it necessary to engage in additional hedging activities, management would 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 commercial real estate loans as well as commercial
construction loans, business loans and  residential (including multi-family) mortgage loans.  During the years ended March
31, 2002 and 2003, the Company originated $298.6 and $435.6 million in total loans, respectively.

A secondary, but increasing activity of the Company  is the origination of business loans.  During the years ended
March 31, 2002 and 2003, the Company originated $28.8 million and $40.0 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.

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 2002 and 2003, EverTrust Bank used these sources of funds primarily to fund loan commitments
and to pay maturing savings certificates and deposit withdrawals.  At March 31, 2003, EverTrust Bank had loan commitments,
excluding loans in process, of $7.8 million.

At March 31, 2003, the Company had $359,000 of unrealized gains on securities classified as available for sale,
which represented one percent of the amortized cost basis, or $33.8 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, 2003, certificates of deposit amounted to $279.5 million, or 55.0%, of the Bank's total deposits,
including $181.6 million which were scheduled to mature by March 31, 2004. 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

49

<PAGE>

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**

****Recently Issued Accounting Standards**.  In April  2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 149, "*Amendment of Statement 133 on Derivative
Instruments and Hedging Activities.*"  SFAS No. 149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133.  The new guidance
amends SFAS No. 133 for decisions made as part of the Derivatives Implementation Group ("DIG") process that effectively
required amendments to SFAS No. 133, and decisions made in connection with other FASB projects dealing with financial
instruments and in connection with implementation issues raised in relation to the application of the definition of a derivative
and characteristics of a derivative that contains financing components. In addition, it clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash flows.  SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003.  The adoption of
SFAS No. 149 is not expected to have any impact on the Company's financial statements.

In January 2003, the FASB issued Financial Accounting Standards Board Interpretation ("FIN") No. 46,
*Consolidation of Certain Variable Interest Entities An Interpretation of ARB No. 51*, to clarify when an entity should
consolidate another entity known as a Variable Interest Entity ("VIE"), more commonly referred to as a special purpose entity
or SPE. A VIE is an entity in which equity investors do not have characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other
parties, and may include many types of SPEs. FIN No. 46 requires that an entity shall consolidate a VIE if that enterprise has
a variable interest that will absorb a majority of the VIE's expected losses if they occur, receive a majority of the VIE's expected
residual returns if they occur, or both. FIN No. 46 is effective for newly created VIEs beginning February 1, 2003, and for
existing VIEs as of the third quarter of 2003. The adoption of FIN No. 46 did not have a material effect on the Company's
financial statements.

In December 2002, the FASB issued SFAS No. 148, *Accounting for Stock-Based Compensation Transition and
Disclosure.* SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.
The provisions of SFAS No. 148 are effective for financial statements for fiscal years and interim periods ending after
December 15, 2002. The disclosure provisions of SFAS No. 148 have been adopted by the Company (see Note 1).  SFAS No.
148 did not require the Company to change to the fair value based method of accounting for stock-based compensation.

In November 2002, the FASB issued FIN No. 45, *Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,* which requires the guarantor to recognize as a liability
the fair value of the obligation at the inception of the guarantee. The disclosure requirements in FIN No. 45 are effective for
financial statements of interim or annual periods ending after December 15, 2002.  Management believes that the Company
has no material guarantees that are required to be disclosed in the financial statements.  The recognition provisions are to be
applied on a prospective basis to guarantees issued after December 31, 2002.  The adoption of the recognition provisions of
FIN No. 45 has not had a material impact on the Company's financial statements.

In October 2002, the FASB issued SFAS No. 147, *Acquisitions of Certain Financial Institutions.*SFAS No. 147
allows financial institutions meeting certain criteria to reclassify unidentifiable intangible asset balances to goodwill and cease
amortization. SFAS No. 147 is generally effective as of October 31, 2002. The adoption of SFAS No. 147 did not materially
impact the Company's financial statements .

In June 2002, the FASB issued SFAS No. 146, *Accounting for Costs Associated with Exit or Disposal Activities*.
SFAS No. 146 requires recording costs associated with exit or disposal activities when a liability has been incurred. Under

50

<PAGE>

previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before
an actual liability has been incurred. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002.
The adoption of SFAS No. 146 has not had a material effect on the Company's financial statements.

In April 2002, the FASB issued Statement No. 145, *Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Correction*s.  SFAS No.145 eliminates extraordinary accounting treatment for
reporting gain or loss on debt extinguishment and amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under changed conditions.  The provisions of SFAS No.
145 related to the rescission of SFAS No. 4 are effective for fiscal years beginning after May 15, 2002.  The provisions related
to SFAS No. 13 are effective for transactions occurring after May 15, 2002.  All other provisions are effective for financial
statements issued on or after May 15, 2002. The adoption of SFAS No. 145 did not materially impact the Company's financial
statements.

In October 2001, the FASB issued SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets*,
which supercedes SFAS No. 121, *Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of*.  SFAS No. 144 retains the fundamental provisions of SFAS No. 121 but sets forth new criteria for asset
classification and broadens the scope of qualifying discontinued operations.  SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. The Company adopted SFAS No. 144 on April 1, 2002.  The adoption of SFAS No. 144
did not have a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS No. 143, *Accounting for Asset Retirement Obligations*, which took effect
for fiscal years beginning after June 15, 2002.  SFAS No. 143 establishes the initial and subsequent accounting for legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and/or
normal operation of a long-lived asset.  The Company adopted SFAS No. 143 as of April 1, 2003.  The adoption of SFAS No.
143 is not expected to materially impact the Company's financial statements.

In July 2001, the FASB issued SFAS No. 141, *Accounting for Business Combinations*, and SFAS No. 142,
*Accounting for Goodwill and Other Intangible Assets*, which were effective for the Company on April 1, 2002.  SFAS No.
141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method.  Under
SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life but instead is subject to an
impairment assessment at least annually.  The Company has not engaged in any business combinations since the adoption of
SFAS No. 141 and does not currently have any goodwill.  The adoption of SFAS No. 141 and SFAS No. 142 have not had
any effect on the Company's financial statements.

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

**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.

51

<PAGE>

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

PageIndependent Auditors' Report
53Consolidated Statements of Financial Condition as of March 31, 2003 and 2002
54Consolidated Statements of Operations For the Years EndedMarch 31, 2003, 2002 and 2001
55Consolidated Statements of Comprehensive Income For theYears Ended March 31, 2003, 2002 and 2001
57Consolidated Statements of Changes in Stockholders' Equity For theYears Ended March 31, 2003, 2002 and 2001
58Consolidated Statements of Cash Flows For the Years EndedMarch 31, 2003, 2002 and 2001
59Notes to Consolidated Financial Statements
61

52

<PAGE>

INDEPENDENT AUDITORS' REPORTBoard 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, 2003 and 2002, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2003.  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, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/Deloitte & Touche LLP
Seattle, Washington
May 2, 200353
<PAGE>

EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 2003 AND 2002
(Amounts in thousands, except share amounts)

|                                                                                                          |            |  |           
|--------------------------------------------------------------------------------------------------------- | ---------- |  | ----------
|ASSETS                                                                                                    | 2003       |  | 2002      
|                                                                                                          |            |  |           
|ASSETS:                                                                                                   |            |  |           
|Cash and cash equivalents, including interest-bearing deposits  of $27,415 and $8,975                     | $   37,259 |  | $   19,166
|Securities available for sale, amortized cost of $33,807 and $49,336                                      | 34,167     |  | 49,903    
|Securities held to maturity, fair value of $3,999 and $5,126                                              | 3,800      |  | 4,955     
|Federal Home Loan Bank stock-at cost                                                                      | 6,334      |  | 5,946     
|Loans receivable, net of allowances of $8,979 and $8,754                                                  | 600,200    |  | 574,646   
|Loans held for sale, fair value of $4,813 and $634                                                        | 4,755      |  | 625       
|Accrued interest receivable                                                                               | 3,280      |  | 3,638     
|Premises and equipment-net                                                                                | 9,074      |  | 10,196    
|Other real estate owned                                                                                   |            |  | 524       
|Prepaid expenses and other assets                                                                         | 7,294      |  | 6,210     
|                                                                                                          |            |  |           
|TOTAL                                                                                                     | $ 706,163  |  | $ 675,809 
|                                                                                                          |            |  |           
|LIABILITIES AND EQUITY                                                                                    |            |  |           
|                                                                                                          |            |  |           
|LIABILITIES:                                                                                              |            |  |           
|Deposit accounts                                                                                          | $ 508,269  |  | $ 449,611 
|Federal Home Loan Bank advances and other borrowings                                                      | 100,984    |  | 129,338   
|Accounts payable and other liabilities                                                                    | 5,215      |  | 4,036     
|                                                                                                          |            |  |           
|Total liabilities                                                                                         | 614,468    |  | 582,985   
|                                                                                                          |            |  |           
|EQUITY:                                                                                                   |            |  |           
|Common stock, no par value-authorized, 49,000,000 shares;     outstanding, 4,834,779 and 5,170,569 shares | 30,613     |  | 37,390    
|Employee Stock Ownership Plan ("ESOP") debt                                                               | (396)      |  | (792)     
|Retained earnings                                                                                         | 62,542     |  | 58,019    
|Shares held in trust for stock-related compensation plans                                                 | (1,301)    |  | (2,167)   
|Accumulated other comprehensive income                                                                    | 237        |  | 374       
|                                                                                                          |            |  |           
|Total equity                                                                                              | 91,695     |  | 92,824    
|                                                                                                          |            |  |           
|TOTAL                                                                                                     | $ 706,163  |  | $ 675,809 
|                                                                                                          |            |  |           
|See notes to consolidated financial statements.                                                           |            |  |           

- 54 -

<PAGE>

---

EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands, except share amounts)

|                                                      |           |  |           |  |            
|----------------------------------------------------- | --------- |  | --------- |  | -----------
|                                                      | 2003      |  | 2002      |  | 2001       
|INTEREST INCOME:                                      |           |  |           |  |            
|Loans receivable                                      | $  42,798 |  | $  43,021 |  | $  40,173  
|Investment securities:                                |           |  |           |  |            
|Taxable interest income                               | 2,514     |  | 3,296     |  | 5,279      
|Tax-exempt interest income                            | 205       |  | 251       |  | 381        
|Dividend income                                       | 419       |  | 465       |  | 639        
|                                                      |           |  |           |  |            
|Total investment securities income                    | 3,138     |  | 4,012     |  | 6,299      
|                                                      |           |  |           |  |            
|Total interest income                                 | 45,936    |  | 47,033    |  | 46,472     
|                                                      |           |  |           |  |            
|INTEREST EXPENSE:                                     |           |  |           |  |            
|Deposit accounts                                      | 13,581    |  | 16,219    |  | 19,169     
|Federal Home Loan Bank advances and other borrowings  | 5,702     |  | 5,114     |  | 3,879      
|                                                      |           |  |           |  |            
|Total interest expense                                | 19,283    |  | 21,333    |  | 23,048     
|                                                      |           |  |           |  |            
|NET INTEREST INCOME BEFORE PROVISION  FOR LOAN LOSSES | 26,653    |  | 25,700    |  | 23,424     
|                                                      |           |  |           |  |            
|PROVISION FOR LOAN LOSSES                             | 390       |  | 1,500     |  | 1,005      
|                                                      |           |  |           |  |            
|NET INTEREST INCOME AFTER PROVISION  FOR LOAN LOSSES  | 26,263    |  | 24,200    |  | 22,419     
|                                                      |           |  |           |  |            
|NONINTEREST INCOME:                                   |           |  |           |  |            
|Loan service fees                                     | 2,401     |  | 1,257     |  | 742        
|Gain on sale of securities and loans                  | 1,075     |  | 471       |  | 431        
|Other                                                 | 2,271     |  | 1,615     |  | 1,459      
|                                                      |           |  |           |  |            
|Total noninterest income                              | 5,747     |  | 3,343     |  | 2,632      
|                                                      |           |  |           |  |            
|NONINTEREST EXPENSES:                                 |           |  |           |  |            
|Salaries and employee benefits                        | 12,406    |  | 10,965    |  | 9,391      
|Occupancy and equipment                               | 3,103     |  | 2,925     |  | 2,618      
|Information processing costs                          | 1,455     |  | 1,103     |  | 962        
|Other                                                 | 5,503     |  | 4,376     |  | 4,432      
|                                                      |           |  |           |  |            
|Total noninterest expenses                            | 22,467    |  | 19,369    |  | 17,403     
|                                                      |           |  |           |  |            
|EARNINGS BEFORE FEDERAL INCOME TAXES                  | 9,543     |  | 8,174     |  | 7,648      
|                                                      |           |  |           |  |            
|                                                      |           |  |           |  | (Continued)

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands, except share amounts)

|                                                |           |  |           |  |            
|----------------------------------------------- | --------- |  | --------- |  | -----------
|                                                | 2003      |  | 2002      |  | 2001       
|                                                |           |  |           |  |            
|EARNINGS BEFORE FEDERAL INCOME TAXES            | $9,543    |  | $8,174    |  | $7,648     
|                                                |           |  |           |  |            
|FEDERAL INCOME TAXES:                           |           |  |           |  |            
|Current                                         | 1,958     |  | 2,525     |  | 2,502      
|Deferred                                        | 744       |  | 70        |  | (211)      
|                                                |           |  |           |  |            
|Total federal income taxes                      | 2,702     |  | 2,595     |  | 2,291      
|                                                |           |  |           |  |            
|NET INCOME                                      | $6,841    |  | $5,579    |  | $5,357     
|                                                |           |  |           |  |            
|NET INCOME PER COMMON SHARE-Basic               | $1.44     |  | $0.97     |  | $0.70      
|                                                |           |  |           |  |            
|NET INCOME PER COMMON SHARE-Diluted             | $1.35     |  | $0.94     |  | $0.70      
|                                                |           |  |           |  |            
|WEIGHTED-AVERAGE SHARES OUTSTANDING-Basic       | 4,745,865 |  | 5,758,952 |  | 7,614,167  
|                                                |           |  |           |  |            
|WEIGHTED AVERAGE SHARES OUTSTANDING-Diluted     | 5,055,002 |  | 5,937,199 |  | 7,666,870  
|                                                |           |  |           |  |            
|See notes to consolidated financial statements. |           |  |           |  | (Concluded)

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands)

|                                                                                                                              |            |  |            |  |           
|----------------------------------------------------------------------------------------------------------------------------- | ---------- |  | ---------- |  | ----------
|                                                                                                                              | 2003       |  | 2002       |  | 2001      
|                                                                                                                              |            |  |            |  |           
|NET INCOME                                                                                                                    | $    6,841 |  | $    5,579 |  | $    5,357
|                                                                                                                              |            |  |            |  |           
|OTHER COMPREHENSIVE INCOME- Net of  income taxes:                                                                             |            |  |            |  |           
|Gross unrealized (loss) gain on securities:                                                                                   |            |  |            |  |           
|Unrealized holding (loss) gain during the period,    net of deferred income tax (benefit) expense of $(42),    $(2), and $809 | (82)       |  | (4)        |  | 1,556     
|Less adjustment for gains included in net income,    net of income tax benefit of $(29), $(9), and $(13)                      | (55)       |  | (17)       |  | (25)      
|                                                                                                                              |            |  |            |  |           
|Other comprehensive (loss) income                                                                                             | (137)      |  | (21)       |  | 1,531     
|                                                                                                                              |            |  |            |  |           
|COMPREHENSIVE INCOME                                                                                                          | $    6,704 |  | $    5,558 |  | $    6,888
|                                                                                                                              |            |  |            |  |           
|See notes to consolidated financial statements.                                                                               |            |  |            |  |           

