|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)                   
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|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 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 27, 2004, there were issued and outstanding 6,890,160 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 September 30, 2003, the aggregate value of the Common Stock outstanding held by nonaffiliates of the registrant was $137,272,036 (7,255,393 shares at $18.92 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 2004 Annual Meeting of Stockholders (Part III).

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|**PART I**.   | Page                                                                               
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|              | **Item 1. Business**                                                               
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|              | **Item 2. Properties**                                                             
|              | **Item 3. Legal Proceedings**                                                      
|              | **Item 4. Submission of Matters to a Vote of Security Holders**                    
|**PART II.**  |                                                                                    
|              | **Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters** 
|              | **and Issuer Purchases of Equity Securities**                                      
|              | **Item 6. Selected Financial Data**                                                
|              | **Item 7. Management's Discussion and Analysis of Financial Condition and Results**
|              | **of Operations**                                                                  
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|              | **Item 7A. Quantitative and Qualitative Disclosures About Market Risk**            
|              | **Item 8. Financial Statements and Supplementary Data**                            
|              | **Item 9. Changes in and Disagreements with Accountants on Accounting and**        
|              | **Financial Disclosure**                                                           
|              | **Item 9A. Controls and Procedures**                                               
|**PART III.** |                                                                                    
|              | **Item 10. Directors and Executive Officers of the Registrant**                    
|              | **Item 11. Executive Compensation**                                                
|              | **Item 12. Security Ownership of Certain Beneficial Owners and Management**        
|              | **Item 13. Certain Relationships and Related Transactions**                        
|              | **Item 14.  Principal Accountant Fees and Services**                               
|**PART IV.**  |                                                                                    
|              | **Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K**      

(i)

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**PART I**

******Item 1.  Business**

**General**

EverTrust Financial Group, Inc. ("EverTrust" or the "Company"), a Washington state corporation, is the
holding company for EverTrust Bank of Washington ("EverTrust Bank" or the "Bank"). 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, 2004, the Company had total assets of $770.1 million, total deposits of $546.4 million and total
equity of $90.6 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, now a Washington state chartered stock savings 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 and residential
related properties. The Bank's principal business is attracting deposits from the general public through its retail branch
network and Private Client Group offices, 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's Private Client
Group focuses on serving high net worth individuals and small businesses with a range of business and private banking
services, as well as wealth management services such as investment management and limited trust services.

**Market Area**

EverTrust Bank conducts business through its 10 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.
EverTrust Bank also operates real estate loan production offices in Tacoma, Washington and Portland, Oregon.  These
offices primarily focus on brokering commercial and mutifamily loans to financing conduits, life insurance companies
and other financial institutions.  In addition, they also provide interim construction and permanent portfolio financing.
To a 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.  EverTrust Bank has and intends to continue to establish correspondent relationships with
financial institutions in these states which will allow for increased commercial real estate and multi-family lending
activity on a participation basis.  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").

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, 2004,
EverTrust Bank's total loans were $662.6 million, including approximately $886,000 of loans held for sale.

The Bank's internal loan policy limits the maximum amount of loans to one borrower to 25% of its capital.
At March 31, 2004, the maximum amount which EverTrust Bank could have lent to any one borrower and the borrower's
related entities was approximately $17.8 million under its policy.  At March 31, 2004, EverTrust Bank had loans to two
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 largest borrower had $18.1 million committed, of which $15.5 million was outstanding, representing 25%
and 22% of EverTrust Bank's total capital of $71.0 million, respectively.  All loans to the borrower were performing
according to their terms at March 31, 2004.  Loans in excess of 25% of EverTrust Bank's capital are participated to the
Company on a last-in, first-out basis.  There were $5.4 million of loan participations with the Company outstanding as
of March 31, 2004, which were performing in accordance with their 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.  The Company does not have any foreign loans for any of the years
presented.

|                             | At March 31,          
|---------------------------- | ----------------------
|                             | 2004                  
|                             | Amount                
|                             | (Dollars in thousands)
|Commercial construction      | $ 76,756              
|Commercial real estate       | 291,799               
|Multi-family construction    | 38,257                
|Multi-family residential     | 185,715               
|Business loans               | 45,565                
|One- to- four family         |                       
|construction and land        |                       
|development                  | 100,765               
|Consumer:                    |                       
|Home equity and other        |                       
|mortgages                    | 36,613                
|Credit cards                 | 6,534                 
|Other installment loans      | 4,936                 
|One- to- four family         |                       
|residential                  | 21,604                
|Total loans                  | 808,544               
|Less:                        |                       
|Undisbursed loan proceeds    | (132,557)             
|Deferred loan fees and other | (4,299)               
|Reserve for loan losses      | (9,046)               
|                             | 662,642               
|Loans receivable held        |                       
|for sale                     | (886)                 
|Loans receivable, net        | $661,756              

**Commercial Real Estate Lending**.  Commercial real estate loans totaled $291.8 million, or 36.1% of total
loans receivable at March 31, 2004, and consisted of 266 loans.  EverTrust Bank originates commercial real estate loans
primarily secured by warehouses, mini-storage facilities, industrial use buildings, office and medical office buildings
and retail shopping centers located in EverTrust Bank's market area. Commercial
real estate loans typically range in principal amount from $500,000 to $7.5
million. At March 31, 2004, the largest commercial real estate loan on one
property had

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an outstanding balance of $11.4 million and is secured by a
156,000 square foot outlet mall located in the Bank's market area. This loan was
performing according to its terms at March 31, 2004.

Commercial adjustable rate mortgage loans are originated with variable rates which generally adjust annually
after an initial period ranging from six months 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
2.75% 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 multi-family and 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 multi-family and 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.  The continued year-over-year increase in the commercial real estate portfolio is attributable to the Company's desire to meet the growing demand
in this sector of the lending market.  New loan officers with significant experience in commercial real estate lending
have been hired to accomplish the growth objectives of the portfolio and are supported by an experienced risk
management staff.

**Multi-Family Lending.**  At March 31, 2004, $185.7 million, or 23.0% of the Bank's total loan portfolio was
secured by multi-family dwelling units, which consist of more than four units, located primarily in its market area.

Multi-family adjustable rate mortgage loans are originated with variable rates which generally adjust annually
after an initial period ranging from six months 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, 2004, the largest
non-construction multi-family loan was on a 148 unit independent and assited living center with an outstanding principal
balance of $12.0 million located in the Bank's market area.  At March 31, 2004, 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

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designated by the Bank, all of which are reviewed by EverTrust Bank's review appraiser.  EverTrust Bank requires its
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.  The increase in the multi-family loan portfolio is the result of financing larger unit properties in fiscal 2004 versus those financed in prior years
in order to increase lending economies of scale and to meet market demand.  The market for these types of projects has
dominated multi-family lending in the region because of the advantage in per unit costs versus smaller projects.  A
portion of the increase in this category is also attributed to loans that are shorter-term in nature and will most likely be
refinanced in the secondary market once certain lease-up and financing ratios are met.  The Company hopes to capitalize
on the eventual refinancing opportunities in line with its strategic objectives to grow non-interest income through the
commercial mortgage banking group.

**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, 2004, the business loans amounted to $45.6 million, or 5.6%, of the Bank's total loans.
The reduction in business loans from the prior year is a result of a rebalancing of the portfolio toward the desired target
market and away from loans that have fallen outside of the Company's risk tolerance.

At March 31, 2004, the Bank's largest outstanding business loan was for $3.7 million and was unsecured.  The
loan was performing according to its terms at March 31, 2004.

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

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for like terms of the letter of credit.  At March 31, 2004, EverTrust Bank had no outstanding letters of credit.
International letters of credit are offered through a correspondent bank that assumes credit and payment risk on the
instrument.  EverTrust Bank receives a fee from the borrower and the correspondent bank for arranging the international
letters of credit.