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands, except share amounts)

|                                                                  |              |             |            |                                                  |                                     |            |          
|----------------------------------------------------------------- | ------------ | ----------- | ---------- | ------------------------------------------------ | ----------------------------------- | ---------- | ---------
|                                                                  | Common Stock | DebtRelated | Retained   | Shares Heldin Trust forStock-RelatedCompensation | AccumulatedOtherComprehensiveIncome |           
|                                                                  | Shares       | Amount      | to ESOP    | Earnings                                         | Plans                               | (Loss)     | Total    
|BALANCE-April 1, 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  
|                                                                  |              |             |            |                                                  |                                     |            |          
|Common stock repurchased                                          | (2,087,674)  | (31,701)    |            |                                                  |                                     |            | (31,701) 
|Repayment of ESOP debt                                            |              |             | 396        |                                                  |                                     |            | 396      
|ESOP activity-change in value of  shares committed to be released |              | 151         |            |                                                  |                                     |            | 151      
|Amortization of compensation  related to MRP                      |              |             |            |                                                  | 867                                 |            | 867      
|Net income                                                        |              |             |            | 5,579                                            |                                     |            | 5,579    
|Dividends paid                                                    |              |             |            | (2,593)                                          |                                     |            | (2,593)  
|Other comprehensive loss-net of  income taxes                     |              |             |            |                                                  |                                     | (21)       | (21)     
|                                                                  |              |             |            |                                                  |                                     |            |          
|BALANCE-March 31, 2002                                            | 5,170,569    | 37,390      | (792)      | 58,019                                           | (2,167)                             | 374        | 92,824   
|                                                                  |              |             |            |                                                  |                                     |            |          
|Common stock repurchased                                          | (375,493)    | (7,664)     |            |                                                  |                                     |            | (7,664)  
|Common stock options exercised                                    | 39,703       | 479         |            |                                                  |                                     |            | 479      
|Tax benefit from stock options exercised                          |              | 143         |            |                                                  |                                     |            | 143      
|Repayment of ESOP debt                                            |              |             | 396        |                                                  |                                     |            | 396      
|ESOP activity-change in value of  shares committed to be released |              | 265         |            |                                                  |                                     |            | 265      
|Amortization of compensation  related to MRP                      |              |             |            |                                                  | 866                                 |            | 866      
|Net income                                                        |              |             |            | 6,841                                            |                                     |            | 6,841    
|Dividends paid                                                    |              |             |            | (2,318)                                          |                                     |            | (2,318)  
|Other comprehensive loss-net of  income taxes                     |              |             |            |                                                  |                                     | (137)      | (137)    
|                                                                  |              |             |            |                                                  |                                     |            |          
|BALANCE-March 31, 2003                                            | 4,834,779    | $ 30,613    | $    (396) | $ 62,542                                         | $  (1,301)                          | $    237   | $ 91,695 
|                                                                  |              |             |            |                                                  |                                     |            |          
|See notes to consolidated financial statements.                   |              |             |            |                                                  |                                     |           

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS 
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands)

|                                                                                            |            |  |            |  |            
|------------------------------------------------------------------------------------------- | ---------- |  | ---------- |  | -----------
|                                                                                            | 2003       |  | 2002       |  | 2001       
|                                                                                            |            |  |            |  |            
|OPERATING ACTIVITIES:                                                                       |            |  |            |  |            
|Net income                                                                                  | $    6,841 |  | $    5,579 |  | $    5,357 
|Adjustments to reconcile net income to net cash  provided by operating activities:          |            |  |            |  |            
|Depreciation and amortization of premises    and equipment                                  | 1,726      |  | 1,521      |  | 1,116      
|Dividends on Federal Home Loan Bank stock and    accretion of investment security discounts | (607)      |  | (463)      |  | (505)      
|Loss (gain) on sale of premises and equipment and    real estate owned                      | (78)       |  | 29         |  |            
|Loss (gain) on impairment of    investment security                                         | 156        |  | (214)      |  | 214        
|Amortization of investment security premiums                                                | 103        |  | 105        |  | 172        
|Loss on limited partnership                                                                 | 631        |  | 107        |  | 108        
|Provision for losses on loans                                                               | 390        |  | 1,500      |  | 1,005      
|Amortization of deferred loan fees and costs                                                | (2,328)    |  | (1,734)    |  | (1,290)    
|Loan fees deferred                                                                          | 2,730      |  | 2,114      |  | 1,672      
|Proceeds from sale of loans                                                                 | 55,349     |  | 22,841     |  | 24,501     
|Loans originated for sale                                                                   | (59,479)   |  | (25,890)   |  | (24,529)   
|Deferred taxes                                                                              | 744        |  | 70         |  | (211)      
|Amortization of compensation related to MRP                                                 | 866        |  | 867        |  | 1,301      
|Changes in operating assets and liabilities:                                                |            |  |            |  |            
|Accrued interest receivable                                                                 | 358        |  | 209        |  | (194)      
|Prepaid expenses and other assets                                                           | (1,969)    |  | 219        |  | 580        
|Accounts payable and other liabilities                                                      | 1,179      |  | (234)      |  | (4)        
|                                                                                            |            |  |            |  |            
|Net cash provided by operating activities                                                   | 6,612      |  | 6,626      |  | 9,293      
|                                                                                            |            |  |            |  |            
|INVESTING ACTIVITIES:                                                                       |            |  |            |  |            
|Proceeds from maturities of securities available for sale                                   | 18,804     |  | 25,908     |  | 34,477     
|Proceeds from maturities of securities held to maturity                                     | 1,158      |  | 3,412      |  | 3,723      
|Proceeds from sale of securities available for sale                                         | 27,145     |  | 18,325     |  | 11,184     
|Purchases of securities available for sale                                                  | (30,464)   |  | (30,632)   |  | (10,841)   
|Purchases of Federal Home Loan Bank stock                                                   |            |  | (961)      |  | (75)       
|Loan principal payments                                                                     | 349,769    |  | 183,587    |  | 123,545    
|Loans originated or acquired                                                                | (376,115)  |  | (273,778)  |  | (192,784)  
|Proceeds from sales of reacquired assets and    real estate owned                           | 587        |  | 231        |  |            
|Investment in real estate owned                                                             |            |  | (674)      |  |            
|Investment in limited partnership                                                           | (419)      |  | (276)      |  | (277)      
|Net additions to premises and equipment                                                     | (589)      |  | (2,200)    |  | (2,520)    
|                                                                                            |            |  |            |  |            
|Net cash used in investing activities                                                       | (10,124)   |  | (77,058)   |  | (33,568)   
|                                                                                            |            |  |            |  |            
|BALANCE                                                                                     | (3,512)    |  | (70,432)   |  | (24,275)   
|                                                                                            |            |  |            |  |            
|                                                                                            |            |  |            |  | (Continued)

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS 
YEARS ENDED MARCH 31, 2003, 2002, AND 2001
(Amounts in thousands)

|                                                                                  |                |  |               |  |               
|--------------------------------------------------------------------------------- | -------------- |  | ------------- |  | --------------
|                                                                                  | 2003           |  | 2002          |  | 2001          
|                                                                                  |                |  |               |  |               
|BALANCE                                                                           | $      (3,512) |  | $    (70,432) |  | $    (24,275) 
|                                                                                  |                |  |               |  |               
|FINANCING ACTIVITIES:                                                             |                |  |               |  |               
|Net increase in deposit accounts                                                  | 58,658         |  | 51,968        |  | 14,657        
|Repurchase shares of common stock                                                 | (7,399)        |  | (31,550)      |  | (19,373)      
|Proceeds from stock options exercised                                             | 479            |  |               |  |               
|Tax benefit from stock options exercised                                          | 143            |  |               |  |               
|Dividends paid on common stock                                                    | (2,318)        |  | (2,593)       |  | (2,595)       
|Repayment of loan to ESOP                                                         | 396            |  | 396           |  | 396           
|Proceeds from other borrowings                                                    |                |  | 4,350         |  | 22,502        
|Repayment of other borrowings                                                     | (12,050)       |  | (5,352)       |  | (12,950)      
|Proceeds from Federal Home Loan Bank advances                                     | 43,800         |  | 128,030       |  | 173,107       
|Repayments of Federal Home Loan Bank advances                                     | (60,104)       |  | (78,034)      |  | (136,738)     
|                                                                                  |                |  |               |  |               
|Net cash provided by financing activities                                         | 21,605         |  | 67,215        |  | 39,006        
|                                                                                  |                |  |               |  |               
|NET INCREASE (DECREASE) IN CASH AND   CASH EQUIVALENTS                            | 18,093         |  | (3,217)       |  | 14,731        
|                                                                                  |                |  |               |  |               
|CASH AND CASH EQUIVALENTS:                                                        |                |  |               |  |               
|Beginning of year                                                                 | 19,166         |  | 22,383        |  | 7,652         
|                                                                                  |                |  |               |  |               
|End of year                                                                       | $    37,259    |  | $    19,166   |  | $    22,383   
|                                                                                  |                |  |               |  |               
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION-Cash paid during the year for: |                |  |               |  |               
|Interest on deposits                                                              | $    13,655    |  | $    16,378   |  | $    19,027   
|                                                                                  |                |  |               |  |               
|Federal income taxes                                                              | $      2,355   |  | $      2,165  |  | $      2,690  
|                                                                                  |                |  |               |  |               
|Interest on borrowings                                                            | $      5,740   |  | $      4,910  |  | $      3,699  
|                                                                                  |                |  |               |  |               
|SUPPLEMENTAL DISCLOSURES OF NONCASH  INVESTING AND FINANCING ACTIVITIES-          |                |  |               |  |               
|Real estate acquired through foreclosure                                          | $           -  |  | $         674 |  | $           85
|                                                                                  |                |  |               |  |               
|See notes to consolidated financial statements.                                   |                |  |               |  | (Concluded)   

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Principles of Consolidation and Basis of PresentationThe consolidated financial statements include EverTrust Financial Group, Inc. and subsidiaries (the "Company"). The Company's subsidiaries are Mutual Bancshares Capital ("MB Cap"), EverTrust Bank (the "Bank"), and the Bank's wholly owned subsidiaries, Sound Financial, Inc. and EverTrust Asset Management ("ETAM").  ETAM was formed as a Washington-chartered trust company in March 2001 and capitalized on May 1, 2001.  ETAM exercises personal trust powers, with a primary emphasis on investment management.  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 the Bank.  Effective July 1, 2001, the Company integrated its item processing subsidiary, I-Pro, Inc. ("I-Pro"), into the operations of its principal subsidiary, EverTrust Bank.  All significant intercompany transactions and balances have been eliminated. Nature of Business The Company is subject to regulation by the Federal Reserve Board ("FRB") and the Federal Deposit Insurance Corporation ("FDIC"). The stock is traded on the NASDAQ stock market under the trading symbol of EVRT.  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 two offices 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 the Bank.  The Company also is engaged in providing loans to customers, which are predominately local businesses and individuals, through its commercial banking group offices in Seattle and Everett.  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 $961,000 and $1,331,000 at March 31, 2003 and 2002, respectively.Investment Securities

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | 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. Unrealized losses resulting from market valuation differences deemed other than temporary are included in earnings.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|b. | 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                                                                                                                                            

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| | and ability to hold such investments to maturity.  No held-to-maturity securities were deemed to have losses resulting from market valuation differences deemed other than temporary.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 charge-offs, 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 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 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 that 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

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losses over the upcoming 12 months based on the annual rate of charge-offs experienced both by the Company and industry-wide over the previous three years on similar loans, adjusted for current trends. 

Specific allowances are established in cases in which 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, if any, 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.  Such amounts are not material at March 31, 2003 and 2002.

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") 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.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 earns low income housing tax credits on these real estate partnerships, which reduce the Company's federal income tax provision and liability. These credits expired as of March 31, 2003, and the recorded value at that date is $-0-.

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Other AssetsThrough its subsidiary, MB Cap, the Company provides equity to high technology businesses in the seed, start-up, and early stages of development via its investment in Bancshares Capital L.P. (the "Fund").  In January 2003, the Company announced that it had reached a tentative agreement to shift the day-to-day operations of the Fund to a local venture capital firm. As a result of the agreement, the sole activity of MB Cap will be to hold its limited partnership investment and a non-managing interest in the General Partner of the Fund. The Fund will be managed by the former employees of MB Cap along with an additional venture capitalist. The agreement has been approved by the limited partners of the Fund and is subject to approval by regulatory authorities.  The investment in the Fund is recorded at fair value using the equity method, based on the percentage of ownership held in the Fund.  Such amounts were $1,196,464 and $1,361,000 at March 31, 2003 and 2002, respectively.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, computers, fixtures, and automobiles | 3 - 15 years    

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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 and incentive stock options to certain employees and directors of the Company, totalling 698,566 shares of the capital stock of the Company.  The Company implemented the Plan to promote the best interests of the Company 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 makes 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.

The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, 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 Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company's net income attributable to common stock would have been reduced by $307,000 for 2003, $289,000  for 2002, and 255,000  for 2001.  Net income per share for both basic and diluted would have decreased by $.06 in 2003, $.05 in 2002, and $.03 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:

|                        | 2003            | 2002            | 2001  
|----------------------- | --------------- | --------------- | ------
|Annual dividend yield   | 2.35 to 2.51%   | 2.82 to 2.99%   | 2.64% 
|Expected volatility     | 17.12 to 17.53% | 17.56 to 18.07% | 17.34%
|Risk-free interest rate | 3.61 to 5.05%   | 4.82 to 5.27%   | 6.07% 
|Expected lives          | 7 yrs           | 7 yrs           | 7 yrs 

Had compensation cost for the 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):

|                            |         |         |        
|--------------------------- | ------- | ------- | -------
|                            | 2003    | 2002    | 2001   
|                            |         |         |        
|Net income:                 |         |         |        
|As reported                 | $ 6,841 | $ 5,579 | $ 5,357
|Pro forma                   | 6,534   | 5,290   | 5,102  
|                            |         |         |        
|Basic earnings per share:   |         |         |        
|As reported                 | 1.44    | 0.97    | 0.70   
|Pro forma                   | 1.38    | 0.92    | 0.67   
|                            |         |         |        
|Diluted earnings per share: |         |         |        
|As reported                 | 1.35    | 0.94    | 0.70   
|Pro forma                   | 1.29    | 0.89    | 0.67   

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

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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 and deferred tax assets and liabilities.Recently Issued Accounting StandardsIn April  2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.  SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133.  The new guidance amends SFAS No. 133 for decisions made as part of the Derivatives Implementation Group ("DIG") process that effectively required amendments to SFAS No. 133, and decisions made in connection with other FASB projects dealing with financial instruments and in connection with implementation issues raised in relation to the application of the definition of a derivative and characteristics of a derivative that contains financing components. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows.  SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003.  The adoption of SFAS No. 149 is not expected to have any impact on the Company's financial statements.

In January 2003, the FASB issued Financial Accounting Standards Board Interpretation ("FIN") No. 46, Consolidation of Certain Variable Interest Entities An Interpretation of ARB No. 51, to clarify when an entity should consolidate another entity known as a Variable Interest Entity ("VIE"), more commonly referred to as a special purpose entity or SPE. A VIE is an entity in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties, and may include many types of SPEs. FIN No. 46 requires that an entity shall consolidate a VIE if that enterprise has a variable interest that will absorb a majority of the VIE's expected losses if they occur, receive a majority of the VIE's expected residual returns if they occur, or both. FIN No. 46 is effective for newly created VIEs beginning February 1, 2003, and for existing VIEs as of the third quarter of 2003. The adoption of FIN No. 46 did not have a material effect on the Company's financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure. SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The provisions of SFAS No. 148 are effective for financial statements for fiscal years and interim periods ending after December 15, 2002. The disclosure provisions of SFAS No. 148 have been adopted by the Company (see Note 1).  SFAS No. 148 did not require the Company to change to the fair value-based method of accounting for stock-based compensation.

In November 2002, the FASB issued FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which requires the guarantor to recognize as a liability the fair value of the obligation at the inception of the guarantee. The disclosure requirements in FIN No. 45 are effective for financial statements of interim or annual periods ending after December 15, 2002.  Management believes that the Company has no material guarantees that are required to be disclosed in the financial statements.  The recognition provisions are to be applied on a prospective basis to guarantees issued after December 31, 2002.  The adoption of the recognition provisions of FIN No. 45 has not had a material impact on the Company's financial statements.

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In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions.SFAS No. 147 allows financial institutions meeting certain criteria to reclassify unidentifiable intangible asset balances to goodwill and cease amortization. SFAS No. 147 is generally effective as of October 31, 2002. The adoption of SFAS No. 147 did not materially impact the Company's financial statements .

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS No. 146 requires recording costs associated with exit or disposal activities when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 has not had a material effect on the Company's financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.  SFAS No.145 eliminates extraordinary accounting treatment for reporting gain or loss on debt extinguishment and amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions.  The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective for fiscal years beginning after May 15, 2002.  The provisions related to SFAS No. 13 are effective for transactions occurring after May 15, 2002.  All other provisions are effective for financial statements issued on or after May 15, 2002. The adoption of SFAS No. 145 did not materially impact the Company's financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.  SFAS No. 144 retains the fundamental provisions of SFAS No. 121 but sets forth new criteria for asset classification and broadens the scope of qualifying discontinued operations.  SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 on April 1, 2002.  The adoption of SFAS No. 144 did not have a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which took effect for fiscal years beginning after June 15, 2002.  SFAS No. 143 establishes the initial and subsequent accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and/or normal operation of a long-lived asset.  The Company adopted SFAS No. 143 as of April 1, 2003.  The adoption of SFAS No. 143 is not expected to materially impact the Company's financial statements.

In July 2001, the FASB issued SFAS No. 141, Accounting for Business Combinations, and SFAS No. 142, Accounting for Goodwill and Other Intangible Assets, which were effective for the Company on April 1, 2002.  SFAS No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method.  Under SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life but instead is subject to an impairment assessment at least annually.  The Company has not engaged in any business combinations since the adoption of SFAS No. 141 and does not currently have any goodwill.  The adoption of SFAS No. 141 and SFAS No. 142 have not had any effect on the Company's financial statements.ReclassificationsCertain reclassifications have been made in the 2002 and 2001 consolidated financial statements to conform with the classifications used in 2003.

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2.   SECURITIES AVAILABLE FOR SALE

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

|                                       |               |                      |                       |           
|-------------------------------------- | ------------- | -------------------- | --------------------- | ----------
|                                       | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | Fair Value
|                                       |               |                      |                       |           
|2003:                                  |               |                      |                       |           
|Debt securities:                       |               |                      |                       |           
|U.S. government agency securities due: |               |                      |                       |           
|Within one year                        | $  1,984      | $    50              | $       -             | $  2,034  
|After one year through five years      | 13,262        | 183                  |                       | 13,445    
|                                       | 15,246        | 233                  |                       | 15,479    
|                                       |               |                      |                       |           
|Municipal obligations due:             |               |                      |                       |           
|Within one year                        | 415           | 7                    |                       | 422       
|After one year through five years      | 610           | 29                   |                       | 639       
|After 10 years                         | 1,321         |                      |                       | 1,321     
|                                       |               |                      |                       |           
|                                       | 2,346         | 36                   |                       | 2,382     
|                                       |               |                      |                       |           
|Obligations of corporations due:       |               |                      |                       |           
|Within one year                        | 500           | 1                    |                       | 501       
|                                       |               |                      |                       |           
|                                       | 500           | 1                    |                       | 501       
|                                       |               |                      |                       |           
|Mortgage-backed securities due:        |               |                      |                       |           
|After one year through five years      | 4,011         | 109                  |                       | 4,120     
|After five years through 10 years      | 2,706         | 91                   |                       | 2,797     
|After 10 years                         | 7,356         | 262                  |                       | 7,618     
|                                       | 14,073        | 462                  |                       | 14,535    
|                                       |               |                      |                       |           
|Equity securities:                     |               |                      |                       |           
|Mutual funds                           | 616           |                      |                       | 616       
|Other stock                            | 1,026         |                      | (372)                 | 654       
|                                       | 1,642         |                      | (372)                 | 1,270     
|                                       | $  33,807     | $    732             | $    (372)            | $  34,167 

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|                                       |               |                      |                       |            
|-------------------------------------- | ------------- | -------------------- | --------------------- | -----------
|                                       | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | Fair Value 
|                                       |               |                      |                       |            
|2002:                                  |               |                      |                       |            
|Debt securities:                       |               |                      |                       |            
|U.S. government agency securities due: |               |                      |                       |            
|Within one year                        | $      472    | $        29          | $       (18)          | $      483 
|After one year through five years      | 3,954         | 78                   |                       | 4,032      
|                                       | 4,426         | 107                  | (18)                  | 4,515      
|                                       |               |                      |                       |            
|Municipal obligations due:             |               |                      |                       |            
|Within one year                        | 913           | 12                   |                       | 925        
|After one year through five years      | 1,582         | 21                   |                       | 1,603      
|After 10 years                         | 1,401         |                      |                       | 1,401      
|                                       | 3,896         | 33                   |                       | 3,929      
|                                       |               |                      |                       |            
|Obligations of corporations due:       |               |                      |                       |            
|Within one year                        | 4,016         | 62                   |                       | 4,078      
|After one year through five years      | 4,847         | 118                  |                       | 4,965      
|After 10 years                         | 500           |                      | (6)                   | 494        
|                                       | 9,363         | 180                  | (6)                   | 9,537      
|                                       |               |                      |                       |            
|Mortgage-backed securities due:        |               |                      |                       |            
|After one year through five years      | 8,257         | 194                  |                       | 8,451      
|After five years through 10 years      | 2,706         | 63                   | (2)                   | 2,767      
|After 10 years                         | 17,384        | 260                  | (94)                  | 17,550     
|                                       | 28,347        | 517                  | (96)                  | 28,768     
|                                       |               |                      |                       |            
|Equity securities:                     |               |                      |                       |            
|Mutual funds                           | 1,148         |                      |                       | 1,148      
|Other stock                            | 2,156         | 14                   | (164)                 | 2,006      
|                                       | 3,304         | 14                   | (164)                 | 3,154      
|                                       | $    49,336   | $      851           | $      (284)          | $    49,903

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 $480,072, $153,831, and $252,801 for the years ended March 31, 2003, 2002, and 2001, respectively.  Gross realized losses on the sale of securities available for sale were $564,139, $128,006, and $214,375 for the years ended March 31, 2003, 2002, and 2001, 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.

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3.   SECURITIES HELD TO MATURITY

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

|                                       |               |                      |                       |             
|-------------------------------------- | ------------- | -------------------- | --------------------- | ------------
|                                       | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | Fair Value  
|                                       |               |                      |                       |             
|2003:                                  |               |                      |                       |             
|Debt securities:                       |               |                      |                       |             
|U.S. government agency securities due: |               |                      |                       |             
|After one year through five years      | $      1,002  | $        109         | $        -            | $      1,111
|                                       | 1,002         | 109                  |                       | 1,111       
|                                       |               |                      |                       |             
|Municipal obligations due:             |               |                      |                       |             
|Within one year                        | 280           | 3                    |                       | 283         
|After one year through five years      | 1,030         | 43                   |                       | 1,073       
|After five years                       | 1,092         | 17                   |                       | 1,109       
|                                       | 2,402         | 63                   |                       | 2,465       
|                                       |               |                      |                       |             
|Mortgage-backed securities due:        |               |                      |                       |             
|After 10 years                         | 396           | 27                   |                       | 423         
|                                       | 396           | 27                   |                       | 423         
|                                       | $      3,800  | $      199           | $        -            | $      3,999

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|                                       |               |                      |                       |             
|-------------------------------------- | ------------- | -------------------- | --------------------- | ------------
|                                       | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | Fair Value  
|                                       |               |                      |                       |             
|2002:                                  |               |                      |                       |             
|Debt securities:                       |               |                      |                       |             
|U.S. government agency securities due: |               |                      |                       |             
|After one year through five years      | $      1,003  | $        77          | $        -            | $      1,080
|                                       | 1,003         | 77                   |                       | 1,080       
|                                       |               |                      |                       |             
|Municipal obligations due:             |               |                      |                       |             
|Within one year                        | 445           | 5                    |                       | 450         
|After one year through five years      | 1,311         | 35                   |                       | 1,346       
|After five through 10 years            | 100           | 3                    |                       | 103         
|After 10 years                         | 992           | 11                   |                       | 1,003       
|                                       | 2,848         | 54                   |                       | 2,902       
|                                       |               |                      |                       |             
|Obligations of corporations due:       |               |                      |                       |             
|Within one year                        | 498           | 10                   |                       | 508         
|                                       | 498           | 10                   |                       | 508         
|                                       |               |                      |                       |             
|Mortgage-backed securities due:        |               |                      |                       |             
|After 10 years                         | 606           | 30                   |                       | 636         
|                                       |               |                      |                       |             
|                                       | 606           | 30                   |                       | 636         
|                                       |               |                      |                       |             
|                                       | $      4,955  | $        171         | $        -            | $      5,126

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 $3,200,000 and $2,835,000 and a market value of $3,286,497 and $2,870,616 were pledged to secure public deposits at March 31, 2003 and 2002, 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.

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4.   LOANS RECEIVABLE

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

|                                                     |              |  |             
|---------------------------------------------------- | ------------ |  | ------------
|                                                     | 2003         |  | 2002        
|                                                     |              |  |             
|Commercial construction                              | $    33,577  |  | $    17,104 
|Commercial real estate                               | 264,313      |  | 229,839     
|Multifamily construction                             | 8,325        |  | 38,338      
|Multifamily residential                              | 158,554      |  | 157,327     
|Business loans                                       | 40,407       |  | 30,602      
|One to four family construction and land development | 57,601       |  | 37,857      
|Consumer:                                            |              |  |             
|Home equity and second mortgages                     | 23,006       |  | 20,646      
|Credit cards                                         | 712          |  | 708         
|Other installment loans                              | 3,263        |  | 3,326       
|One to four family residential                       | 23,968       |  | 51,798      
|                                                     |              |  |             
|                                                     | 613,726      |  | 587,545     
|Less:                                                |              |  |             
|Deferred loan fees and other                         | (4,547)      |  | (4,145)     
|Reserve for loan losses                              | (8,979)      |  | (8,754)     
|                                                     |              |  |             
|                                                     | (13,526)     |  | (12,899)    
|                                                     |              |  |             
|Loans receivable - net                               | $  600,200   |  | $  574,646  
|                                                     |              |  |             
|Loans held for sale                                  | $      4,755 |  | $        625

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.  

The Bank originates both adjustable and fixed interest rate loans.  At March 31, 2003, the composition of the loan portfolio was as follows (in thousands):

|                                     |             |                |           
|------------------------------------ | ----------- | -------------- | ----------
|Term to Maturity or Rate Adjustment  | FixedRate   | AdjustableRate | Total     
|                                     |             |                |           
|Due within one year                  | $    16,276 | $  315,666     | $  331,942
|After one year through three years   | 11,195      | 152,133        | 163,328   
|After three years through five years | 29,208      | 52,379         | 81,587    
|After five years through 15 years    | 23,601      | 4,381          | 27,982    
|After 15 years                       | 8,879       | 8              | 8,887     
|                                     | $    89,159 | $  524,567     | $  613,726

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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 totalled $7,767,000 and $10,068,000 at March 31, 2003 and 2002, respectively.

The Bank serviced loans for others totalling $225,424,589 and $177,887,134 as of March 31, 2003 and 2002, respectively.

5.   ALLOWANCE FOR LOAN LOSSES

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

|                                                           |              |              |             
|---------------------------------------------------------- | ------------ | ------------ | ------------
|                                                           | 2003         | 2002         | 2001        
|                                                           |              |              |             
|Balance, beginning of year                                 | $      8,754 | $      7,439 | $      6,484
|Provision for loan losses                                  | 390          | 1,500        | 1,005       
|Loans charged off, net of recoveries of $-0-, $40, and $20 | (165)        | (185)        | (50)        
|                                                           |              |              |             
|Balance, end of year                                       | $      8,979 | $      8,754 | $      7,439

The average balance of impaired loans during 2003, 2002, and 2001 was $58,000, $952,000, and $2,926,000, respectively, and the Company recognized $2,800, $164,000, and $421,000 of related interest income during 2003, 2002, and 2001, 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.

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

|                                 |  |           |          
|-------------------------------- |  | --------- | ---------
|                                 |  | 2003      | 2002     
|                                 |  |           |          
|Loans with allocated reserves    |  | $      -  | $      - 
|Loans without allocated reserves |  | 24        | 17       
|                                 |  |           |          
|                                 |  | $      24 | $      17
|                                 |  |           |          
|Loans on nonaccrual status       |  | $      24 | $      17

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6.   PREMISES AND EQUIPMENT

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

|                                               |  |                |               
|---------------------------------------------- |  | -------------- | --------------
|                                               |  | 2003           | 2002          
|                                               |  |                |               
|Land                                           |  | $        1,491 | $        1,491
|Buildings (including leasehold improvements)   |  | 7,510          | 7,518         
|Furniture, fixtures, and automobiles           |  | 10,357         | 10,259        
|                                               |  |                |               
|                                               |  | 19,358         | 19,268        
|Less accumulated depreciation and amortization |  | (10,284)       | (9,072)       
|                                               |  |                |               
|                                               |  | $      9,074   | $      10,196 

7.   DEPOSIT ACCOUNTS

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

|                                |                       |             |         |                       |             |        
|------------------------------- | --------------------- | ----------- | ------- | --------------------- | ----------- | -------
|                                | 2003                  | 2002       
|                                | Weighted-Average Rate | Amount      | %       | Weighted-Average Rate | Amount      | %      
|Noninterest-bearing accounts    | -   %                 | $    18,398 | 3.6 %   | -   %                 | $    14,813 | 3.3 %  
|                                |                       |             |         |                       |             |        
|Savings accounts                | 0.8                   | 12,426      | 2.4     | 1.5                   | 11,753      | 2.6    
|Checking accounts               | 1.2                   | 64,358      | 12.7    | 1.5                   | 50,713      | 11.3   
|Money market accounts           | 1.6                   | 133,586     | 26.3    | 2.2                   | 130,912     | 29.1   
|Time deposits by original term: |                       |             |         |                       |             |        
|One to 11 months                | 2.2                   | 51,334      | 10.1    | 2.8                   | 71,346      | 15.9   
|12 to 23 months                 | 2.7                   | 118,362     | 23.3    | 3.7                   | 75,788      | 16.9   
|24 to 35 months                 | 3.7                   | 24,842      | 4.9     | 5.2                   | 21,106      | 4.7    
|36 to 59 months                 | 4.9                   | 22,292      | 4.4     | 5.5                   | 19,031      | 4.2    
|60 months and beyond            | 5.7                   | 62,671      | 12.3    | 6.2                   | 54,149      | 12.0   
|                                |                       |             |         |                       |             |        
|                                | 3.6                   | 279,501     | 55.0    | 4.3                   | 241,420     | 53.7   
|                                |                       |             |         |                       |             |        
|                                | 2.6 %                 | $  508,269  | 100.0 % | 3.1 %                 | $  449,611  | 100.0 %

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

|                     |               
|-------------------- | --------------
|Year ending March 31 |               
|2004                 | $      181,648
|2005                 | 50,817        
|2006                 | 14,084        
|2007                 | 6,953         
|2008                 | 19,167        
|Thereafter           | 6,832         
|                     |               
|                     | $      279,501

Included in deposits are time deposits greater than or equal to $100,000 of $94,498,000 and $82,371,000 at March 31, 2003 and 2002, respectively.  Interest on time deposits greater than or equal to $100,000 totalled $3,308,000, $2,732,000, and $2,576,000 for the years ended March 31, 2003, 2002, and 2001, respectively.

8.   FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

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

|                                     |               |                     |               |                    
|------------------------------------ | ------------- | ------------------- | ------------- | -------------------
|                                     | 2003          | 2002               
|                                     |               |                     |               |                    
|                                     | Amount        | Interest RateRanges | Amount        | Interest RateRanges
|                                     |               |                     |               |                    
|Nonamortizing:                       |               |                     |               |                    
|Due within one year                  | $      19,400 | 2.83-7.26%          | $      34,800 | 1.90 - 6.92%       
|After one year through two years     | 18,750        | 3.22-6.32           | 19,400        | 2.83 - 7.26        
|After two years through three years  | 17,900        | 4.01-7.27           | 17,750        | 3.47 - 6.32        
|After three years through five years | 26,700        | 4.34-7.39           | 32,250        | 4.03 - 7.27        
|After five years through 10 years    | 15,300        | 5.09-6.75           | 21,150        | 4.80 - 7.39        
|After 10 years                       | 2,300         | 6.38-6.93           | 3,300         | 6.18 - 6.93        
|Amortizing:                          |               |                     |               |                    
|After 10 years                       | 634           | 8.19                | 688           | 8.19               
|                                     |               |                     |               |                    
|                                     | $    100,984  |                     | $    129,338  |                    

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

At March 31, 2003 and 2002, the Bank had available unsecured lines of credit with commercial banks totalling $47,000,000, and $42,000,000, respectively, and a revolving line of credit with the FHLB of up to 35% of total assets.  There were no advances outstanding as of March 31, 2003 or 2002, on the lines of credit with the commercial banks.

At March 31, 2003, the Bank had no outstanding repurchase agreements with securities dealers. At March 31, 2002, the Bank had outstanding a repurchase agreement, reported within Federal Home Loan

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Bank advances and other borrowings, with a securities dealer in the amount of $12,050,000, maturing April 2002.

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.  