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

**Construction and Land Development Lending.** EverTrust Bank has an established market niche as an
originator of construction and land development loans.

The Bank's portfolio includes one- to- four family construction and land development loans totaling $100.8
million or 12.5% at March 31, 2004.  The single largest one- to- four family construction and land development loan
at March 31, 2004 was for $7.7 million and was secured by a 58 one-to-four family residential subdivision.  The
continued year-over-year increase in the one- to- four family construction and land development portfolio is attributable
to the Company's desire to meet the growing demand in this sector of the lending market.

EverTrust Bank also provides construction and construction permanent financing for multi-family and
commercial properties.  At March 31, 2004, such construction loans amounted to $115.0 million, or 14.2%.  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, 2004, the largest multi-family construction loan was for
$4.9 million secured by a 70 unit apartment building located in EverTrust Bank's market area and was performing
according to its terms.  At March 31, 2004, the largest commercial construction loan was for $11.0 million, secured by
a medical campus 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.  The increase in multi-family and commercial
construction loans over the prior year is attributable to the Company's desire to meet the growing demand in this sector
of the lending market.  Although a majority of the construction loans will become permanent portfolio loans upon
completion of construction, the construction only loans may provide refinancing opportunities for the commercial
mortgage banking group.

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 repeat business, walk-in customers, customer
referrals, contacts in the business community and real estate brokers seeking financing for their clients.

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

**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, 2004, consumer loans, excluding credit card
loans, amounted to $41.5 million, or 5.1% of the total loan portfolio.

At March 31, 2004, 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 4.5%, 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.

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, 2004, the combined credit card portfolio consisted of business
credit lines of $1.3 million and personal credit card lines of $6.5 million for a total of $7.8 million or 0.96% of total
loans.  Amounts disbursed under the credit lines were $1.0 million at March 31, 2004 compared to $869,200 at March
31, 2003.  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, 2004, there were $2,800 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

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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, 2004, no consumer loans were delinquent in excess of 90 days or in nonaccrual status.

**Residential One- to- Four Family Lending**.  At March 31, 2004, $21.6 million of the Bank's loan portfolio
consisted of permanent loans secured by one- to- four family residences, including approximately $886,000 of loans
held for sale.  This amount represents 2.7% of the Bank's total loans.  The continued year-over-year decline in the
residential one- to- four family loan portfolio is the result of loan refinancing activity in the historically low interest rate
environment.  The Company has determined not to hold long-term assets in the one- to- four family loan portfolio with
these interest rate risk characteristics at the present time.

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, 2004, $9.7 million, or 47.5%, of the Bank's one- to- four family loan portfolio consisted of fixed
rate one- to- four family mortgage loans, both held for sale and held for investment.  EverTrust Bank also offers
adjustable rate mortgage loans at rates and terms competitive with market conditions.  All of EverTrust Bank's adjustable
rate mortgage loans are retained in its loan portfolio and not with a view toward sale in the secondary market.

EverTrust Bank offers several adjustable rate mortgage products which adjust annually after an initial period
ranging from six months to seven years.  Contractual annual adjustments generally range from 2% to unlimited, subject
to a general overall limitation of 8%.  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, 2004, $10.7 million, or 52.5%, of the Bank's mortgage loan
portfolio consisted of adjustable rate mortgage loans.

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

While fixed-rate, single-family residential mortgage loans are normally originated with 15 to 30 year terms,
such loans typically remain outstanding for substantially shorter periods.  This is because borrowers often prepay their
loans in full upon sale of the property pledged as security or upon refinancing the original loan.  In addition,
substantially all

7

<PAGE>

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.

**Loan Maturity and Repricing.**  The following table sets forth information at March 31, 2004 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           | $ 14,514       | $ 17,590 | $ 13,255 | $     427 | $            -- | $ 45,786
|Commercial real estate            | 128,940        | 85,885   | 57,804   | 14,324    | 93              | 287,046 
|Multi-family construction         | 15,265         | 4,918    | 3,544    | --        | --              | 23,727  
|Multi-family residential          | 77,053         | 75,716   | 29,960   | 1,379     | 417             | 184,525 
|Business loans                    | 18,424         | 1,012    | 4,442    | --        | --              | 23,878  
|One- to- four family construction |                |          |          |           |                 |         
|and land development              | 64,499         | 24       | 24       | 117       | 299             | 64,963  
|Consumer:                         |                |          |          |           |                 |         
|Home equity and other mortgages   | 19,418         | 563      | 519      | 1,013     | --              | 21,513  
|Credit cards                      | 900            | --       | --       | --        | --              | 900     
|Other installment loans           | 1,661          | 510      | 141      | 95        | 3               | 2,410   
|One- to- four family residential  | 6,471          | 3,724    | 2,841    | 4,493     | 2,824           | 20,353  
|                                  |                |          |          |           |                 |         
|Total                             | $347,145       | $189,942 | $112,530 | $21,848   | $3,636          | $675,101

8

<PAGE>

The following table sets forth the dollar amount of all loans due after March 31, 2004, which have fixed interest
rates and have floating or adjustable interest rates.

|                                  | Fixed          | Variable  | Total    
|--------------------------------- | -------------- | --------- | ---------
|                                  | Rates          | Rates     | Rates    
|                                  | (In thousands)
|                                  |                |           |          
|Commercial construction           | $13,283        | $  32,503 | $  45,786
|Commercial real estate            | 25,511         | 261,535   | 287,046  
|Multi-family construction         | --             | 23,727    | 23,727   
|Multi-family residential          | 27,243         | 157,282   | 184,525  
|Business loans                    | 6,318          | 17,560    | 23,878   
|One- to- four family construction |                |           |          
|and land development              | 472            | 64,491    | 64,963   
|Consumer:                         |                |           |          
|Home equity and other mortgages   | 2,418          | 19,095    | 21,513   
|Credit cards                      | --             | 900       | 900      
|Other installment loans           | 1,116          | 1,294     | 2,410    
|One- to- four family residential  | 9,675          | 10,678    | 20,353   
|                                  |                |           |          
|Total                             | $86,036        | $589,065  | $675,101 

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

**Loan Solicitation and Processing.**  Loan originations are obtained from a variety of sources, including repeat
business, 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 $2.5 million
for consumer and business loans and $4.0 million for real estate loans  may be approved by the Management Loan
Committee without Board approval; all other loans over $2.5 million to $4.0 million must be approved by the Board
Loan Committee; and loans exceeding $10.0 million, as well as loans of any size granted to a single borrower whose
aggregate lending relationship exceeds 25% of total capital, must be approved by EverTrust Bank's Board of Directors.

**Loan Originations, Purchases and Sales**.  During the year ended March 31, 2004, the Bank's total gross loan
originations were $498.9 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 and to a much lesser extent, other states, from other lenders.  EverTrust Bank has and intends to
continue to establish correspondent lending relationships with financial institutions in states such as Oregon, Idaho
California and Hawaii which will allow for increased commercial real estate and multi-family lending activity on a
participation basis.  The purchase of loan participations both within and out of the Bank's  market area is generally

9

<PAGE>

conducted to accommodate correspondent banking relationships between EverTrust and other financial institutions to
which EverTrust sells and/or participates loans on a reciprocal basis.  The sale of loan participations to these
correspondent financial institutions allows EverTrust to diversify credit risk, enhance loan yields and generate servicing
fee income in an effort to meet strategic plan objectives for increasing non-interest income.  All loan purchases and sales
are conducted on a non-recourse basis. Loan  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.  One- to- four family 30 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.  One- to-
four family loans sold in the secondary market are generally sold on a servicing retained basis.  At March 31, 2004
EverTrust Bank's loan servicing portfolio totaled $269.9 million and was comprised of $76.3 million of one- to four-
family loans and $193.6 million of commercial and multi-family loans.