Retained earnings at March 31, 2003 and 2002, 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 (in thousands):

|                                     |              |              |             
|------------------------------------ | ------------ | ------------ | ------------
|                                     | 2003         | 2002         | 2001        
|                                     |              |              |             
|Income tax expense at statutory rate | $      3,340 | $      2,861 | $      2,677
|Income tax effect of:                |              |              |             
|Tax-exempt interest                  | (98)         | (107)        | (103)       
|Low income housing tax credit        | (217)        | (217)        | (216)       
|Valuation allowance                  | 257          | 140          |             
|Other - net                          | (580)        | (82)         | (67)        
|                                     |              |              |             
|Income tax expense at effective rate | $      2,702 | $      2,595 | $      2,291

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In accounting for the deferred tax asset, the Company applies SFAS No. 109, Accounting for Income Taxes.  SFAS No. 109 requires, among other things, that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.  Management believes that it is more likely than not that the Company will not realize all of the deferred tax asset related to charitable contributions made in 1999, and, accordingly, has recorded a valuation allowance.

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

|                                |               |  |              
|------------------------------- | ------------- |  | -------------
|                                | 2003          |  | 2002         
|                                |               |  |              
|Deferred tax liabilities:       |               |  |              
|Loan origination fees and costs | $        (24) |  | $        (34)
|Prepaid expenses                | (134)         |  | (140)        
|FHLB dividends                  | (821)         |  | (689)        
|Depreciation                    | (38)          |  |              
|Other - net                     | (52)          |  | (161)        
|Unrealized gain on securities   | (122)         |  | (192)        
|                                |               |  |              
|                                | (1,191)       |  | (1,216)      
|                                |               |  |              
|Deferred tax assets:            |               |  |              
|Deferred compensation           | 422           |  | 442          
|Bad debt deduction              | 3,102         |  | 3,025        
|Accrued vacation                | 120           |  | 110          
|Depreciation                    |               |  | 227          
|Charitable contribution         | 1,590         |  | 1,872        
|                                |               |  |              
|                                | 5,234         |  | 5,676        
|                                |               |  |              
|                                | 4,043         |  | 4,460        
|Valuation allowance             | (397)         |  | (140)        
|                                |               |  |              
|Net deferred tax asset          | $      3,646  |  | $      4,320 

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 50% 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 Company's cost for the 401(k) plan was $212,189, $171,609, and $152,771 for 2003, 2002, and 2001, 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.

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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, 2002, 2001, and 2000.

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

|                              |      |       |      
|----------------------------- | ---- | ----- | -----
|                              | 2002 | 2001  | 2000 
|                              |      |       |      
|Assumed discount rate         | N/A  | 8.0 % | 8.0 %
|Rate of compensation increase | N/A  | N/A   | N/A  
|Expected return on assets     | N/A  | 8.0   | 8.0  

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

|                                      |        |            |           
|------------------------------------- | ------ | ---------- | ----------
|                                      | 2002   | 2001       | 2000      
|                                      |        |            |           
|Benefit obligation, beginning of year | $    - | $    1,650 | $    1,493
|                                      |        |            |           
|Actuarial loss                        |        | (44)       | 51        
|Interest cost                         |        | 66         | 129       
|Benefits paid                         |        | (1,668)    | (15)      
|Expenses                              |        | (4)        | (8)       
|                                      |        |            |           
|Benefit obligation, end of year       | $    - | $    -     | $    1,650

Changes in defined benefit pension plan assets are as follows for the years ended December 31 (in thousands):

|                                        |        |            |           
|--------------------------------------- | ------ | ---------- | ----------
|                                        | 2002   | 2001       | 2000      
|                                        |        |            |           
|Fair value of assets, beginning of year | $    - | $    1,650 | $    1,615
|                                        |        |            |           
|Actual return on assets                 |        | 22         | 58        
|Benefits paid                           |        | (1,668)    | (15)      
|Expenses                                |        | (4)        | (8)       
|Contribution                            |        |            |           
|                                        |        |            |           
|Fair value of assets, end of year       | $    - | $    -     | $1,650    

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

|                            |        |        |               
|--------------------------- | ------ | ------ | --------------
|                            | 2002   | 2001   | 2000          
|                            |        |        |               
|Funded status               | $    - | $    - | $        (425)
|Unrecognized net loss       |        |        | (122)         
|Curtailment gain recognized |        |        | 547           
|                            |        |        |               
|Accrued benefit cost        | $    - | $    - | $    -        

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

|                          |        |        |             
|------------------------- | ------ | ------ | ------------
|                          | 2002   | 2001   | 2000        
|                          |        |        |             
|Interest cost             | $    - | $    - | $        129
|Service cost              |        |        |             
|Expected return on assets |        |        | (129)       
|                          |        |        |             
|Net periodic expense      | $    - | $    - | $    -      

During the year ended March 31, 2001, the Company's noncontributory defined benefit plan was settled.Employee Stock Ownership PlanOn April 1, 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 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 $395,957 and $791,915 at March 31, 2003 and 2002, respectively.

Shares held by the ESOP at March 31, 2003, are as follows:

|             |                  |                      |                          
|------------ | ---------------- | -------------------- | -------------------------
|             | Number of Shares | Price RangePer Share | Average Price   Per Share
|             |                  |                      |                          
|Allocated:   |                  |                      |                          
|Vested       | 118,236          | $             -      | $        -               
|Nonvested    | 15,353           |                      |                          
|             |                  |                      |                          
|             | 133,589          |                      |                          
|             |                  |                      |                          
|Nonallocated | 32,818           | 10.88 - 11.06        | 11.02                    
|             |                  |                      |                          
|             | 166,407          |                      |                          

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Shares held by the ESOP at March 31, 2002, are as follows:

|             |                  |                      |                          
|------------ | ---------------- | -------------------- | -------------------------
|             | Number of Shares | Price RangePer Share | Average Price   Per Share
|             |                  |                      |                          
|Allocated:   |                  |                      |                          
|Vested       | 93,915           | $              -     | $       -                
|Nonvested    | 16,769           |                      |                          
|             |                  |                      |                          
|             | 110,684          |                      |                          
|             |                  |                      |                          
|Nonallocated | 68,840           | 10.88 - 11.06        | 11.02                    
|             |                  |                      |                          
|             | 179,524          |                      |                          

Shares held by the ESOP increased by 108 as a result of dividend income purchases in excess of employment terminations.  Contributions to the ESOP, recorded as compensation expense for the years ended March 31, 2003, 2002, and 2001, were $700,847, $546,739, and $429,228, respectively. Deferred Compensation PlanThe Company also maintains a nonqualified deferred compensation plan for certain key management personnel and the Board of Directors, 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, 2003 and 2002, the liability for accumulated deferred compensation was $1,240,000 and $1,298,000, respectively, and is included in the consolidated statements of financial condition in accounts payable and other liabilities.  Annual expense for the Company related to this plan totalled $69,000, $84,000, and $82,000, in 2003, 2002, and 2001, 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 is amortized over a five-year period.  Amortization expense was approximately $866,000 for the years ended March 31, 2003 and 2002, respectively, and $1,301,000 for the year ended March 31, 2001.

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 and incentive stock options to certain employees and directors of the Company, totalling 698,566 shares of the capital stock of the Company.  The Company implemented the Plan to promote the best interests of the Company 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 makes 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.

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

|                                       |                       |  |                                       |  |                                     
|-------------------------------------- | --------------------- |  | ------------------------------------- |  | ------------------------------------
|                                       | Number ofOptionShares |  | Weighted-Average Priceof OptionShares |  | Weighted-Average IssueDateFair Value
|                                       |                       |  |                                       |  |                                     
|Granted at inception (August 29, 2000) | 698,566               |  | $      12.06                          |  | $      12.06                        
|Exercised                              |                       |  |                                       |  |                                     
|Cancelled                              |                       |  |                                       |  |                                     
|                                       |                       |  |                                       |  |                                     
|Balance at March 31, 2001              | 698,566               |  | 12.06                                 |  |                                     
|                                       |                       |  |                                       |  |                                     
|Granted                                | 102,500               |  | 15.64                                 |  | 15.64                               
|Exercised                              |                       |  |                                       |  |                                     
|Cancelled                              |                       |  |                                       |  |                                     
|                                       |                       |  |                                       |  |                                     
|Balance at March 31, 2002              | 801,066               |  | 12.52                                 |  |                                     
|                                       |                       |  |                                       |  |                                     
|Granted                                | 57,081                |  | 21.26                                 |  | 21.26                               
|Exercised                              | (39,703)              |  | 12.33                                 |  | 12.33                               
|Cancelled                              | (32,350)              |  | 12.06                                 |  | 12.06                               
|                                       |                       |  |                                       |  |                                     
|Balance at March 31, 2003              | 786,094               |  | 13.18                                 |  |                                     

Financial data pertaining to outstanding stock options is as follows:

|                        |                       |                                 |                                      |                                   |                                                 
|----------------------- | --------------------- | ------------------------------- | ------------------------------------ | --------------------------------- | ------------------------------------------------
|Ranges ofExercisePrices | Number ofOptionShares | AverageRemainingContractualLife | AverageExercisePrice ofOption Shares | Number ofExercisableOption Shares | AverageExercise Priceof ExercisableOption Shares
|                        |                       |                                 |                                      |                                   |                                                 
|$12.06                  | 629,263               | 7.2 years                       | $12.06                               | 366,012                           | $12.06                                          
|14.25-23.10             | 156,831               | 8.7 years                       | 17.68                                | 35,750                            | 15.75                                           
|                        |                       |                                 |                                      |                                   |                                                 
|                        | 786,094               | 7.7 years                       | $13.18                               | 401,762                           | $12.39                                          

At March 31, 2003, the Company had an aggregate of 72,828 shares of common stock available for future issuance under its stock option plan.

12.   INTEREST RATE RISK

The Bank is engaged principally in providing first mortgage permanent and construction loans for both commercial and residential 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.

The Bank also originates adjustable and certain fixed rate commercial and residential 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, 2003 and 2002, adjustable rate

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mortgages held for investment totalled $524,567,000 and $485,094,000, respectively.  Fixed rate mortgages held for investment totalled $89,159,000 and $102,451,000 at March 31, 2003 and 2002, respectively.

The Bank originates both fixed and adjustable rate commercial and residential property construction loans.  Adjustable 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 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

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's 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.

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, 2003, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of March 31, 2003 and 2002, 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.

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

|                                          |             |                              |                                                                            |           |               |      
|----------------------------------------- | ----------- | ---------------------------- | -------------------------------------------------------------------------- | --------- | ------------- | -----
|                                          | Actual      | For CapitalAdequacy Purposes | To Be Categorizedas WellCapitalized UnderPrompt CorrectiveAction Provision
|                                          | Amount      | Ratio                        | Amount                                                                     | Ratio     | Amount        | Ratio
|                                          |             |                              |                                                                            |           |               |      
|As of March 31, 2003 (in thousands):      |             |                              |                                                                            |           |               |      
|Total capital (to risk-weighted assets):  |             |                              |                                                                            |           |               |      
|Company                                   | $    98,587 | 16.1% >                      | $    48,987 >                                                              | 8.0% >    | $    61,324 > | 10.0%
|Bank                                      | 77,744      | 12.9                         | 48,213                                                                     | 8.0       | 60,267        | 10.0 
|                                          |             |                              |                                                                            |           |               |      
|Tier I capital (to risk-weighted assets): |             |                              |                                                                            |           |               |      
|Company                                   | 91,042      | 14.8     >                   | 24,606 >                                                                   | 4.0     > | N/A >         | N/A  
|Bank                                      | 70,199      | 11.7                         | 24,000                                                                     | 4.0       | 35,999        | 6.0  
|                                          |             |                              |                                                                            |           |               |      
|Tier I capital (to average assets):       |             |                              |                                                                            |           |               |      
|Company                                   | 91,042      | 12.8     >                   | 28,451 >                                                                   | 4.0     > | N/A >         | N/A  
|Bank                                      | 70,199      | 10.1                         | 27,802                                                                     | 4.0       | 34,752        | 5.0  
|                                          |             |                              |                                                                            |           |               |      
|As of March 31, 2002 (in thousands):      |             |                              |                                                                            |           |               |      
|Total capital (to risk-weighted assets):  |             |                              |                                                                            |           |               |      
|Company                                   | $  100,075  | 15.8% >                      | $    50,671 >                                                              | 8.0% >    | $    63,339 > | 10.0%
|Bank                                      | 78,294      | 12.5                         | 50,108                                                                     | 8.0       | 62,635        | 10.0 
|                                          |             |                              |                                                                            |           |               |      
|Tier I capital (to risk-weighted assets): |             |                              |                                                                            |           |               |      
|Company                                   | 92,263      | 14.6     >                   | 25,278 >                                                                   | 4.0     > | N/A >         | N/A  
|Bank                                      | 70,482      | 11.3                         | 24,949                                                                     | 4.0       | 37,424        | 6.0  
|                                          |             |                              |                                                                            |           |               |      
|Tier I capital (to average assets):       |             |                              |                                                                            |           |               |      
|Company                                   | 92,263      | 14.0     >                   | 26,361 >                                                                   | 4.0     > | N/A >         | N/A  
|Bank                                      | 70,482      | 10.8                         | 26,104                                                                     | 4.0       | 32,631        | 5.0  

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 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.

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

|                                                         |                |             |                |            
|-------------------------------------------------------- | -------------- | ----------- | -------------- | -----------
|                                                         | 2003           | 2002       
|                                                         | CarryingAmount | Fair Value  | CarryingAmount | Fair Value 
|                                                         |                |             |                |            
|Financial assets:                                        |                |             |                |            
|Cash and cash equivalents                                | $    37,259    | $    37,259 | $    19,166    | $    19,166
|Securities available for sale                            | 34,167         | 34,167      | 49,903         | 49,903     
|Securities held to maturity                              | 3,800          | 3,999       | 4,955          | 5,126      
|Loans held for sale                                      | 4,755          | 4,813       | 625            | 634        
|Loans receivable                                         | 600,200        | 609,075     | 574,646        | 584,510    
|Federal Home Loan Bank stock                             | 6,334          | 6,334       | 5,946          | 5,946      
|                                                         |                |             |                |            
|                                                         | 686,515        | 695,647     | 655,241        | 665,285    
|                                                         |                |             |                |            
|Financial liabilities:                                   |                |             |                |            
|Deposit accounts                                         | 508,269        | 515,198     | 449,611        | 449,174    
|Federal Home Loan Bank advances     and other borrowings | 100,984        | 110,916     | 129,338        | 131,080    
|                                                         |                |             |                |            
|                                                         | 609,253        | 626,114     | 578,949        | 580,254    
|                                                         |                |             |                |            
|Net financial instruments                                | $    77,262    | $    69,533 | $    76,292    | $    85,031

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, 2003 and 2002: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.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.

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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.CommitmentsCommitments to sell loans with a notional balance of $2,955,309 at March 31, 2003, have a carrying value of $64,000, representing the fair value of such commitments.  Commitments of $6,254,650 to originate loans at March 31, 2003, have a carrying value of  $102,000.    There were no commitments to originate or sell loans at March 31, 2002.