The increase in multi-family loan originations, both construction and permanent, resulted from the Bank's
marketing efforts for these types of loans along with increased refinancing activity as a result of lower interest rates.
Business loan originations declined as the number of loan officers was reduced through attrition and the Bank's target
market was more narrowly defined.  The origination of home equity and other consumer mortgages declined as
homeowners continued to refinance their first mortgages which precluded the need for second mortgage financing.
Principal repayments increased slightly from the prior year and were the result of refinancing activity in the continued
low interest rate environment.

10

<PAGE>

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

|                                            | Year Ended March 31,
|------------------------------------------- | --------------------
|                                            | 2004                
|                                            | (In thousands)      
|Loans originated:                          
|Commercial construction                     | $ 67,392            
|Commercial real estate                      | 110,259             
|Multi-family construction                   | 52,317              
|Multi-family residential                    | 113,614             
|Business loans                              | 30,065              
|One- to- four family construction and land  |                     
|development                                 | 56,193              
|Consumer:                                   |                     
|Home equity and other mortgages             | 11,076              
|Credit cards                                | 1,440               
|Other installment loans                     | 2,458               
|One- to- four family residential            | 54,048              
|Total loans originated                      | 498,862             
|                                            |                     
|Loans purchased:                            |                     
|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                     | --                  
|One- to- four family residential            | --                  
|Total loans purchased                       | --                  
|                                            |                     
|Loans sold:                                 |                     
|Total whole loans sold                      | 30,853              
|Participation loans                         | 53,048              
|Total loans sold                            | 83,901              
|                                            |                     
|Principal repayments                        | 356,998             
|Loans securitized                           | --                  
|Transfer to real estate owned               | 375                 
|Increase (decrease) in other items, net     | 166                 
|Net increase (decrease) in loans receivable |                     
|and loans held for sale                     | $ 57,754            

**Loan Origination and Other Fees**.  The Bank, in most 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
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

11

<PAGE>

recognized as income at the time of prepayment. The Bank had
    $4.3 million of net deferred mortgage loan fees at March 31, 2004.

**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,      
|---------------------------------------------------- | ----------------------
|                                                     | 2004                  
|                                                     | (Dollars in thousands)
|Loans accounted for on a nonaccrual basis:           |                       
|Commercial construction                              | $3,432                
|Commercial real estate                               | --                    
|Multi-family construction                            | --                    
|Multi-family residential                             | 393                   
|Business loans                                       | 65                    
|One- to- four family construction and                |                       
|land development                                     | --                    
|Consumer:                                            |                       
|Home equity and other mortgages                      | --                    
|Credit cards                                         | --                    
|Other installment loans                              | --                    
|One- to- four family residential                     | 83                    
|Total                                                | 3,973                 
|                                                    
|                                                     |                       
|*(table continues on following page)*               
|12
  <PAGE>                                         
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     |                       
|                                                     | Year Ended  March 31, 
|                                                     | 2004                  
|                                                     | (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                                       | --                    
|                                                     |                       
|One- to- four family construction and                |                       
|land development                                     | --                    
|Consumer:                                            |                       
|Home equity and other mortgages                      | --                    
|Credit cards                                         | 3                     
|Other installment loans                              | --                    
|One- to- four family residential                     | --                    
|Total                                                | 3                     
|                                                     |                       
|Total of nonaccrual and 90 days  past due loans      | 3,976                 
|                                                     |                       
|Real estate and other assets owned/acquired in       |                       
|satisfaction of debts previously contracted          | 375                   
|                                                     |                       
|Total nonperforming assets                           | 4,351                 
|                                                     |                       
|Restructured loans                                   | --                    
|                                                     |                       
|Nonaccrual and 90 days or more past due loans as a   |                       
|percentage of loans receivable, net                  | 0.60%                 
|                                                     |                       
|Nonaccrual and 90 days or more past due              |                       
|loans as a percentage of total assets                | 0.52%                 
|                                                     |                       
|Nonperforming assets as a percentage of total assets | 0.56%                 

Nonaccrual commercial construction loans are comprised of a 35 lot single family residential development loan.
Nonaccrual multi-family residential loans are comprised of a 20 unit multi-family loan.   Management believes both
loans are well-secured at the present time.

**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, 2004, EverTrust Bank had one piece of real estate owned valued at $375,000.
During April 2004, the property was sold and the Bank recorded a gain of $18,000.

**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

13

<PAGE>

to the borrower's financial difficulties grants a concession to the borrowers that the Bank would not otherwise consider.
Debt restructures or loan modifications for a borrower do not necessarily always constitute troubled debt restructures,
however, and troubled debt restructures do not necessarily result in nonaccrual loans.  EverTrust Bank had no
restructured loans as of March 31, 2004.

**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 the adequacy of the allowance for loan losses and the provision for loan loss expense 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, risk characteristics of the loan portfolio, comparative peer group and industry reserve-related
ratios and the application of estimated loss factors assigned by loan grade.

The Bank recorded a $525,000 provision for loan losses for the year ended March 31, 2004, compared to
$390,000 and $1.5 million for the years ended March 31, 2003 and 2002, respectively. The increase was primarily due
to the increase in net loan charge-offs from the prior year.  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 (i.e. an impaired loan),
and determination of the existence and realizable value of the collateral and guarantees securing the loans.  A specific
allowance may be assigned to these loans if they are individually determined to be impaired.  Impaired loans totaled $4.0
million at March 31, 2004, however, an analysis of the collateral underlying these loans indicated that no specific loss
allowance was necessary since the loans are more than adequately secured even though they are in non-accrual status.
Loans that are determined to be impaired are excluded from the formula allowance analysis so as not to duplicate the
loss exposure.

14

<PAGE>

The Bank's charge-offs as a percentage of average loans outstanding reflected in the following table increased
from the past several years but remains at a relatively low level.  The ratio of the allowance for loan losses as a
percentage of nonperforming loans at March 31, 2004 declined due to the increase in non-accrual loans, however, if
well-secured non-accrual loans are excluded, this ratio increases to over 13,000 percent.

Although the general allowance is allocated by loan type, 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.  There were no unallocated reserves at March 31, 2004.  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, 1.00% to 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 these may be adjusted in future periods to reflect changes in delinquency
percentages and loss experience. The overall adequacy of the loan reserve is also measured by applying estimated loss
factors assigned by loan grades.  These loss factors are derived from peer group and industry data, adjusted for specific
industry conditions and loss experience by portfolio type, 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.

At March 31, 2004, the Bank had a general allowance for loan losses of $9.0 million, compared to $9.0 million,
at March 31, 2003.  Management has determined that no change in the overall size of the allowance was necessary based
on the foregoing analysis and State economic reports that indicate the State's economy has begun to show slow, but
favorable growth signs in some sectors and in leading economic indicators.

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.

15

<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, 
|--------------------------------------------------- | ----------------------
|                                                    | 2004                  
|                                                    | (Dollars in thousands)
|                                                    |                       
|Allowance at beginning of period                    | $ 8,979               
|Provision for loan losses                           | 525                   
|Charge-offs:                                        |                       
|Commercial construction                             | --                    
|Commercial real estate                              | --                    
|Multi-family construction                           | --                    
|Multi-family residential                            | --                    
|Business loans                                      | 380                   
|One- to- four family construction                   |                       
|and land development                                | --                    
|Consumer:                                           |                       
|Home equity and other mortgages                     | --                    
|Credit cards                                        | 51                    
|Automobiles                                         | 5                     
|Other installment loans                             | 93                    
|One- to- four family residential                    | --                    
|Total charge-offs                                   | 529                   
|                                                    |                       
|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                                        | 1                     
|Automobiles                                         | 23                    
|Other installment loans                             | 47                    
|One- to- four family residential                    | --                    
|Total recoveries                                    | 71                    
|Net charge-offs                                     | 458                   
|Balance at end of period                            | $9,046                
|                                                    |                       
|Allowance for loan losses as a percentage of  total |                       
|loans outstanding at the end of the period          | 1.35%                 
|                                                    |                       
|Net charge-offs as a percentage of average loans    |                       
|outstanding during the period                       | 0.08%                 
|                                                    |                       
|Allowance for loan losses as a percentage of        |                       
|nonperforming loans at end of period                | 227.53%               

16

<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,          
|-------------------- | ----------------------
|                     | 2004                  
|                     |                       
|                     |                       
|                     |                       
|                     | Amount of             
|                     | Loan Loss             
|                     | Allowance             
|                     | (Dollars in thousands)
|                     |                       
|                     |                       
|Commercial           |                       
|construction         | $  842                
|Commercial real      |                       
|estate               | 3,229                 
|Multi-family         |                       
|construction         | 637                   
|Multi-family         |                       
|residential          | 1,948                 
|Business loans       | 655                   
|One- to- four family |                       
|construction  and    |                       
|land development     | 1,077                 
|Consumer:            |                       
|Home equity and      |                       
|other mortgages      | 388                   
|Credit cards         | 78                    
|Other installment    |                       
|loans                | 98                    
|One- to- four family |                       
|residential          | 94                    
|Total allocated      | 9,046                 
|Unallocated          | --                    
|Total                | $9,046                

17

<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").
All new investments purchased are generally placed in the available for sale category to allow for maximum flexibility
in managing the portfolio.

At March 31, 2004, the Company's consolidated investment portfolio totaled $76.5 million and consisted
principally of U.S. Government and agency obligations, municipal bonds, mortgage-backed securities 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, 2004, totaled
$38.1 million at estimated fair value, was comprised of Fannie Mae, Freddie Mac and GNMA mortgage-backed
securities.  The Company increased the mortgage-backed securities portfolio during the year ended March 31, 2004,
to enhance the overall credit quality of the investment portfolio.

**State and Municipal Bonds**.  The Company's tax exempt and taxable municipal bond portfolio, which at
March 31, 2004, totaled $3.0 million at estimated fair value, or $2.9 million at amortized cost, was comprised of general
obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by revenues from the
specific project being financed) issued by various housing authorities, hospitals, schools, water and sanitation districts
and other authorities located in the State of Washington.  At March 31, 2004, general obligation bonds and revenue
bonds had total estimated fair values of $1.4 million and $1.6 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, 2004, the Company's municipal bond portfolio had a weighted average maturity
of approximately five years and a weighted average coupon rate of 3.1%.

**Equity Securities**.  The Company's equity investments totaled $28,000 at fair value, or $15,000 at cost, at
March 31, 2004.  In prior years, the Company's equity portfolio consisted primarily of common stocks of companies
included in the Standard and Poor's Average and the Company decided during fiscal 2004 to sell a majority of its
holdings.  At this time the Company does not anticipate investing in common stocks in the future.

**U.S. Government and Agency Obligations**.  The Company's portfolio of U.S. Government and agency
obligations had a fair value of $28.8 million, or $28.5 million at amortized cost, at  March 31, 2004.  The longest term
bond has an amortized cost of $1.0 million and a term to maturity of 2.9 years.

**Off Balance Sheet Derivatives**.  Derivatives include "off balance sheet" financial products whose value is
dependent on the value of an underlying financial asset, such as a stock, bond, foreign currency, or a reference rate or
index.  Such derivatives include "forwards," "futures," "options" or "swaps."  The Company generally has not invested
in "off balance sheet" derivative instruments, although investment policies authorize such investments to hedge the
saleable loan pipeline of EverTrust Bank. Commitments to sell loans with a
notional balance of $886,000 at March 31, 2004 have a carrying value of $20,000,
representing the fair value of such commitments. Commitments of $2.7 million

18

<PAGE>

to originate loans at March 31, 2004, have a carrying value
of $30,000. At March 31, 2003, the Company had commitments to sell loans with a
notional balance of $3.0 million that had a carrying value of $64,000,
representing the fair value of such commitments. Commitments of $6.3 million to
originate loans at March 31, 2003, had a carrying value of $102,000.

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

|                           | At March 31,  
|-------------------------- | --------------
|                           | 2004          
|                           | Amortized     
|                           | Cost          
|                           | (In thousands)
|                           |               
|**Available for sale:**    |               
|Investment securities:     |               
|U.S. Government Agency     |               
|obligations                | $  27,525     
|Corporate obligations      | --            
|Municipal obligations      | 1,931         
|Equity securities          | 15            
|Mortgage-backed securities | 37,443        
|Total available for sale   | $ 66,914      
|                           |               
|**Held to maturity:**      |               
|Investment securities:     |               
|U.S. Government Agency     |               
|obligations                | $   1,001     
|Corporate obligations      | --            
|Municipal obligations      | 1,015         
|Mortgage-backed securities | 295           
|Total held to maturity     | $   2,311     
|                           |               
|Total                      | $ 69,225      

19

<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, 2004.

|                           | At March 31, 2004               
|-------------------------- | --------------------------------
|                           | Amount Due or Repricing within:*
|                           |                                 
|                           | One Year or Less                
|                           |                                 
|                           | Amortized                       
|                           | Cost                            
|                           | (Dollars in thousands)          
|**Available for sale:**   
|Investment securities:    
|U.S. Government Agency    
|obligations                | $5,023                          
|Corporate obligations      | --                              
|Municipal obligations      | 415                             
|Equity securities          | 15                              
|Mortgage-backed securities | 463                             
|Total available for sale   | $5,916                          
|                          
|**Held to maturity:**     
|Investment securities:    
|U.S. Government Agency    
|obligations                | $1,001                          
|Corporate obligations      | --                              
|Municipal obligations      | 720                             
|Equity securities          | --                              
|Mortgage-backed securities | --                              
|Total held to maturity     | $1,721                          
|                          
|Total                      | $7,637                          

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

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<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.

At March 31, 2004, EverTrust Bank's deposit composition reflects a deposit mixture with certificates of deposit
accounting for 46.9% of total deposits and negotiable order of withdrawal/checking accounts comprising a relatively
modest 17.7% 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, 2004, the Bank had $96.4 million of jumbo certificates of deposit (balances of $100,000 or
more), including $12.9 million in public unit funds which represents 2.4% of total deposits at March 31, 2004.
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, 2004.

|Weighted |               |                               |                |               |           
|-------- | ------------- | ----------------------------- | -------------- | ------------- | ----------
|Average  |               |                               |                |               | Percentage
|Interest |               |                               |                | Minimum       | of Total  
|Rate     | Term          | Category                      | Amount         | Balance       | Deposits  
|         |               |                               | (In thousands) |               |           
|        
|--%      | N/A           | Non-interest bearing accounts | $ 22,662       | $          -- | 4.1%      
|0.56     | N/A           | Savings accounts              | 12,964         | 300           | 2.4       
|0.99     | N/A           | Checking accounts             | 96,463         | 300           | 17.7      
|1.26     | N/A           | Money market deposit accounts | 157,850        | 1000          | 28.9      
|         |               |                               |                |               |           
|         |               | Certificates of Deposit       |                |               |           
|         |               |                               |                |               |           
|1.39     | 1-11 months   | Fixed-term, fixed-rate        | 35,575         | 500           | 6.5       
|1.76     | 12-23 months  | Fixed-term, fixed-rate        | 96,355         | 500           | 17.6      
|2.87     | 24-35 months  | Fixed-term, fixed-rate        | 28,240         | 500           | 5.2       
|3.93     | 36-59 months  | Fixed-term, fixed-rate        | 22,956         | 500           | 4.2       
|5.28     | 60-156 months | Fixed-term, fixed rate        | 73,323         | 500           | 13.4      
|         |               |                               | 256,449        |               | 46.9      
|         |               | TOTAL                         | $ 546,388      |               | 100.00%   

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<PAGE>

The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until
maturity as of March 31, 2004.  Jumbo certificates of deposit are certificates in amounts of $100,000 or more.