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

Condensed financial information as of March 31 and for the years then ended is as follows (in thousands):

|                                                                                         |                |  |               
|---------------------------------------------------------------------------------------- | -------------- |  | --------------
|STATEMENTS OF FINANCIAL CONDITION                                                        |                |  |               
|                                                                                         |                |  |               
|ASSETS                                                                                   | 2003           |  | 2002          
|                                                                                         |                |  |               
|ASSETS:                                                                                  |                |  |               
|Cash and cash equivalents, including interest-bearing    deposits of $10,851 and $16,515 | $      10,869  |  | $      16,532 
|Securities available for sale, amortized cost of $553 and $100                           | 553            |  | 100           
|Loans receivable, net of allowances of $-0-                                              | 4,000          |  |               
|Accrued interest receivable                                                              | 16             |  |               
|Premises and equipment - net                                                             | 95             |  | 114           
|Investment in subsidiaries:                                                              |                |  |               
|Bank subsidiary                                                                          | 70,851         |  | 71,066        
|Other subsidiaries                                                                       | 1,871          |  | 2,580         
|Prepaid expenses and other assets                                                        | 5,213          |  | 4,172         
|                                                                                         |                |  |               
|TOTAL                                                                                    | $      93,468  |  | $      94,564 
|                                                                                         |                |  |               
|LIABILITIES AND EQUITY                                                                   |                |  |               
|                                                                                         |                |  |               
|LIABILITIES:                                                                             |                |  |               
|Accounts payable and other liabilities                                                   | $        1,773 |  | $        1,740
|                                                                                         |                |  |               
|EQUITY:                                                                                  |                |  |               
|Common stock                                                                             | 30,613         |  | 37,390        
|ESOP debt                                                                                | (396)          |  | (792)         
|Retained earnings                                                                        | 62,542         |  | 58,019        
|Shares held in trust for stock-related compensation plans                                | (1,301)        |  | (2,167)       
|Accumulated other comprehensive income                                                   | 237            |  | 374           
|                                                                                         |                |  |               
|Total equity                                                                             | 91,695         |  | 92,824        
|                                                                                         |                |  |               
|TOTAL                                                                                    | $      93,468  |  | $      94,564 

- 85 -

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|                                                                                            |                |                |               
|------------------------------------------------------------------------------------------- | -------------- | -------------- | --------------
|STATEMENTS OF OPERATIONS                                                                    |                |                |               
|                                                                                            |                |                |               
|                                                                                            | 2003           | 2002           | 2001          
|                                                                                            |                |                |               
|INCOME:                                                                                     |                |                |               
|Interest from investment securities                                                         | $          234 | $          933 | $        2,313
|Dividend from bank subsidiary                                                               | 9,300          | 16,700         | 18,106        
|Interest and other income                                                                   | 30             |                | 184           
|                                                                                            |                |                |               
|Total income                                                                                | 9,564          | 17,633         | 20,603        
|                                                                                            |                |                |               
|OTHER EXPENSE:                                                                              |                |                |               
|Salary and employee benefits                                                                | 1,993          | 1,853          | 2,390         
|Occupancy and equipment                                                                     | 85             | 80             | 205           
|Information processing costs                                                                |                | 3              | 52            
|Other - net                                                                                 | 533            | 411            | 727           
|                                                                                            |                |                |               
|                                                                                            | 2,611          | 2,347          | 3,374         
|                                                                                            |                |                |               
|Income before federal income taxes and     equity in undistributed net income of subsidiary | 6,953          | 15,286         | 17,229        
|                                                                                            |                |                |               
|FEDERAL INCOME TAXES                                                                        | (674)          | (369)          | (296)         
|                                                                                            |                |                |               
|Income before equity in undistributed net     income of subsidiary                          | 7,627          | 15,655         | 17,525        
|                                                                                            |                |                |               
|EQUITY IN UNDISTRIBUTED NET INCOME    OF SUBSIDIARY                                         | (786)          | (10,076)       | (12,168)      
|                                                                                            |                |                |               
|NET INCOME                                                                                  | $        6,841 | $        5,579 | $        5,357

- 86 -

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|                                                                                                         |                |                |                
|-------------------------------------------------------------------------------------------------------- | -------------- | -------------- | ---------------
|STATEMENTS OF CASH FLOWS                                                                                 |                |                |                
|                                                                                                         |                |                |                
|                                                                                                         | 2003           | 2002           | 2001           
|                                                                                                         |                |                |                
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                    |                |                |                
|Net income                                                                                               | $        6,841 | $        5,579 | $        5,357 
|Adjustments to reconcile net income to net cash    provided by operating activities:                     |                |                |                
|Accretion of investment security discounts                                                               |                | (22)           | (77)           
|Amortization of investment security premiums                                                             |                | 4              | 49             
|Depreciation and amortization of premises     and equipment                                              | 23             | 20             | 112            
|Equity in undistributed income of subsidiaries                                                           | 786            | 10,076         | 12,168         
|Amortization of compensation related to MRP                                                              | 866            | 867            | 1,301          
|Changes in operating assets and liabilities:                                                             |                |                |                
|Accrued interest receivable                                                                              | (16)           | 102            | 166            
|Prepaid expenses and other assets                                                                        | (1,069)        | (494)          | 1,029          
|Accounts payable and other liabilities                                                                   | 33             | 34             | (25)           
|                                                                                                         |                |                |                
|Net cash provided by operating activities                                                                | 7,464          | 16,166         | 20,080         
|                                                                                                         |                |                |                
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                    |                |                |                
|Proceeds from maturities of securities available    for sale                                             |                | 3,068          | 17,199         
|Proceeds from sale of securities available for sale                                                      | 3,756          | 11,108         | 1,941          
|Purchases of securities available for sale                                                               | (4,209)        | (4,709)        | (3,886)        
|Loans originated or acquired                                                                             | (4,000)        |                |                
|Contribution from (to) MB Cap                                                                            | 1              | 4              | (6)            
|Contribution from (to) I-Pro                                                                             |                | (1)            | (1)            
|Contribution from (to) the Bank                                                                          | 28             | 11             | (50)           
|Net additions to premises and equipment                                                                  | (4)            | (44)           | 216            
|                                                                                                         |                |                |                
|Net cash (used in) provided by investing activities                                                      | (4,428)        | 9,437          | 15,413         
|                                                                                                         |                |                |                
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                    |                |                |                
|Repurchase shares of common stock                                                                        | (7,399)        | (31,550)       | (19,373)       
|Tax benefit from stock options exercised                                                                 | 143            |                |                
|Proceeds from stock options exercised                                                                    | 479            |                |                
|Dividends paid on common stock                                                                           | (2,318)        | (2,593)        | (2,595)        
|Repayment of loan to ESOP                                                                                | 396            | 396            | 396            
|                                                                                                         |                |                |                
|Net cash used in financing activities                                                                    | (8,699)        | (33,747)       | (21,572)       
|                                                                                                         |                |                |                
|NET (DECREASE) INCREASE IN CASH  AND CASH EQUIVALENTS                                                    | (5,663)        | (8,144)        | 13,921         
|                                                                                                         |                |                |                
|CASH AND CASH EQUIVALENTS:                                                                               |                |                |                
|Beginning of year                                                                                        | 16,532         | 24,676         | 10,755         
|End of year                                                                                              | $      10,869  | $      16,532  | $      24,676  
|                                                                                                         |                |                |                
|SUPPLEMENTAL DISCLOSURES OF CASH  FLOW INFORMATION - Cash paid during  the year for federal income taxes | $            - | $            - | $            27

- 87 -

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

16.   COMMITMENTS, CONTINGENCIES AND GUARANTEES

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

|           |               
|---------- | --------------
|2004       | $        1,088
|2005       | 1,004         
|2006       | 989           
|2007       | 823           
|2008       | 673           
|Thereafter | 3,936         
|           | $        8,513

Rent expense for the years ended March 31, 2003, 2002, and 2001, totalled $1,102,000, $995,000, and $842,000, respectively.

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, 2003.

In connection with certain asset sales, the Company typically makes representations and warranties about the underlying assets conforming to specified guidelines.  If the underlying assets do not conform to the specifications, the Company may have an obligation to repurchase the assets or indemnify the purchaser against any loss.  The Company believes that the potential for loss under these arrangements is remote.  Accordingly, no contingent liability is recorded in the financial statements.

17.   LINES OF BUSINESS

The Company is managed by lines of business.  The lines of business are the Bank's retail division, the Bank's business banking group, and MB Cap.  MB Cap 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.  Effective July 1, 2001, the Company integrated its item processing subsidiary, I-Pro, into the operations of its principal subsidiary, the Bank. I-Pro's results are included in the Bank's retail division.

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.

- 88 -

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

|                                                       |                         |                                   |               |                 |              
|------------------------------------------------------ | ----------------------- | --------------------------------- | ------------- | --------------- | -------------
|                                                       | 2003                   
|                                                       | TheBank'sRetailDivision | The Bank'sBusinessBankingGroup(1) | Other         | Eliminations    | Total        
|Condensed income statement:                            |                         |                                   |               |                 |              
|Net interest income after    provision for loan losses | $     23,645            | $       2,349                     | $         270 | $           (1) | $     26,263 
|Other income                                           | 5,294                   | 508                               | 8,513         | (8,568)         | 5,747        
|Other expense                                          | 16,211                  | 2,699                             | 3,612         | (55)            | 22,467       
|                                                       |                         |                                   |               |                 |              
|Income before income taxes                             | 12,728                  | 158                               | 5,171         | (8,514)         | 9,543        
|                                                       |                         |                                   |               |                 |              
|Income taxes                                           | 3,615                   | 48                                | (961)         |                 | 2,702        
|                                                       |                         |                                   |               |                 |              
|Net income                                             | $       9,113           | $           110                   | $       6,132 | $       (8,514) | $       6,841
|                                                       |                         |                                   |               |                 |              
|Total assets                                           | $   628,653             | $     65,905                      | $     95,346  | $     (83,741)  | $   706,163  
|                                                       |                         |                                   |               |                 |              
|(1) Formerly Commercial Bank of Everett                |                         |                                   |               |                 |              

|                                                       |                         |                                   |               |                 |              
|------------------------------------------------------ | ----------------------- | --------------------------------- | ------------- | --------------- | -------------
|                                                       | 2002                   
|                                                       | TheBank'sRetailDivision | The Bank'sBusinessBankingGroup(1) | Other         | Eliminations    | Total        
|Condensed income statement:                            |                         |                                   |               |                 |              
|Net interest income after    provision for loan losses | $     21,653            | $       1,582                     | $         966 | $           (1) | $     24,200 
|Other income                                           | 2,986                   | 348                               | 6,689         | (6,680)         | 3,343        
|Other expense                                          | 15,568                  | 1,141                             | 2,717         | (57)            | 19,369       
|                                                       |                         |                                   |               |                 |              
|Income before income taxes                             | 9,071                   | 789                               | 4,938         | (6,624)         | 8,174        
|                                                       |                         |                                   |               |                 |              
|Income taxes                                           | 2,786                   | 270                               | (461)         |                 | 2,595        
|                                                       |                         |                                   |               |                 |              
|Net income                                             | $       6,285           | $           519                   | $       5,399 | $       (6,624) | $       5,579
|                                                       |                         |                                   |               |                 |              
|Total assets                                           | $   618,725             | $     50,228                      | $     97,159  | $     (90,303)  | $   675,809  
|                                                       |                         |                                   |               |                 |              
|(1) Formerly Commercial Bank of Everett                |                         |                                   |               |                 |              

- 89 -

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|                                                       |                         |                                   |                 |                 |              
|------------------------------------------------------ | ----------------------- | --------------------------------- | --------------- | --------------- | -------------
|                                                       | 2001                   
|                                                       | TheBank'sRetailDivision | The Bank'sBusinessBankingGroup(1) | Other           | Eliminations    | Total        
|Condensed income statement:                            |                         |                                   |                 |                 |              
|Net interest income after    provision for loan losses | $     18,883            | $       1,110                     | $         2,425 | $           1   | $     22,419 
|Other income                                           | 2,576                   | 245                               | 6,321           | (6,510)         | 2,632        
|Other expense                                          | 12,541                  | 1,292                             | 4,141           | (571)           | 17,403       
|                                                       |                         |                                   |                 |                 |              
|Income before income taxes                             | 8,918                   | 63                                | 4,605           | (5,938)         | 7,648        
|                                                       |                         |                                   |                 |                 |              
|Income taxes                                           | 2,717                   | 25                                | (451)           |                 | 2,291        
|                                                       |                         |                                   |                 |                 |              
|Net income                                             | $       6,201           | $           38                    | $       5,056   | $       (5,938) | $       5,357
|                                                       |                         |                                   |                 |                 |              
|Total assets                                           | $   546,624             | $     39,781                      | $     124,632   | $     (108,634) | $   602,403  
|                                                       |                         |                                   |                 |                 |              
|(1) Formerly Commercial Bank of Everett                |                         |                                   |                 |                 |              

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18.   SELECTED QUARTERLY FINANCIAL DATA (unaudited)

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

|                                                         |                   |                   |                   |                  
|-------------------------------------------------------- | ----------------- | ----------------- | ----------------- | -----------------
|                                                         | 2003             
|                                                         |                   |                   |                   |                  
|                                                         | First   Quarter   | Second Quarter    | Third   Quarter   | Fourth Quarter   
|                                                         |                   |                   |                   |                  
|Interest income                                          | $      11,704     | $      11,541     | $      11,322     | $      11,369    
|Interest expense                                         | 4,952             | 4,955             | 4,852             | 4,524            
|                                                         |                   |                   |                   |                  
|Net interest income before     provision for loan losses | 6,752             | 6,586             | 6,470             | 6,845            
|                                                         |                   |                   |                   |                  
|Provision for loan losses                                | 190               |                   | 200               |                  
|                                                         |                   |                   |                   |                  
|Net interest income after     provision for loans losses | 6,562             | 6,586             | 6,270             | 6,845            
|                                                         |                   |                   |                   |                  
|Noninterest income                                       | 1,124             | 1,418             | 1,665             | 1,540            
|Noninterest expense                                      | 5,412             | 5,487             | 5,923             | 5,645            
|                                                         |                   |                   |                   |                  
|Income before provision for     income taxes             | 2,274             | 2,517             | 2,012             | 2,740            
|                                                         |                   |                   |                   |                  
|Provision for income taxes                               | 643               | 713               | 570               | 776              
|                                                         |                   |                   |                   |                  
|Net income                                               | $          1,631  | $          1,804  | $          1,442  | $          1,964 
|                                                         |                   |                   |                   |                  
|Net income per common share - Basic                      | $            0.34 | $            0.38 | $            0.30 | $            0.42
|                                                         |                   |                   |                   |                  
|Net income per common share - Diluted                    | $            0.32 | $            0.36 | $            0.29 | $            0.39

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|                                                         |                   |                   |                   |                  
|-------------------------------------------------------- | ----------------- | ----------------- | ----------------- | -----------------
|                                                         | 2002             
|                                                         |                   |                   |                   |                  
|                                                         | First   Quarter   | Second Quarter    | Third   Quarter   | Fourth Quarter   
|                                                         |                   |                   |                   |                  
|Interest income                                          | $      11,786     | $      11,872     | $      11,824     | $      11,551    
|Interest expense                                         | 5,657             | 5,539             | 5,177             | 4,960            
|                                                         |                   |                   |                   |                  
|Net interest income before     provision for loan losses | 6,129             | 6,333             | 6,647             | 6,591            
|                                                         |                   |                   |                   |                  
|Provision for loan losses                                | 250               | 375               | 625               | 250              
|                                                         |                   |                   |                   |                  
|Net interest income after     provision for loans losses | 5,879             | 5,958             | 6,022             | 6,341            
|                                                         |                   |                   |                   |                  
|Noninterest income                                       | 685               | 728               | 914               | 1,016            
|Noninterest expense                                      | 4,585             | 4,782             | 4,998             | 5,004            
|                                                         |                   |                   |                   |                  
|Income before provision for     income taxes             | 1,979             | 1,904             | 1,938             | 2,353            
|                                                         |                   |                   |                   |                  
|Provision for income taxes                               | 598               | 572               | 654               | 771              
|                                                         |                   |                   |                   |                  
|Net income                                               | $          1,381  | $          1,332  | $          1,284  | $          1,582 
|                                                         |                   |                   |                   |                  
|Net income per common share - Basic                      | $            0.21 | $            0.21 | $            0.25 | $            0.32
|                                                         |                   |                   |                   |                  
|Net income per common share - Diluted                    | $            0.20 | $            0.21 | $            0.25 | $            0.31

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|                                                         |                   |                   |                   |                  
|-------------------------------------------------------- | ----------------- | ----------------- | ----------------- | -----------------
|                                                         | 2001             
|                                                         |                   |                   |                   |                  
|                                                         | First   Quarter   | Second Quarter    | Third   Quarter   | Fourth 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 
|                                                         |                   |                   |                   |                  
|Net income per common share - Basic                      | $            0.18 | $            0.13 | $            0.19 | $            0.20
|                                                         |                   |                   |                   |                  
|Net income per common share - Diluted                    | $            0.18 | $            0.13 | $            0.19 | $            0.20

- 93 -

<PAGE>

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Not applicable.

The information contained under the section captioned "Proposal I -- Election of Directors" is included in the
Company's Definitive Proxy Statement for the 2003 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.

|                    | Age atMarch 31, | Position                        
|------------------- | --------------- | --------------------------------
|Name                | 2003            | EverTrust                       
|                   
|Michael B. Hansen   | 61              | Chairman of the Board, President
|                    |                 | and Chief Executive Officer     
|                   
|Michael R. Deller   | 52              | Executive Vice President        
|                    |                 |                                 
|                   
|Jeffrey R. Mitchell | 44              | Senior Vice President, Chief    
|                    |                 | Financial Officer               
|                    |                 |                                 
|Lorelei Christenson | 49              | Senior Vice President and       
|                    |                 | Corporate Secretary             
|                    |                 |                                 
|                   
|Philip Mitterling   | 45              | Treasurer                       
|                   
|Robert L. Nall      | 47              | --                              
|                    |                 |                                 
|                    |                 |                                 
|Kirk A. Bottles     | 41              | --                              

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 since 1979.

*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.

94

<PAGE>

*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.

*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 Senior Vice President and Chief Lending Officer of EverTrust Bank, a position he has held since
March 2002.  From November 1999 to March 2002 he was Vice President of EverTrust Bank.  From 1995 to 1999 he served
as a branch manager of EverTrust Bank.

*Kirk A. Bottles* is Executive Vice President of EverTrust Bank responsible for business banking and private banking.
He was employed by the Bank on March 1, 2002.  Mr Bottles has 18 years experience in business and private banking.  Prior
to joining the Bank, he spent eight years at Bank of America, most recently serving as senior vice president, focusing on
business and commercial banking.

**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 and Related Stockholder Matters**

(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.

(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.

95

<PAGE>

**Equity Compensation Plan Information.**The following table summarizes share and exercise price information
about the Company's equity compensation plans as of March 31, 2003.

|                                   |                        |                     | (c)                       
|---------------------------------- | ---------------------- | ------------------- | --------------------------
|                                   |                        |                     | *Number of securities*    
|                                   | *(a)*                  | *(b)*               | *remaining available*     
|                                   | *Number of securities* | *Weighted-average*  | *for future issuance*     
|                                   | *to be issued upon*    | *exercise price*    | *under equity*            
|                                   | *exercise of*          | *of outstanding*    | *compensation plans*      
|                                   | *outstanding options,* | *options, warrants* | *(excluding securities*   
|*Plan category*                    | *warrants and rights*  | *and rights*        | *reflected in column (a))*
|                                   |                        |                     |                           
|Equity compensation plans approved |                        |                     |                           
|by security holders:               |                        |                     |                           
|Option plan                        | 786,094                | $13.18              | 72,828                    
|Restricted stock plan              | 359,450                | 12.06               | --                        
|                                   |                        |                     |                           
|Equity compensation plans not      |                        |                     |                           
|approved by security holders:      | NA                     | NA                  | NA                        
|Total                              | 1,145,544              | $12.83              | 72,828                    
|                                   |                        |                    

(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.

**Item 14.  Controls and Procedures**

(a) Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure controls and
procedures (as defined in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the "Act")) was carried out under the
supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officer and several other
members of the Company's senior management within the 90-day period preceding the filing date of this annual report.  The
Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the
reports it files or submits under the Act is (i) accumulated and communicated to the Company's management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.

(b) Changes in Internal Controls:  In the year ended March 31, 2003, the Company did not make any significant
changes in, nor take any corrective actions regarding, its internal controls or other factors that could significantly affect these
controls.

**Item 15.  Principal Accountant Fees and Services**

The information contained under the section captioned "Proposal II -- Approval of Appointment of Independent
Auditors" is included in the Company's Proxy Statement and is incorporated herein by reference.

96

<PAGE>

| | (a) | Exhibits
| | --- | --------
|
| |     | 3.1     
| |     | 3.2     
| |     | 10.1    
| |     | 10.2    
| |     | 10.3    
| |     | 10.4    
| |     | 10.5    
| |     | 10.6    
| |     | 10.7    
| |     | 10.8    
| |     | 10.9    
| |     | 10.10   
| |     | 21      
| |     | 23      
| |     | 99      

|(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

One Current Report on Form 8-K was filed during the quarter ended March 31, 2003.  The Form 8-K was
filed on January 14, 2003, regarding a venture capital write-down.

97

<PAGE>

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.     
|---------------------- | ----------------------- | ------------------------------------
|                      
|                      
|Date:  June
  19, 2003 | By:/s/Michael B. Hansen
|                       |                         | 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 19, 2003
|Michael B. Hansen       | Chief Executive Officer and              
|                        | Director (Principal Executive             |              
|                        | Officer)                                  |              
|                       
|/s/Jeffrey R. Mitchell  | Senior Vice President and Chief Financial | June 19, 2003
|Jeffrey R. Mitchell     | Officer (Principal Financial             
|                        | and Accounting Officer)                   |              
|                       
|                       
|/s/Margaret B. Bavasi   | Director                                  | June 19, 2003
|Margaret B. Bavasi     
|                       
|                       
|/s/Thomas R. Collins    | Director                                  | June 19, 2003
|Thomas R. Collins      
|                       
|                       
|/s/Micheal R. Deller    | Director                                  | June 19, 2003
|Michael R. Deller      
|                       
|                       
|/s/Thomas J. Gaffney    | Director                                  | June 19, 2003
|Thomas J. Gaffney      
|                       
|                       
|/s/R. Michael Kight     | Director                                  | June 19, 2003
|R. Michael Kight       
|                       
|                       
|/s/Robert A. Leach, Jr. | Director                                  | June 19, 2003
|Robert A. Leach, Jr.   
|98
  <PAGE>            
|                        |                                           |              
|                        |                                           |              
|/s/George S. Newland    | Director                                  | June 19, 2003
|George S. Newland      
|                       
|                       
|/s/William J. Rucker    | Director                                  | June 19, 2003
|William J. Rucker       |                                           |              
|                        |                                           |              
|                        |                                           |              
|/s/Louis H. Mills       | Director                                  | June 19, 2003
|Louis H. Mills          |                                           |              
|                        |                                           |              
|                        |                                           |              
|/s/Robert G. Wolfe      | Director                                  | June 19, 2003
|Robert G. Wolfe         |                                           |              

<PAGE>

**CERTIFICATIONS**

**Certification Required
by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934**

I, Michael B. Hansen, certify that:

|(1) | I have reviewed this
annual report on Form 10-K of EverTrust Financial Group, Inc.;                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this
annual report;                                                              
|   
|(3) | Based on my knowledge, the financial statements, and other financial information included in this
annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;                                                                                 
|   
|(4) | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                             
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | c)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(5) | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent function):                                                                                                                                        
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(6) | The registrant's other certifying officers and I have indicated in this
annual report whether or not there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

Date: June 19, 2003

/s/ Michael B. HansenMichael B. HansenPresident and Chief Executive Officer

100

<PAGE>

**Certification Required
by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934**

I, Jeffrey R. Mitchell, certify that:

|(1) | I have reviewed this
annual report on Form 10-K of EverTrust Financial Group, Inc.;                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this
annual report;                                                              
|   
|(3) | Based on my knowledge, the financial statements, and other financial information included in this
annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;                                                                                 
|   
|(4) | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                             
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | c)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(5) | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent function):                                                                                                                                        
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(6) | The registrant's other certifying officers and I have indicated in this
annual report whether or not there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

Date: June 19, 2003

/s/Jeffrey R. MitchellJeffrey R. MitchellChief
Financial Officer

101

<PAGE>



Exhibit 10.6
Amended Employment Agreement with Michael B. Hansen











<PAGE>



AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT attached hereto as Exhibit "A"
(the "Agreement") is made and entered into as of 28th day of April, 2003 by and between
EVERTRUST FINANCIAL GROUP, INC. (the "Company") and its wholly owned subsidiary,
EVERTRUST BANK (the "Bank"), and Michael B. Hansen, (the "Employee").

WHEREAS,  the Employee is currently serving as the Chief Executive Officer of the
Company and of the Bank;

WHEREAS, the Board of Directors of the Company and the Board of Directors of the Bank
(collectively, the "Board of Directors") desire to achieve uniformity in when they conduct their
annual reviews of senior management employment agreements for the purpose of more efficiently
administering review of senior management employment agreements and that such efficiency is in
the best interest of the Company and the Bank; and

WHEREAS,  the Board of Directors has approved and authorized the execution of this
amendment of the Agreement with the Employee,

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements of the parties herein, the Agreement attached hereto as Exhibit "A" is amended as
follows:

1.     Paragraph 2 of the Agreement entitled "Term" is amended as follows:

"The term of this Agreement will be until February 24, 2003.  Beginning on February 24, 2003 and
on each anniversary thereafter, the term of this Agreement shall be extended for a period of one year,
provided that (i) neither the Employee nor the Bank and/or Company have given notice to the other
in writing at least 90 days prior to such anniversary that the term of this Agreement shall not be
extended further; and (ii) prior to such anniversary, the Board of Directors explicitly reviews and
approves the extension.  Reference herein to the term of this Agreement shall refer to both such
initial term and such extended terms."

2.     Paragraph 9 of the Agreement entitled "Non-Competition", subparagraph a) is
amended as follows:

"Upon termination of Employee's employment hereunder except pursuant to Sections 7(a) and (d)
hereof, Employee agrees not to compete with the Bank and/or Company for a period of one (1) year
following such termination in Snohomish or King County, Washington.  Employee agrees that
during such period and within such area, Employee shall not work for or advise, consult or otherwise
serve with, directly or indirectly, any entity whose business materially competes with the depository,
lending or other business activities of the Bank and/or the Company.  The parties hereto, recognizing
that irreparable injury will

<PAGE>

result to the Bank and/or Company, its business and property in the event
of Employee's breach of this Subsection 9(a) agree that in the event of any such breach by Employee,
the Bank and/or Company will be entitled, in addition to any other remedies and damages available,
to an injunction to restrain the violation hereof by Employee, Employee's partners, agents, servants,
employers, employees and all persons acting for or with  Employee.  Employee represents and admits
that in the event of the termination of his employment pursuant to Section 7(b) and (c) hereof,
Employee's experience and capabilities are such that Employee can obtain employment in a business
engaged in other kinds and/or of a different nature than the Bank and/or Company, and that the
enforcement of a remedy by way of injunction will not prevent Employee from earning a livelihood.
Nothing herein will be construed as prohibiting the Bank and/or Company from pursuing any other
remedies available to the Bank and/or Company for such breach or threatened breach, including the
recovery of damages from Employee."

3.     A new Paragraph 10 is added to the Agreement as follows:

"10. 	Solicitation and/or Providing Services After Termination.

|(a)       | Employee agrees that, in addition to any other limitations, for a period of two (2)
years after termination of his employment under this Agreement, Employee will not,
on behalf of himself or on behalf of any other person, firm, corporation, or other
entity solicit, nor shall provide any financial services to those customers/relationships
who/which have been developed as a result of the Employee's tenure with the Bank
and/or Company under this Agreement.  Customer/banker relationships which the
Employee brought to the Bank and/or Company as a result of previous relationships
and those that arose as a result of referrals from those previous relationships are
exempt from this provision.  Upon termination from employment, upon request of
the Bank and/or Company, Employee will provide a list of those previous
relationships which he claims are exempt from this provision to the Bank and/or
Company.  If a customer, in the Bank and/or Company's sole discretion, requests a
relationship or a service which is not offered by the Bank and/or Company after
termination of this Agreement, such will also be exempt from this provision.  If there
is a "Change in control" as defined in paragraph 1. a) of the Agreement resulting in
Employee's termination, this provision becomes null and void.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b)<PAGE> | Employee agrees that for a period of
two (2) years after Employee's employment under the terms of this Agreement end,
for whatever reason, Employee will not directly or indirectly encourage or
solicit any employee of employer to leave such employment for any reason, nor
assist others in so soliciting or encouraging employees of the Bank and/or
Company to leave. In the event there is a "Change in control" as
defined in paragraph1. a) of the Agreement resulting in Employee's
termination, this provision becomes null and void."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4.     All remaining paragraphs in the Agreement following amended newly inserted
Paragraph 10 are renumbered in the order in which they appear.

5.     All provisions of the Agreement not specifically amended remain in full force and
effect.

|EVERTRUST FINANCIAL GROUP, INC.
EVERTRUST BANK/s/Lorelei Christenson
Lorelei Christenson
Corporate Secretary | EMPLOYEE/s/Michael B. Hansen
Michael B. Hansen
Chief Executive Officer
|------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------
|/s/William J. Rucker
William J. Rucker
Compensation Committee Chair                                          |                                                                       



<PAGE>

Exhibit 10.7
Amendment to Employment Agreement with Michael R. Deller



<PAGE>



AMENDMENT TO EMPLOYMENT AGREEMENT



THIS AMENDMENT TO EMPLOYMENT AGREEMENT attached hereto as Exhibit "A"
(the "Agreement") is made and entered into as of 28th day of April, 2003 by and between
EVERTRUST FINANCIAL GROUP, INC. (the "Company") and its wholly owned subsidiary,
EVERTRUST BANK (the "Bank"), and Michael R. Deller, (the "Employee").

WHEREAS,  the Employee is currently serving as the President of the Company and of the
Bank;

WHEREAS, the Board of Directors of the Company and the Board of Directors of the Bank
(collectively, the "Board of Directors") desire to achieve uniformity in when they conduct their
annual reviews of senior management employment agreements for the purpose of more efficiently
administering review of senior management employment agreements and that such efficiency is in
the best interest of the Company and the Bank; and

WHEREAS,  the Board of Directors has approved and authorized the execution of this
amendment of the Agreement with the Employee,

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements of the parties herein, the Agreement attached hereto as Exhibit "A" is amended as
follows:

1.     Paragraph 2 of the Agreement entitled "Term" is amended as follows:

"The term of this Agreement will be until February 24, 2003.  Beginning on February 24,
2003 and on each anniversary thereafter, the term of this Agreement shall be extended for
a period of one year, provided that (i) neither the Employee nor the Bank and/or Company
have given notice to the other in writing at least 90 days prior to such anniversary that the
term of this Agreement shall not be extended further; and (ii) prior to such anniversary, the
Board of Directors explicitly reviews and approves the extension.  Reference herein to the
term of this Agreement shall refer to both such initial term and such extended terms."

2.     Paragraph 9 of the Agreement entitled "Non-Competition", subparagraph a) is
amended as follows:

"Upon termination of Employee's
employment hereunder except pursuant to Sections 7(a) and (d) hereof, Employee
agrees not to compete with the Bank and/or Company for a period of one (1) year
following such termination in Snohomish or King County, Washington. Employee
agrees that during such period and within such area, Employee shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Company. The parties hereto,
recognizing that irreparable injury will

<PAGE>

result to the Bank and/or
Company, its business and property in the event of Employee's breach of this
Subsection 9(a) agree that in the event of any such breach by Employee, the Bank
and/or Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Employee,
Employee's partners, agents, servants, employers, employees and all persons
acting for or with Employee. Employee represents and admits that in the event of
the termination of his employment pursuant to Section 7(b) and (c) hereof,
Employee's experience and capabilities are such that Employee can obtain
employment in a business engaged in other kinds and/or of a different nature
than the Bank and/or Company, and that the enforcement of a remedy by way of
injunction will not prevent Employee from earning a livelihood. Nothing herein
will be construed as prohibiting the Bank and/or Company from pursuing any other
remedies available to the Bank and/or Company for such breach or threatened
breach, including the recovery of damages from Employee."

3.     A new Paragraph 10 is added to the Agreement as follows:

"10. 	Solicitation and/or Providing Services After Termination.

|(a)       | Employee agrees that, in addition to any other limitations, for a period of two (2)
years after termination of his employment under this Agreement, Employee will not,
on behalf of himself or on behalf of any other person, firm, corporation, or other
entity solicit, nor shall provide any financial services to those customers/relationships
who/which have been developed as a result of the Employee's tenure with the Bank
and/or Company under this Agreement.  Customer/banker relationships which the
Employee brought to the Bank and/or Company as a result of previous relationships
and those that arose as a result of referrals from those previous relationships are
exempt from this provision.  Upon termination from employment, upon request of
the Bank and/or Company, Employee will provide a list of those previous
relationships which he claims are exempt from this provision to the Bank and/or
Company.  If a customer, in the Bank and/or Company's sole discretion, requests a
relationship or a service which is not offered by the Bank and/or Company after
termination of this Agreement, such will also be exempt from this provision.  If there
is a "Change in control" as defined in paragraph 1. a) of the Agreement resulting in
Employee's termination, this provision becomes null and void.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b)<PAGE> | Employee agrees that for a period of two (2)
years after Employee's employment under the terms of this Agreement end, for
whatever reason, Employee will not directly or indirectly encourage or solicit
any employee of employer to leave such employment for any reason, nor assist
others in so soliciting or encouraging employees of the Bank and/or Company to
leave. In the event there is a "Change in control" as defined in paragraph1.
a) of the Agreement resulting in Employee's termination, this provision becomes
null and void."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4.     All remaining paragraphs in the Agreement following amended newly inserted
Paragraph 10 are renumbered in the order in which they appear.