CertificatesMaturity Period
of Deposit(In thousands)Three months or less
$22,225Over three through six months
14,955Over six through twelve months
19,785Over twelve months
39,474Total
$96,439


**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,          
|------------------------------------- | ----------------------
|                                      | 2004                  
|                                      |                       
|                                      |                       
|                                      | Amount                
|                                      | (Dollars in thousands)
|                                      |                       
|                                      |                       
|Savings accounts                      | $ 12,964              
|Demand deposit accounts               | 119,125               
|Money market deposit accounts         | 157,850               
|Fixed-rate certificates which mature: |                       
|Within 1 year                         | 151,000               
|After 1 year, but within 2 years      | 47,706                
|After 2 years, but within 5 years     | 45,877                
|Certificates maturing  thereafter     | 11,866                
|Total                                 | $546,388              

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

|                                |                                      | At March 31,          
|------------------------------- | ------------------------------------ | ----------------------
|                                | WeightedAverage Rateat March 31,2004 | 2004                  
|                                | Amount                               | %                     
|                                |                                      | (Dollars in thousands)
|                                |                                     
|Noninterest-bearing accounts    | --%                                  | $   22,662            
|Savings accounts                | 0.56                                 | 12,964                
|Checking accounts               | 0.99                                 | 96,463                
|Money market accounts           | 1.26                                 | 157,850               
|Time deposits by original term: |                                     
|1 to 11 months                  | 1.39                                 | 35,575                
|12 to 23 months                 | 1.76                                 | 96,355                
|24 to 35 months                 | 2.87                                 | 28,240                
|36 to 59 months                 | 3.93                                 | 22,956                
|60 to 156 months                | 5.28                                 | 73,323                
|                                | 3.03                                 | 256,449               
|                                | 1.97%                                | $546,388              

22

<PAGE>

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

|                                                    | Year Ended March 31,
|--------------------------------------------------- | --------------------
|                                                    | 2004                
|                                                    | (In thousands)      
|                                                    |                     
|Beginning balance                                   | $ 508,269           
|Net deposits (withdrawals) before interest credited | 26,190              
|Interest credited                                   | 11,929              
|Net increase in deposits                            | 38,119              
|Ending balance                                      | $546,388            

**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, 2004, 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 $264.6 million, of which $128.5 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, 2004, of which none was
outstanding at March 31, 2004.

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, 2004, average borrowings outstanding increased primarily to fund loan growth.

|                                           | For the Year Ended March 31,
|------------------------------------------ | ----------------------------
|                                           | 2004                        
|                                           | (Dollars in thousands)      
|                                           |                             
|Maximum amount of borrowings outstanding   |                             
|at any month end                           | $ 128,531                   
|                                           |                             
|Approximate average borrowings outstanding | $ 100,622                   
|                                           |                             
|Approximate weighted average rate paid     | 4.88%                       
|                                          
|                                           | At March 31,                
|                                           | 2004                        
|                                           | (Dollars in thousands)      
|                                           |                             
|Balance outstanding at end of period       | $ 128,531                   
|                                           |                             
|Weighted average rate paid                 | 3.79%                       

23

<PAGE>

**Subsidiary Activities**

**Subsidiaries of the Company.**   At March 31, 2004, 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 MB Cap 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. The limited partnership 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 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.  MB Cap has
committed to a total investment of $2.3 million.  As of March 31, 2004, MB Cap has invested $2.3 million.  The book
value of the limited partnership investment, net of writedowns, at March 31, 2004 was $1.3 million compared to $1.2
million at March 31, 2003.  There are no additional capital calls remaining as of March 31, 2004.

**Subsidiaries of EverTrust Bank.**  Sound Financial, Inc. is a wholly-owned subsidiary of EverTrust Bank.
Sound Financial, Inc. serves as the Bank's trustee under deeds of trust taken in connection with lending activities.

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, 2004, assets under management totaled $185.0 million compared to $111.9
million at March 31, 2003.

**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 the President of the United States on July 30, 2002 in response to public concerns regarding corporate accountability
in connection with recent accounting scandals.  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 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"), including EverTrust.

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 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.

24

<PAGE>

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.

Gramm-Leach-Bliley Act.  On November 12, 1999, the President of the United States 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:

- 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;
- provided a uniform framework for the functional regulation of the activities of banks, savings
institutions and their holding companies;
- broadened the activities that may be conducted by national banks, banking subsidiaries of bank
holding companies and their financial subsidiaries;
- provided an enhanced framework for protecting the privacy of consumer information;
- 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.

25

<PAGE>

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 terrorist events of September 11, 2001, the President of the United
States 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.

Among other requirements, Title III of the USA Patriot Act imposes the following requirements:

- All financial institutions must establish anti-money laundering programs that include: (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.

- Financial institutions 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.

- Financial institutions are prohibited from establishing, maintaining, administering or managing correspondent
accounts for 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.

26

<PAGE>

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

**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.

**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, 2004, the Company's total risk based capital was 14.0% of risk-weighted assets and its risk based capital of Tier 1 (core) capital was 12.8% 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.

27

<PAGE>

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 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 2003, and therefore paid no deposit insurance assessments.

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.  For the first quarter of 2004, the annualized
rate was 1.54 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

28

<PAGE>

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, 2004, EverTrust Bank was categorized as "well capitalized" under the prompt corrective action
regulations of the FDIC.

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

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

The FDIC currently measures an institution's capital using a leverage limit together with certain risk-based
ratios.  The FDIC's minimum leverage capital requirement specifies a minimum ratio of Tier 1 capital to average total
assets.  Most banks are required to maintain a minimum leverage ratio of at least 4% to 5% of total assets.  The FDIC
retains the right to require a particular institution to maintain a higher capital level based on an institution's particular
risk profile.  EverTrust Bank calculated its leverage ratio to be 9.4% as of March 31, 2004.  EverTrust Bank has not
been notified by the FDIC of any higher capital requirements specifically applicable to it.

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 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 11.5% as of March 31, 2004,
and its Tier 1 risk-based capital ratio to be 10.2%.   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.

29

<PAGE>

The table below sets forth EverTrust Bank's capital position relative to the FDIC capital requirements at March
31, 2004.  The definitions of the terms used in the table are those provided in the capital regulations issued by the FDIC.

At March 31, 2004Percent of
AdjustedAmount
Total Assets(1)(In thousands)Tier 1 (leverage) capital
$ 70,581
9.4%Tier 1 (leverage) capital requirement
30,034
4.0Excess
$40,547
5.4%Tier 1 risk adjusted capital
$70,581
10.2%Tier 1 risk adjusted capital requirement
27,679
4.0Excess
$42,902
6.2%Total risk-based capital
$79,205
11.5%Total risk-based capital requirement
55,099
8.0Excess
$24,106
3.5%


|(1) | For the Tier 1 (leverage) capital and regulatory capital calculations, percent of total average assets of $755.1
million for EverTrust Bank.  For the Tier 1 risk-based capital and total risk-based capital calculations,
percent of total risk-weighted assets of $689.0 million for EverTrust Bank.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**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

30

<PAGE>

of national 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, 2004, EverTrust Bank held stock in the FHLB of Seattle in the amount of $6.7 million
and  had advances totaling $128.5 million, which mature in 2004 through 2020 at interest rates ranging from 1.1% to
6.9%.   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, 2004, 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.