5.     All provisions of the Agreement not specifically amended remain in full force and
effect.

|EVERTRUST FINANCIAL GROUP, INC.
EVERTRUST BANK/s/Lorelei Christenson
Lorelei Christenson
Corporate Secretary | EMPLOYEE/s/Michael R. Deller
Michael R. Deller
President
|------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------
|/s/William J. Rucker
William J. Rucker
Compensation Committee Chair                                          |                                                         



<PAGE>



Exhibit 10.8
Amended Employment Agreement with Jeffrey R. Mitchell



<PAGE>



AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT attached hereto as Exhibit "A"
(the "Agreement") is made and entered into as of 28th day of April, 2003 by and between
EVERTRUST FINANCIAL GROUP, INC. (the "Company") and its wholly owned subsidiary,
EVERTRUST BANK (the "Bank"), and Jeffrey R. Mitchell, (the "Employee").

WHEREAS,  the Employee is currently serving as the Senior Vice President and Chief
Financial Officer of the Company and of the Bank;

WHEREAS, the Board of Directors of the Company and the Board of Directors of the Bank
(collectively, the "Board of Directors") desire to achieve uniformity in when they conduct their
annual reviews of senior management employment agreements for the purpose of more efficiently
administering review of senior management employment agreements and that such efficiency is in
the best interest of the Company and the Bank; and

WHEREAS,  the Board of Directors has approved and authorized the execution of this
amendment of the Agreement with the Employee,

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements of the parties herein, the Agreement attached hereto as Exhibit "A" is amended as
follows:

1.     Paragraph 2 of the Agreement entitled "Term" is amended as follows:

"The term of this Agreement will be until February 24, 2003.  Beginning on February 24,
2003 and on each anniversary thereafter, the term of this Agreement shall be extended for
a period of one year, provided that (i) neither the Employee nor the Bank and/or Company
have given notice to the other in writing at least 90 days prior to such anniversary that the
term of this Agreement shall not be extended further; and (ii) prior to such anniversary, the
Board of Directors explicitly reviews and approves the extension.  Reference herein to the
term of this Agreement shall refer to both such initial term and such extended terms."

2.     Paragraph 9 of the Agreement entitled "Non-Competition", subparagraph a) is
amended as follows:

"Upon termination of Employee's
employment hereunder except pursuant to Sections 7(a) and (d) hereof, Employee
agrees not to compete with the Bank and/or Company for a period of one (1) year
following such termination in Snohomish or King County, Washington. Employee
agrees that during such period and within such area, Employee shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Company. The parties hereto,
recognizing that irreparable injury will

<PAGE>

result to the Bank and/or
Company, its business and property in the event of Employee's breach of this
Subsection 9(a) agree that in the event of any such breach by Employee, the Bank
and/or Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Employee,
Employee's partners, agents, servants, employers, employees and all persons
acting for or with Employee. Employee represents and admits that in the event of
the termination of his employment pursuant to Section 7(b) and (c) hereof,
Employee's experience and capabilities are such that Employee can obtain
employment in a business engaged in other kinds and/or of a different nature
than the Bank and/or Company, and that the enforcement of a remedy by way of
injunction will not prevent Employee from earning a livelihood. Nothing herein
will be construed as prohibiting the Bank and/or Company from pursuing any other
remedies available to the Bank and/or Company for such breach or threatened
breach, including the recovery of damages from Employee."

3.     A new Paragraph 10 is added to the Agreement as follows:

"10. 	Solicitation and/or Providing Services After Termination.

|(a)       | Employee agrees that, in addition to any other limitations, for a period of two (2)
years after termination of his employment under this Agreement, Employee will not,
on behalf of himself or on behalf of any other person, firm, corporation, or other
entity solicit, nor shall provide any financial services to those customers/relationships
who/which have been developed as a result of the Employee's tenure with the Bank
and/or Company under this Agreement.  Customer/banker relationships which the
Employee brought to the Bank and/or Company as a result of previous relationships
and those that arose as a result of referrals from those previous relationships are
exempt from this provision.  Upon termination from employment, upon request of
the Bank and/or Company, Employee will provide a list of those previous
relationships which he claims are exempt from this provision to the Bank and/or
Company.  If a customer, in the Bank and/or Company's sole discretion, requests a
relationship or a service which is not offered by the Bank and/or Company after
termination of this Agreement, such will also be exempt from this provision.  If there
is a "Change in control" as defined in paragraph 1. a) of the Agreement resulting in
Employee's termination, this provision becomes null and void.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b)<PAGE> | Employee agrees that for a period of two (2)
years after Employee's employment under the terms of this Agreement end, for
whatever reason, Employee will not directly or indirectly encourage or solicit
any employee of employer to leave such employment for any reason, nor assist
others in so soliciting or encouraging employees of the Bank and/or Company to
leave. In the event there is a "Change in control" as defined in paragraph1.
a) of the Agreement resulting in Employee's termination, this provision becomes
null and void."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4.     All remaining paragraphs in the Agreement following amended newly inserted
Paragraph 10 are renumbered in the order in which they appear.

5.     All provisions of the Agreement not specifically amended remain in full force and
effect.

|EVERTRUST FINANCIAL GROUP, INC.
EVERTRUST BANK/s/Lorelei Christenson
Lorelei Christenson
Corporate Secretary | EMPLOYEE/s/Jeffrey R. Mitchell
Jeffrey R. Mitchell
Senior Vice President & Chief Financial Officer
|------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------
|/s/William J. Rucker
William J. Rucker
Compensation Committee Chair                                          |                                                                                                   

<PAGE>



Exhibit 10.9
Employment Agreement with Kirk A. Bottles



<PAGE>





EMPLOYMENT AGREEMENT



THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of this
1stth day of March, 2002, by and between EverTrust Financial Group, Inc. (the "Company"), and its
wholly owned subsidiary, EverTrust Bank (the "Bank"), and Kirk Bottles, (the "Employee").

WHEREAS, the Employee is currently serving as the Executive Vice President of the
Company and of the Bank;

WHEREAS, the Employee has made and will continue to make a major contribution to the
success of the Company and the Bank in the position of Executive Vice President;

WHEREAS, the board of directors of the Company and the board of directors of the Bank
(collectively, the "Board of Directors") recognize that the possibility of a change in control of the
Bank or Company may exist and that such possibility, and the uncertainty and questions which arise
among management, may result in the departure or distraction of key management to the detriment
of the Company, the Bank and their respective stockholders;

WHEREAS, the Board of Directors believes that it is in the best interests of the Company
and the Bank to enter into this Agreement with the Employee in order to assure continuity of
management of the Company and its subsidiaries; and

WHEREAS, the Board of Directors has approved and authorized the execution of this
Agreement with the Employee;

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreement of the parties herein, it is AGREED as follows:

1.        	Definitions.

|a)<PAGE> | The term "Change in Control" means (1) an offeror other than the Company
purchases shares of stock of the Company or the Bank pursuant to a tender or
exchange offer for such shares (2) an event of a nature that results in the acquisition
of control of the Company or the Bank within the meaning of the Bank Holding
Company Act of 1956, as amended under 12 U.S.C. Section 1841 (or any successor
statute or regulation) or requires the filing notice with the Federal Deposit Insurance
Corporation under 12 U.S.C. Section 1817 (j) (or any successor statute or regulation);
(3) an event that would be required to be reported in response to Item 1 of the current
report  on Form 8-K, as in effect on the Effective Date, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); (4) any person
(as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the beneficial owner (as defined1in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Company or the Bank representing 25% or more of the
combined voting power of the Company's or the Bank's outstanding securities; (5)
individuals who are members of the board of directors of the Company immediately
following the Effective Date or who are members of the board of directors of the
Bank immediately following the Effective Date (in each case, the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequently whose election was approved by a vote
of at least three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Company's or the Bank's stockholders was approved
by the nominating committee serving under an Incumbent Board, shall be considered
a member of the Incumbent Board; or (6) consummation of a plan of reorganization,
merger, consolidation, sale of all or substantially all of the assets of the Company or
a similar transaction in which the former stockholders of the acquired corporation
become holders of more than 40% of the outstanding common stock of the Company
and the Company is the resulting entity of such transaction; provided that the term
"Change in Control" shall not include an acquisition of securities by an employee
benefit plan of the Bank or the Company.                              
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|b)       | The term "Consolidation Subsidiaries" means any subsidiary or subsidiaries of the
Company (or its successors that are part of the affiliated group (as defined in Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code"), without regard
to subsection (b) thereof) that includes the Bank, including but not limited to the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|c)       | The term "Date of Termination" means the date upon which the Employee's
employment with the Company or the Bank or both ceases, as specified in a notice
of termination pursuant to Section 8 of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|d)       | The term "Effective Date" means the date of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|e)<PAGE> | The term "Involuntary Termination" means the termination of the employment of
Employee (i) by either the Company or the Bank or both without his express
written consent; or (ii) by the Employee by reason of a material diminution of
or interference with his duties, responsibilities or benefits, including
(without limitation) any of the following actions unless consented to in writing
by the Employee: (1) a requirement that the Employee be based at any place other
than Everett Washington, or within a radius of 35 miles from the location of the
Company's administrative offices as of the date of this Agreement, except for
reasonable travel on Company or Bank business; (2) a material demotion of the
Employee; (3) a material reduction in the number or seniority of personnel
reporting to2the
Employee or a material reduction in the frequency with which, or in the nature
of the matters with respect to which such personnel are to report to the
Employee, other than as part of a Bank- or Company- wide reduction in staff; (4)
a reduction in the Employee's salary or a material adverse change in the
Employee's perquisites, benefits, contingent benefits or vacation, other than as
part of an overall program applied uniformly and with equitable effect to all
members of the senior management of the Bank or Company; (5) a material
permanent increase in the required hours of work or the workload of the
Employee; (6) the failure of the board of directors of the Company (or a board
of directors of a successor of the Company) to elect him as Executive Vice
President of the Company (or a successor of the Company) or any action by the
board of directors of the Company (or a board of directors of a successor of the
Company) removing him from such office, or the failure of the board of directors
of the Bank (or any successor of the Bank) to elect him as Executive Vice
President of the Bank (or any successor of the Bank) or any action by such board
(or a board of a successor of the Bank) removing him from such office. The term
"Involuntary Termination" does not include Termination for Cause, termination of
employment due to death or permanent disability pursuant to Section 7(f) of this
Agreement, retirement or suspension or temporary or permanent prohibit from
participation in the conduct of the Bank's affairs under Section 8 of the
Federal Deposit Insurance Act.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|f)       | The terms "Termination for Cause" and "Terminated For Cause" mean termination
of the employment of the Employee with either the Company or the Bank, as the case
may be, because of the Employee's personal dishonesty, incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional failure
to perform stated duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or (except as
provided below) material breach of any provision of this Agreement. No act or failure
to act by the Employee shall be considered willful unless the Employee acted or
failed to act was in the best interest of the Company or the Bank. The Employee shall
not be deemed to have been Terminated for Cause unless and until there shall have
been delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the entire membership of the Board of
Directors at a meeting of the Board duly called and held for such purposes (after
reasonable notice to Employee and an opportunity for the Employee, together with
the Employee's counsel, to be heard before the Board), stating that in the good faith
opinion of the Board of Directors the Employee has engaged in conduct described in
the preceding sentence and specifying the particulars thereof in detail.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

3

<PAGE>

|2. | Term.The term of this Agreement shall be a period of three years commencing on the
Effective Date, subject to earlier termination as provided herein. Beginning on the first
anniversary of the Effective Date, and on each anniversary thereafter, the term of this
Agreement shall be extended for a period of one year in addition to the then-remaining term,
provided that (i) neither the Employee nor the Company has given notice to the other in
writing at least 90 days prior to such anniversary that the term of this Agreement shall not
be extended further; and (ii) prior to such anniversary, the Board of Directors explicitly
reviews and approves the extension. Reference herein to the term of this Agreement shall
refer to both such initial term and such extended terms.                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | Employment. The Employee shall be employed as the Executive Vice President of the Bank.
As such, the Employee shall render all services as are customarily performed by persons
situated in similar executive capabilities, and shall have such other powers and duties as the
Board of Directors may prescribe from time to time. The Employee shall also render services
to any subsidiary or subsidiaries of the Company or Bank as requested by the Company or
the Bank from time to time consistent with his executive position. The Employee shall
devote his best efforts and reasonable time and attention to the business and affairs of the
Company and the Bank to the extent necessary to discharge his responsibilities hereunder.
The Employee may (i) serve on charitable board or committees and, in addition, on such
corporate board as are approved in a resolution adopted by a majority of the Board of
Directors, which approval shall not be withheld unreasonably and (ii) manage personal
investments, so long as such activities do not interfere materially with performance of his
responsibilities hereunder.

4.            	Cash Compensation.

|a)       | Salary. The Company and the Bank jointly agree to pay the Employee during the term
of this Agreement a base salary (the "Salary") the annualized amount of which shall
be not less than the annualized aggregate amount of the Employee's base salary from
the Company and any Consolidated Subsidiaries in effect at the Effective Date;
provided that any amounts of salary actually paid to the Employee by any
Consolidated Subsidiaries shall reduce the amount to be paid by the Company and
the Bank to the Employee. The Salary shall be paid no less frequently than monthly
and shall be subject to customary tax withholding. The amount of the Employee's
Salary shall be increased (but shall not be decreased) from time to time in accordance
with the amounts of salary approved by the Board of Directors or the board of
directors of any of the Consolidated Subsidiaries after the Effective Date. The
amount of the Salary shall be review by the Board of Director at least annually during
the term of this Agreement.
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|b)<PAGE> | Bonuses. The Employee shall be entitled to
participate in an equitable manner with all other executive officers of the
Company and the Bank in4such performance-based and discretionary bonuses, if any, as are authorized and
declared by the Board of Directors for executive officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|c)       | Expenses. The Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Employee in performing services under this
Agreement in accordance with the policies and procedures applicable to the executive
officers of the Company and the Bank, provided that the Employee accounts for such
expenses as required under such policies and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

5.           	Benefits.

|a) | Participation in Benefit Plans. The Employee shall be entitled to participate, to the
same extent as executive officers of the Company and the Bank generally, in all plans
of the Company and the Bank relating to pension, retirement, thrift, profit-sharing,
savings, group or other life insurance, hospitalization, medical and dental coverage,
travel and accident insurance, education, cash bonuses, and other retirement or
employee benefits or combinations thereof. In addition, the Employee shall be
entitled to be considered for benefits under all of the stock and stock option related
plans in which the Company's or the Bank's executive officers are eligible or become
eligible to participate.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|b) | Fringe Benefits. The Employee shall be eligible to participate in, and receive benefits
under, any other fringe benefit plans or perquisites which are or may become
generally available to the Company's or the Bank's executive officers, including but
not limited to supplemental retirement, incentive compensation, supplemental
medical or life insurance plans, company cars, club dues, physical examinations,
financial planning and tax preparation services.                                                                                                                                                                                                                                                 

|6. | Vacations; Leave. The Employee shall be entitled (i) to annual paid vacation in accordance
with the policies established by the Board of Directors for executive officers, and (ii) to
voluntary leaves of absence, with or without pay, from time to time at such times and upon
such conditions as the Board of Directors may determine it its discretion.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7.           	Termination of Employment.