31

<PAGE>

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

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

**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.

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

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

32

<PAGE>

**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, 2004, the Company had five employees and EverTrust Bank had 155 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, 2004 EverTrust and EverTrust Bank operate 12 full-service banking facilities, six of which are
owned and six of which are leased, and two loan production offices which are 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, Washington for its trust and wealth management operations and loan production
offices in Tacoma, Washington and Portland, Oregon.  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.

33

<PAGE>

**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, 2004.

**PART II**

**Item 5. 	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

The Company's common stock is traded on the Nasdaq National Market under the symbol "EVRT".  As of
March 31, 2004, there were 6,890,160 shares of common stock outstanding and approximately 1,841 shareholders of
record, excluding persons or entities who hold stock in nominee or "street name" accounts with brokers.  In December
2003, the Company's Board of Directors approved a three-for-two stock split effective in January 2004.  All share
numbers, prices, earnings per share amounts and dividends paid have been restated to reflect the stock split.

Dividend Policy

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.

The following table sets forth the market price range of the Company's common stock for the years ended
March 31, 2004 and 2003.  This information was provided by the Nasdaq National Market.

Year

High
Low
Dividends2004
First Quarter
$16.853
$15.133
$0.080Second Quarter
19.433
15.267
0.100Third Quarter
21.333
17.613
0.110Fourth Quarter
21.173
17.700
0.1102003
First Quarter
$12.773
$11.667
$0.077Second Quarter
13.660
11.033
0.077Third Quarter
14.820
11.900
0.077Fourth Quarter
15.987
14.273
0.080


In January 2003, the Company announced that its Board of Directors had authorized its eigth stock repurchase
plan for the repurchase of up to 10% (approximately 735,000 shares) of the Company's outstanding common stock.
At March 31, 2004, the Company had repurchased 6.6 million shares of its common stock since its initial stock
repurchase plan was approved in January 2000.

34

<PAGE>

The following table sets forth the Company's repurchases of its outstanding Common Stock during the fourth
quarter of the year ended March 31, 2004.

|                                     | **Issuer Purchases of Equity Securities**
****
|------------------------------------ | ----------------------------------------------
|                                     |                                               
|                                     |                                               
|                                     |                                               
|                                     |                                               
|                                     |                                               
|                                     |                                               
|                                     | **(a)**                                       
|                                     | **Total**                                     
|                                     | **Number of**                                 
|                                     | **Shares (or**                                
|                                     | **Units)**                                    
|**Period**                           | **Purchased**                                 
|                                     |                                               
|January 1, 2004 - January 31, 2004   | 48,929                                        
|                                     |                                               
|February 1, 2004 - February 29, 2004 | 53,576                                        
|                                     |                                               
|March 1, 2004 - March 31, 2004       | 43,255                                        
|                                     |                                               
|Total                                | 145,760                                       

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.  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,  
|--------------------------------------- | --------------
|                                        | 2004          
|                                        | (In thousands)
|FINANCIAL CONDITION DATA:               |               
|                                        |               
|Total assets                            | $770,072      
|Investment securities                   | 69,878        
|Loans receivable, net                   | 661,756       
|Deposit accounts                        | 546,388       
|Borrowings                              | 128,531       
|Total equity                            | 90,579        
|                                       
|                                       
|                                       
|*(table continued on following page)*  
|35
  <PAGE>                            
|                                       
|                                       
|                                       
|                                       
|                                        | At March 31,  
|                                        | 2004          
|OPERATING DATA:                         |               
|                                        |               
|Interest income                         | $ 43,174      
|Interest expense                        | 16,831        
|Net interest income                     | 26,343        
|Provision for loan losses               | 525           
|Net interest income after provision for |               
|loan losses                             | 25,818        
|Other operating income                  | 6,274         
|Other operating expenses                | 20,528        
|Income before income taxes              | 11,564        
|Provision for income taxes              | 4,518         
|Net income                              | $  7,046      
|                                        |               
|Net income per common share:            |               
|Basic                                   | $   1.01      
|Diluted                                 | $   0.95      
|                                       
|OTHER DATA:                             |               
|                                        |               
|Number of:                              |               
|Loans outstanding                       | 3,673         
|Deposit accounts                        | 28,923        
|Full service banking offices            | 12            
|Dividends paid                          | $  2,850      

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



|                                       | At or For           
|-------------------------------------- | --------------------
|                                       | Year Ended March 31,
|                                       | 2004                
|KEY FINANCIAL RATIOS:                  |                     
|                                       |                     
|*Performance Ratios*:                  |                     
|Return on assets(1)                    | 0.96%               
|Return on equity(2)(7)                 | 7.63                
|Equity-to-assets ratio(3)              | 12.59               
|Interest rate spread (4)               | 3.26                
|Net interest margin(5)                 | 3.66                
|Average interest-earning assets to     |                     
|average interest-bearing liabilities   | 117.19              
|Other operating expenses as a percent  |                     
|of average total assets                | 2.8                 
|Efficiency ratio (6)(7)                | 62.79               
|Dividend payout ratio (8)              | 40.45               
|36
  <PAGE>                           
|                                       | At or For           
|                                       | Year Ended March 31,
|                                       | 2004                
|                                       |                     
|Capital Ratios:                        |                     
|Leverage                               | 11.80               
|Tier 1 risk-based                      | 12.80               
|Total risk-based                       | 14.00               
|                                       |                     
|*Asset Quality Ratios:*                |                     
|Nonaccrual and 90 days or more         |                     
|past due loans as a percent            |                     
|of total loans, net                    | 0.60                
|Nonperforming assets as a percent      |                     
|of total assets                        | 0.56                
|Allowance for losses as a percent      |                     
|of gross loans receivable              | 1.35                
|Allowance for loan losses as a percent |                     
|of nonperforming loans                 | 227.53              
|Net charge-offs to average             |                     
|outstanding loans                      | 0.08                

|(1) | Net earnings divided by average total assets.                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net earnings divided by average equity.                                                                                                                                                                                
|(3) | Average equity divided by average total assets.                                                                                                                                                                        
|(4) | Difference between weighted average yield on interest-earning assets and weighted average rate on interest-bearing liabilities.                                                                                        
|(5) | Net interest income as a percentage of average interest-earning assets.                                                                                                                                                
|(6) | Total other operating expenses divided by total net interest income (on a tax-equivalent basis) before
provision for loan losses plus total other operating income.                                                    
|(7) | Calculations are not meaningful for the year ended March 31, 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.

37

<PAGE>

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, the fair value of mortgage servicing rights and the valuation of real estate owned ,
which are described in greater detail below:

|            | 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 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|38
  <PAGE>
|            | 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, 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 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. During fiscal 2004,
the Company contracted with a third party vendor to value its servicing rights and compared the results to its
own valuation model. The Company anticipates continuing to use the third party vendor as a basis for
comparison in future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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 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 12 full service
banking offices and its two loan production offices using repeat business, targeted marketing, customer cross-selling,
referrals and its longstanding reputation in its market area as a primary means of meeting this strategy.  EverTrust Bank

39

<PAGE>

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, and to a much lesser extent, 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.  The Bank established a commercial mortgage banking group
in July 2001, in an effort to increase non-interest fee revenue through commercial mortgage banking and servicing
activities.  Additional lending officers were added to the group in fiscal 2004 to enhance this objective.  In addition to
brokering loans to life insurance companies, the group arranges loan participations with correspondent lenders in an
effort to diversify credit risk, enhance loan yields and generate servicing fee income.  To a lesser 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 up to $10 million, but will also consider
relationships outside of this range.

The Bank 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.  A primary objective of the group is to generate non-interest bearing and other low-cost core deposits through its business banking and cash management products and services.  See Item 1, "Business --
Lending Activities."  In 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 enhance the performance of EverTrust Bank, and
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, 2004 and March 31, 2003**

Total assets increased 9.1% from $706.2 million at March 31, 2003 to $770.1 million at March 31, 2004,
primarily as a result of an increase in deposits and borrowings used to fund the increase in loans receivable, net, and
the investment portfolio, partially offset by a decrease in the Company's cash and cash equivalents.

Cash and cash equivalents decreased 59.8% from $37.3 million at March 31, 2003 to $15.0 million at March
31, 2004, primarily as a result of funding the loan and investment growth, which provided increased yields over cash
and cash equivalents.

Securities available for sale increased 97.8% from $34.2 million at March 31, 2003 to $67.6 million at March
31, 2004. The large increase reflects the Company's desire to enhance the investment portfolio with lower risk securities
of short to medium term duration. These high credit quality investments can also be used to collateralize FHLB
of Seattle borrowings. Management intends to place most new investment purchases
in the available for sale category which allows

40

<PAGE>

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 10.3% from $600.2 million at March 31, 2003 to $661.8 million at March 31,
2004, primarily as a result of  commercial real estate construction and permanent loans and multifamily residential loans
increases totalling  $60.9 million from March 31, 2003 to March 31, 2004. Business loans decreased $16.5 million from
$40.4 million at March 31, 2003 to $23.9 million at March 31, 2004, the result of the Company intentionally disengaging
some specific customers and narrowing its target lending market.

Loans held for sale on the secondary market were approximately $886,000 at March 31, 2004 a decrease of
$3.9 million from $4.8 million at March 31, 2003. The decrease in loans held for sale is the result of a reduction in the
secondary mortgage pipeline from lower refinancing activity.

Premises and equipment, net, decreased approximately $1.9 million  from $9.1 million at March 31, 2003 to
$7.2 million at March 31, 2004, as a result of depreciation expense associated with prior year purchases and the sale
of  the Smokey Point branch, partially offset by additions.  For the years ended March 31, 2004 and 2003, depreciation
expense was $1.6 million and $1.7 million, respectively. See Item 2, "Properties."

Total deposits of EverTrust increased approximately $38.1 million, or 7.5%, from $508.3 million at  March
31, 2003 to $546.4 million at March 31, 2004. The change is primarily the result of increases in money market and
transaction  accounts of $60.6 million from a combined $216.3 million at March 31, 2003 to $277.0 million at March
31, 2004, partially offset by a $23.1 million decrease in time deposits from $279.5 million at March 31, 2003 to $256.4
million at march 31, 2004. The net increase in deposits from March 31, 2003 to March  31, 2004 is generally attributable
to EverTrust Bank's targeted deposit growth marketing and an increased emphasis in attracting business deposits.  The
improved equity market condition over the last twelve months appears to have softened customer demand for insured
deposits, which dampened deposit growth.

Federal Home Loan Bank advances and other borrowings increased $27.5 million or 27.3% from $101.0
million at March 31, 2003 to $128.5 million at March  31, 2004. The larger balance in  borrowings since March 31, 2003
is attributable to the increase in outstanding loans.

Total equity decreased approximately $1.1 million at March 31, 2004 to $90.6 million compared to $91.7
million at March 31, 2003. Earnings of  $7.0 million for the year ended March 31, 2004 were more than offset by the
repurchase of shares of the Company's common stock for $9.3 million and dividends paid of $2.9.

**Comparison of Operating Results for the Years Ended March 31, 2004 and 2003**

**Net Income.** Net income increased approximately $205,000 from $6.8 million for the year ended March 31,
2003 to $7.0 million for the year ended March 31, 2004. The increase is due primarily to a $1.9 million reduction in non
interest expenses, offset in part by the $445,000 decrease in net interest income after provision for loan losses and a $1.8
million increase in income tax expense. The large increase in income tax expense is due primarily to a $450,000
valuation allowance taken against the Company's charitable contribution deferred asset and an increase in the effective
tax rate due to the expiration of low income housing tax credits and the Company's ESOP plan.

**Net Interest Income.** Net interest income decreased $310,000 from $26.7 million for the year ended March
31, 2003 to $26.3 million for the year ended March 31, 2004. The change is due primarily to the lower yield on interest
earning assets offset in part by the lower expense on interest bearing liabilities.

Interest income decreased $2.8 million to $43.2 million for the year ended March 31, 2004, compared to $45.9
million for the same period in 2003. The average balance of interest-earning assets increased from $671.4 million for
the year ended March 31, 2003 to $719.5 million for the year ended March 31, 2004 resulting in an increase of
approximately $2.6 million in income. The yield on interest-earning assets decreased from 6.84% for the year ended
March 31, 2003 to 6.00% for the same period in 2004 resulting in a decrease to income of $4.8 million. 
Increased

41

<PAGE>

balances were due to increased loan
volumes, which were funded by cash and cash equivalents, proceeds received from
sales and maturities of securities and increased borrowings. 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 and downward interest
rate adjustments on variable rate loans.

Interest expense decreased $2.5 million for the year ended March 31, 2004 compared to the same period in
2003. The average balance of interest-bearing liabilities increased 7.1% or $40.5 million from $573.5 million at March
31, 2003 to $614.0 million for the year ended March 31, 2004 resulting in an increase of $416,000 in expense. This
increase was offset by a $2.7 million decrease in expense as a result of a decrease in the rates on interest-bearing
liabilities from 3.36% for the year ended March 31, 2003 to 2.74% for the same period in 2004. The reduction is due
to market interest rate decreases and the generally downward interest rate adjustments on maturing and renewal time
deposits. The average balance of borrowings comprised 16.2% of interest-bearing liabilities for the year ended March
31, 2004 compared to 19.7% for the same period in 2003.

**Provision for Loan Losses.** For the year ended March 31, 2004, the provision for loan losses was 525,000,
compared to $390,000 for the same period in 2003, an increase of $135,000, or 34.6%. The allowance for loan losses
was $9.0 million for the year ended March 31, 2004 and March 31, 2003. The allowance for loan losses as a percentage
of net loans (loans receivable excluding allowance for losses) was 1.35% at March 31, 2004, compared to 1.46% at
March 31, 2003. Net loan charge-offs for the year ended March 31, 2004 were $458,000 compared to $165,000 in the
year earlier.

**Non-interest Income.** Non-interest income increased $527,000 to $6.3 million for the year ended March 31,
2004 compared to the same period in 2003. The growth in non-interest income was primarily the result of the $424,000
gain on the sale of a bank branch. In addition,  management fees from ETAM were $1.0 million for the year ended
March 31, 2004 compared to $586,000 for the year ended March 31, 2003. The increase from the prior period in ETAM
management fees was due to increased assets under management. These increases were partially offset by a reduction
in the gain on the sale of one-to-four family loans for the year ended March 31, 2004 of $380,000, from $1.2 million
in 2003 to $779,000 for the year ended March 31, 2004. The reduction is due to a decrease in the volume of secondary
market transactions.

Loan modification fees decreased $173,000 from $627,000 for the year ended March 31, 2003 to $454,000
for the twelve months ended March 31, 2004. The decrease was due to a lower number of loan renewals and extensions.

Year Ended March 31,2004
2003(In thousands)Brokered loan fees
$    662
$   716ETAM management fees
1,006
586Loan modification fees
454
627Gain (loss) on sale of securities
(44)
(84)Gain on sale of loans
779
1,159Service fees and other, net
3,417
2,743Total noninterest income
$6,274
$ 5,747


**Non-interest Expense.**Non-interest expense decreased approximately $2.0 million from $22.5 million for the
year ended March 31, 2003 to $20.5 million for the same period in 2004.  $577,000 of the decrease was due to the
recording of an investment write-down during the year ended March 31, 2003. Lower depreciation expense on fully
depreciated equipment and lower marketing expense due to timing of marketing activities also contributed to the decline.
In addition, during the year ended March 31, 2004, the Company released the final installment of shares associated with
its ESOP plan that was part of EverTrust's conversion to a public company. As a result, compensation expense
associated with the plan of approximately $200,000 per quarter ended at December 31, 2003.