|a)<PAGE> | Involuntary Termination. The Board of Directors may terminate the Employee's
employment at any time, but, except in the case of Termination for Cause,
termination of employment shall not prejudice the Employee's right to compensation
or other benefits under this Agreement. In the event of Involuntary Termination other
than after a Change in Control which occurs during the term of this Agreement, the
Company and the Bank jointly shall (i) pay to the Employee during the remaining5term of this Agreement
the Salary at the rate in effect immediately prior to the Date of Termination,
payable in such manner and at such times as the Salary would have been payable
to the Employee under Section 4(a) if the Employee had continued to be employed
by the Company and the Bank, and (ii) provide to the Employee during the
remaining term of this Agreement substantially the same group life insurance,
hospitalization, medical, dental, prescription drug and other health benefits,
and long-term disability insurance (if any) for the benefit of the Employee and
his dependants and beneficiaries who would have been eligible for such benefits
if the Employee had not suffered Involuntary Termination, on terms substantially
as favorable to the Employee, including amounts of coverage and deductibles and
other cost to him, as if he had not suffered Involuntary Termination.
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|b)       | Termination for Cause. In the event of Termination for Cause, the Company and the
Bank shall pay to the Employee the Salary and provide benefits under this Agreement
only through the Date of Termination, and shall have no further obligation to the
Employee under this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|c)       | Voluntary Termination. The Employee's employment may be voluntary terminated
by the employee at any time upon 90 days' written notice to the Company and the
Bank or such shorter period as may be agreed upon between the Employee and the
Board of Directors. In the event of such Voluntary Termination, the Company and
the Bank shall be obligated jointly to continue to pay the Employee the Salary and
provide benefits under this Agreement only through the Date of Termination, at the
time such payments are due, and shall have no further obligation to the Employee
under this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|d)       | Change in Control. In the event of Involuntary Termination after a Change in Control
which occurs at any time following the Effective Date which the Employee is
employed under this Agreement, the Company and the Bank jointly shall (i) pay to
the Employee in a lump sum in cash within 25 business days after the Date of
Termination an amount equal to 299% of the Employee's "base amount" as defined
in Section 280G of the Internal Revenue Code of 1986 as amended (the "Code"); and
(ii) provide to the Employee during the remaining term of this Agreement
substantially the same group life insurance, hospitalization, medical, dental,
prescription drug and other health benefits, and long-term disability insurance (if any)
for the benefit of the Employee and his dependants and beneficiaries who have been
eligible for such benefits if the Employee had not suffered Involuntary Termination,
on terms substantially as favorable to the Employee, including amounts of coverage
and deductibles and other costs to him as if he had not suffered Involuntary
Termination.                                                                                                                                                                                                                                                                                                               
|<PAGE>   | 6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|e)       | Death. In the event of the death of the Employee while employed under this
Agreement and prior to any termination of employment, the Company or the Bank
jointly shall pay to the Employee's  estate, or such person as the Employee may have
previously designated in writing, the Salary which was not previously paid to the
Employee and which he would have earned if he had continued to be employed under
this Agreement through the last day of the calendar month in which the Employee
died, together with the benefits provided hereunder through such date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|f)       | Disability. If the Employee becomes entitled to benefits under the terms of the then-current disability plan, if any, of the Company or the Bank (the "Disability Plan") or
becomes and otherwise unable to fulfill his duties under this Agreement, he shall be
entitled to receive such group and other disability benefits, if any, as are then
provided by the Company or the Bank for executive employees. In the event of such
disability, this Agreement shall not be suspended , except that (i) the obligation to
pay the Salary to the Employee shall be reduced in accordance with the amount of
disability income benefits received by the Employee, if any, pursuant to this
paragraph such that, on an after-tax basis, the Employee shall realize from the sum
of disability income benefits and the Salary the same amount as he would realize on
an after-tax basis from the Salary if the obligation to pay the Salary were not reduced
pursuant to this Section 7(f); and (ii) upon a resolution adopted by a majority of the
disinterested members of the Board of Directors, the Company and the Bank may
discontinue payment of the Salary beginning six months following a determination
that the Employee has become entitled to benefits under the Disability Plan or
otherwise unable to fulfill his duties under this Agreement.                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|g)       | Temporary Suspension or Prohibition. If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and
(g)(1), the Bank's obligations under this Agreement shall be suspended as of the date
of service, unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its obligations under this Agreement were suspended
and (ii) reinstate in whole or in part any of its obligations which were suspended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|h)       | Permanent Suspension or Prohibition . If the Employee is removed and/or
permanently prohibited from participating in the conduct of the Bank's affairs by an
order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12 U.S.C. Section 1818(e)(3) and
(g)(1), all obligations of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall not be
affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|<PAGE>   | 7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|i)       | Default of the Bank. If the Bank is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of the date of default,
but this provision shall not affect any vested rights of the contracting parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|j)       | Termination by Regulators. All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary for
the continued operation of the Bank: (1) at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of the
Bank under the authority contained in Section 13(c) of the FDIA; or (2) by the FDIC,
at the time it approves a supervisory merger to resolve problems related to operation
of the Bank. Any rights of the parties that have already vested, however, shall not be
affected by any such action.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|k)       | Reductions of Benefits. Notwithstanding any other provision of this Agreement, if
payments and the value of benefits received or to be received under this Agreement,
together with any other amounts and the value of benefits received or to be received
by the Employee, would cause any amount to  be nondeductible by the Company or
any of the Consolidated Subsidiaries for federal income tax purposes pursuant to or
by reason of Section 280G of the Code, then payments and benefits under this
Agreement shall be reduced (not less than zero) to the extent necessary so as to
maximize amounts and the value of benefits to be received by the Employee without
causing any amount to become nondeductible pursuant to or by reason of Section
280G of the Code. The Employee shall determine the allocation of such reduction
among payments and benefits to the Employee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|l)       | Further Reductions. Any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance with
12 U.S.C. 1828(k) and any regulations promulgated thereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|8.<PAGE> | Notice of Termination . In the event that
the Company or the Bank, or both, desire to terminate the employment of the
Employee during the term of this Agreement, the Company or the Bank, or both,
shall deliver to the Employee a written notice of termination, stating whether
such termination constitutes Termination for Cause or Involuntary Termination,
setting forth in reasonable detail the facts and circumstances that are the
basis for the termination, and specifying the date upon which employment shall
terminate, which date shall be at least 30 days after the date upon which the
notice is delivered, except in the case of Termination for Cause. In the event
that the Employee determines in good faith that he has experienced an
Involuntary Termination of his employment, he shall send a written notice to the
Company and the Bank stating the circumstances that constitute such Involuntary
Termination and the date upon which his employment shall8have ceased due to such Involuntary Termination. In the event that the Employee
desires to effect a Voluntary Termination, he shall deliver a written notice to
the Company and the Bank, stating the date upon which employment
shall terminate, which date shall be at least 90 days after the date upon which
the notice is delivered, unless the parties agree to a date sooner.
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9.          	Non-Competition.

|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b)<PAGE> | Employee recognizes and acknowledges that
the knowledge of the business activities and plans for business activities of
the Bank and affiliates thereof, as it may exist from time to time, is a
valuable, special and unique asset of the business of the Bank. Employee will
not, during or after the term of his employment, disclose any knowledge of the
past, present, planned or considered business activities of the Bank or
affiliates thereof to any person, firm, corporation, or other entity for any
reason or purpose whatsoever. Notwithstanding the foregoing, Employee may
disclose any knowledge of banking, financial and/or economic principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Bank. In the event of a breach or threatened breach
by Employee of the provisions of this Section, the Bank9will be entitled to an injunction restraining Employee from disclosing, in whole
or in part, the knowledge of the past, present, planned or considered business
activities of the Bank or affiliates thereof, or from rendering any services to
any person, firm, corporation, or other entity to whom such knowledge, in whole
or in part, has been disclosed or is threatened to be disclosed. Nothing herein
will be construed as prohibiting the Bank from pursuing any other remedies
available to the Bank for such breach or threatened breach, Including the
recovery of damages from Employee.

|10. | Attorneys' Fees. The Company and the Bank jointly shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the Employee
as a result of (i) the Employee's contesting or disputing any termination of employment, or
(ii) the Employee's seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company or the Bank (or
a successor) or the Consolidation Subsidiaries under which the Employee is or may be
entitled to receive benefits; provided that the Company's and the Bank's obligation to pay
such fees and expenses is subject to the Employee's prevailing with respect to the matters
in dispute in any action initiated by the Employee or the Employee's having been determined
to have acted reasonable and in good faith with respect to any action initiated by the
Company or the Bank.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11.          	No Assignments.

|(a) | This Agreement is personal to each of the parties hereto, and no party may assign or
delegate any of its rights or obligation hereunder without first obtaining the written
consent of the other parties; provided, however, that the Company and the Bank shall
require any successor or assign (whether direct or indirect, by purchase , merger,
consolidation or otherwise) by an assumption agreement in form and substance
satisfactory to the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company and/or the
Bank would be required to perform it if no such succession or assignment had taken
place. Failure to obtain such an assumption agreement prior to the effectiveness of
any such succession or assignment shall be a breach of this Agreement and shall
entitle the Employee to compensation and benefits from the Company and the Bank
in the same amount and on the same terms as the provisions of this Section 7(d) of
this Agreement. For purposes of implementing the provisions of this Section 11(a),
the date on which any such succession becomes effective shall be deemed the Date
of Termination.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(b) | This Agreement and all rights of the Employee hereunder shall inure to the benefit
of and be enforceable by the Employee's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and lagatees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

10

<PAGE>

|12. | Notice. For purposes of this Agreement, notices and all other communication provided for
in this Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or sent by certified mail, return receipt requested, postage prepaid, to
the Company and Bank at their home offices, to the attention of the Board of Directors with
a copy to the Secretary of the Company and the Secretary of the Bank, or, if to the Employee,
to such home or other address as the Employee has most recently provided in writing to the
Company or the Bank.                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|13. | Amendments. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties, except as herein otherwise provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|14. | Headings. The heading used in this Agreement are included solely for convenience and shall
not affect, or be used in connection with, the interpretation of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|15. | Severability. The provisions of this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the validity or enforceability of the other
provisions hereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|16. | Governing Law. This Agreement shall be governed by the laws of the State of Washington.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|17. | Arbitration. Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction.                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|18. | Deferral of Non-Deductible Compensation. In the event that the Employee's aggregate
compensation (including compensatory benefits which are deemed remuneration for
purposes of Section 162(m) of the Code) from the Company and the Consolidated
Subsidiaries for any calendar year under Section 162(m) of the Code (the "maximum
mandatorily deferred with interest thereon at 8% per annum to a calendar year such that the
amount to be paid to the Employee in such calendar year, including deferred amounts and
interest thereon, does not exceed the maximum allowable amount. Subject to the foregoing,
deferred amounts including interest thereon shall be payable at the earliest time permissible.

11

<PAGE>



IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.

Attest:                                                                         EVERTRUST FINANCIAL GROUP, INC.

/s/Lorelei Christenson	                                  /s/Michael B. Hansen
Lorelei Christenson, Corporate Secretary                     By    	Michael B. Hansen
                                                                                   
Its:    President and Chief Executive Officer

Attest:                                                                           EVERTRUST BANK

/s/Lorelei Christenson	                                  /s/Michael
R. Deller
Lorelei Christenson, Corporate Secretary                     By     Michael R. Deller
						                                                                                   
						Its:     President

/s/Kirk Bottles
						                                                                                   
						Employee



12

<PAGE>



Exhibit 10.10
Employment Agreement with Robert Nall



<PAGE>

AMENDMENT TO EMPLOYMENT AGREEMENT



THIS AMENDMENT TO EMPLOYMENT AGREEMENT attached hereto as Exhibit "A"
(the "Agreement") is made and entered into as of 28th day of April, 2003 by and between
EVERTRUST FINANCIAL GROUP, INC. (the "Company") and its wholly owned subsidiary,
EVERTRUST BANK (the "Bank"), and Robert Nall, (the "Employee").

WHEREAS, the Employee is currently serving as the Senior Vice President and Chief
Lending Officer of the Company and of the Bank;

WHEREAS, the Board of Directors of the Company and the Board of Directors of the Bank
(collectively, the "Board of Directors") desire to achieve uniformity in when they conduct their
annual reviews of senior management employment agreements for the purpose of more efficiently
administering review of senior management employment agreements and that such efficiency is in
the best interest of the Company and the Bank; and

WHEREAS,  the Board of Directors has approved and authorized the execution of this
amendment of the Agreement with the Employee,

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements of the parties herein, the Agreement attached hereto as Exhibit "A" is amended as
follows:

1.	Paragraph 2 of the Agreement entitled "Term" is amended as follows:

"The term of this Agreement will be until February 24, 2003.  Beginning on February
24, 2003 and on each anniversary thereafter, the term of this Agreement shall be
extended for a period of one year, provided that (i) neither the Employee nor the
Bank and/or Company have given notice to the other in writing at least 90 days prior
to such anniversary that the term of this Agreement shall not be extended further; and
(ii) prior to such anniversary, the Board of Directors explicitly reviews and approves
the extension.  Reference herein to the term of this Agreement shall refer to both such
initial term and such extended terms."

2.     Paragraph 9 of the Agreement entitled "Non-Competition", subparagraph a) is
amended as follows:

"Upon termination of Employee's
employment hereunder except pursuant to Sections 7(a) and (d) hereof, Employee
agrees not to compete with the Bank and/or Company for a period of one (1) year
following such termination in Snohomish or King County, Washington. Employee
agrees that during such period and within such area, Employee shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Company. The parties hereto,
recognizing that irreparable injury will

<PAGE>

result to the Bank and/or Company,
its business and property in the event of Employee's breach of this Subsection
9(a) agree that in the event of any such breach by Employee, the Bank and/or
Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Employee,
Employee's partners, agents, servants, employers, employees and all persons
acting for or with Employee. Employee represents and admits that in the event of
the termination of his employment pursuant to Section 7(b) and (c) hereof,
Employee's experience and capabilities are such that Employee can obtain
employment in a business engaged in other kinds and/or of a different nature
than the Bank and/or Company, and that the enforcement of a remedy by way of
injunction will not prevent Employee from earning a livelihood. Nothing herein
will be construed as prohibiting the Bank and/or Company from pursuing any other
remedies available to the Bank and/or Company for such breach or threatened
breach, including the recovery of damages from Employee."

3.     A new Paragraph 10 is added to the Agreement as follows:

"10.   	Solicitation and/or Providing Services After Termination.

|(a)       | Employee agrees that, in addition to any other limitations, for a period of two (2)
years after termination of his employment under this Agreement, Employee will not,
on behalf of himself or on behalf of any other person, firm, corporation, or other
entity solicit, nor shall provide any financial services to those customers/relationships
who/which have been developed as a result of the Employee's tenure with the Bank
and/or Company under this Agreement.  Customer/banker relationships which the
Employee brought to the Bank and/or Company as a result of previous relationships
and those that arose as a result of referrals from those previous relationships are
exempt from this provision.  Upon termination from employment, upon request of
the Bank and/or Company, Employee will provide a list of those previous
relationships which he claims are exempt from this provision to the Bank and/or
Company.  If a customer, in the Bank and/or Company's sole discretion, requests a
relationship or a service which is not offered by the Bank and/or Company after
termination of this Agreement, such will also be exempt from this provision.  If there
is a "Change in control" as defined in paragraph 1. a) of the Agreement resulting in
Employee's termination, this provision becomes null and void.
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b)<PAGE> | Employee agrees that for a period of two (2)
years after Employee's employment under the terms of this Agreement end, for
whatever reason, Employee will not directly or indirectly encourage or solicit
any employee of employer to leave such employment for any reason, nor assist
others in so soliciting or encouraging employees of the Bank and/or Company to
leave. In the event there is a "Change in control" as defined in paragraph1. a) of the Agreement resulting in Employee's termination, this provision
becomes null and void."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

4.     All remaining paragraphs in the Agreement following amended newly inserted
Paragraph 10 are renumbered in the order in which they appear.

5.     All provisions of the Agreement not specifically amended remain in full force and
effect.

|EVERTRUST FINANCIAL GROUP, INC.
EVERTRUST BANK/s/Lorelei Christenson
Lorelei Christenson
Corporate Secretary | EMPLOYEE/s/Robert Nall
Robert Nall
Senior Vice President & Chief Lending Officer
|------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------
|/s/William J. Rucker
William J. Rucker
Compensation Committee Chair                                          |                                                                                 



<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            
|                               
|EverTrust Asset Management (1)  | 100%         | Washington            
|                               
|Mutual Bancshares Capital, Inc. | 100%         | Washington            
|                               
|Sound Financial, Inc. (1)       | 100%         | Washington            
|                               

____________

|(1) | 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 Statement Nos. 333-89285 and 333-48884 of EverTrust
Financial Group, Inc. on Form S-8 of our report dated May 2, 2003, appearing in this Annual Report on Form 10-K
of EverTrust Financial Group, Inc. and subsidiaries  for the year ended March 31, 2003.

/s/Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Seattle, Washington
June 18, 2003

<PAGE>



Exhibit 99



Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



<PAGE>

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF EVERTRUST FINANCIAL GROUP, INC.
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection
with this Annual Report on Form 10-K, that:

|1. | the report fully complies with the requirements of Sections 13(a) and 15(d) of the Securities Exchange
Act of 1934, as amended, and            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------
|2. | the information contained in the report fairly presents, in all material respects, the company's financial
condition and results of operations.

/s/Michael B. Hansen                                                
/s/Jeffrey R. MitchellMichael B. Hansen                                                                                 Jeffrey R. MitchellChief Executive Officer                                                                          Chief Financial Officer





Dated:  June 19, 2003



A signed original of this written statement required by Section 906 has been provided to EverTrust Financial Group, Inc. and
will be retained by EverTrust Financial Group, Inc. and furnished to the staff of the Securities and Exchange Commission or
its staff upon request.

<PAGE>