42

<PAGE>

Information processing costs increased $36,000 from the year ended March 31, 2003 to $1.5 million for the
same period in 2004. The small increase is primarily the result of additional software depreciation associated with the
addition of the client contact center.

**Provision for Income Taxes.**Federal income taxes increased $1.8 million from $2.7 million for the year ended
March 31, 2003 to $4.5 million for the year ended March 31, 2004. The large increase is primarily due to a $450,000
valuation allowance booked against the Company's charitable contribution deferred tax asset. The deferred tax asset
was generated from contributions EverTrust made in fiscal 1999 and 2000 to its charitable foundation. The annual
federal income tax deduction for charitable contributions is limited to 10% of taxable income per year, and any unused
amount of the deduction can be carried forward for a period of up to five years after the contribution is made. At this
time the Company does not believe it will be able to use the entire amount of the tax asset. In addition, the Company's
effective tax rate  increased in the year ended March 31, 2004 due to the expiration of low income housing tax credits
at March 31, 2003.

**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.

**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.

43

<PAGE>

**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.

**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.

******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,  
|--------------------------------- | ----------------------
|                                  | 2004                  
|                                  |                       
|                                  | Average               
|                                  | Balance               
|                                  | (Dollars in thousands)
|Interest-earning assets:          |                       
|Loans receivable, net  (1)        | $621,517              
|Investment securities             | 60,975                
|Federal Home Loan Bank stock      | 6,460                 
|Cash and cash equivalents         | 30,538                
|Total interest-earning assets     | 719,490               
|                                  |                       
|Noninterest-earning assets        | 14,531                
|                                  |                       
|Total average assets              | $734,021              
|                                  |                       
|Interest-bearing liabilities:     |                       
|Savings accounts                  | $  12,616             
|Checking accounts                 | 84,376                
|Money market deposit accounts     | 145,929               
|Time deposits                     | 271,674               
|Total deposits                    | 514,595               
|Borrowings                        | 99,365                
|Total interest-bearing            |                       
|liabilities                       | 613,960               
|                                  |                       
|Noninterest-bearing liabilities   | 27,663                
|                                  |                       
|Total average liabilities         | 641,623               
|                                  |                       
|Average equity                    | 92,398                
|                                  |                       
|Total liabilities and equity      | $734,021              
|                                  |                       
|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.
Changes attributable to the combined affect of rate and volume have been allocated proportionately to the changes due
to volume and the changes due to interest rates.

|                                                                            | Year Ended March 31,  | Year Ended March 31, 
|--------------------------------------------------------------------------- | --------------------- | ---------------------
|                                                                            | 2004 Compared to Year | 2003 Compared to Year
|                                                                            | Ended March 31, 2003  | Ended March 31, 2002 
|                                                                            | Increase (Decrease)   | Increase (Decrease)  
|                                                                            | Due to                | Due to               
|                                                                            |                       |                      
|                                                                            | Rate                  | Volume               
|                                                                            | (In thousands)       
|Interest-earning assets:                                                   
|Loans receivable, net (1)                                                   | $ (3,683)             | $ 1,612              
|Investment securities                                                       | (960)                 | 821                  
|Federal Home Loan Bank stock                                                | (91)                  | 24                   
|Interest-bearing deposits                                                   | (111)                 | 148                  
|                                                                            |                      
|Total net change in income on
             
        interest-earning assets | $ (4,845)             | $ 2,605              
|                                                                            |                      
|Interest-bearing liabilities:                                               |                      
|Savings accounts                                                            | $          (57)       | $           11       
|Checking accounts                                                           | (168)                 | 362                  
|Money market deposit accounts                                               | (750)                 | 313                  
|Time deposits                                                               | (1,533)               | 404                  
|Total average deposits                                                      | (2,508)               | 1,090                
|Federal Home Loan Bank advances                                             | (143)                 | (674)                
|                                                                            |                      
|Total net change in expense on                                              |                      
|interest-bearing liabilities                                                | $(2,651)              | $     416            
|                                                                            |                      
|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,
|                                   | 2004         | 2004           
|Weighted average yield on         
|Loans receivable, net (1)          | 6.00%        | 6.53%          
|Investment securities              | 2.82         | 3.24           
|Federal Home Loan Bank stock       | 4.74         | 4.88           
|Cash and cash equivalents          | 0.93         | 0.97           
|Total interest-earning assets      | 5.72         | 6.00           
|                                   |              |                
|Weighted average rate paid on:     |              |                
|Savings accounts                   | 0.56         | 0.73           
|Checking accounts                  | 0.99         | 1.09           
|Money market deposit accounts      | 1.26         | 1.36           
|Time deposits                      | 3.03         | 3.29           
|Total average deposits             | 1.97         | 2.32           
|Federal Home Loan Bank advances    | 3.79         | 4.93           
|Total interest-bearing liabilities | 2.32         | 2.74           
|                                   |              |                
|Interest rate spread               | 3.14         | 3.26           
|                                   |              |                
|Net interest margin                | 3.49         | 3.66           

|(1) | Weighted average rate earned on loans does not include earnings from deferred loan fees at March 31, 2004.
Earnings from the amortization of loan fees was included in the weighted average rate calculations for the
years ended March 31, 2004, 2003 and 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**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.  The slope of the yield curve, changes in the relationship
of market rates, and how quickly interest rates change affect the sensitivity of net interest income to changes in interest
rates.

The net interest margin is expected to contract when interest rates rise because the repricing period of assets
is longer than the repricing period of liabilities.  Conversely, the net interest margin will tend to expand when interest
rates fall.

47

<PAGE>

The following table sets forth at March 31, 2004, 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 inChange (In Basis Points ("bp"))
Net Interest Income
Economic Value ofin Interest Rates (1)
(next four quarters)
Portfolio Equity200
(8.9)%
(12.1)%100
(5.0)
(6.8)0
--
--(100)
6.4
5.2


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

Key assumptions are made about the expected prepayment of loans in different interest rate environments and
the repricing frequency of deposit accounts with managed interest rates and no defined maturity like money market
accounts.   Prepayments for loans are 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.  Management assumes that non-maturity deposits will have rate adjustments not directly proportionate to the change in market interest rate and that lag
changes in market rates.  These assumptions are based upon management's analysis of its customer base, competitive
factors and historical review of EverTrust's deposit mix.

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.  In addition, certain assets, such as adjustable rate mortgage loans,
have periodic caps and lifetime ceilings and floors which may restrict changes in interest rates in certain interest rate
environments.  Most of the banks mortgage loans have lifetime floors and ceilings.  The ceilings are typically set at 6% -
8% over the initial rate on the loan.  If rates increase substantially the ceilings could have a material adverse impact on
net interest income.  Conversely, when rates decrease the lifetime floors can have a material positive impact on net
interest income.

The net interest income table presented above is predicated upon a stable balance sheet with no growth or
change in asset or liability mix. The economic value of portfolio equity includes existing assets and liabilities with no
new future business added.  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  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.  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.

Management sets risk tolerance limits for net interest income and economic value at risk.  Risk has been
managed to be within management's risk tolerances.  Net interest income at risk has increased somewhat from last year
primarily because of a higher proportion of market-rate deposits and short-term borrowings.  Net economic value at risk
has decreased somewhat primarily because the expected repricing term of the loan portfolio is shorter.

48

<PAGE>

**How the Company Manages Its Risk of Interest Rate Changes.**The Company does not maintain a trading
account for any class of financial instrument nor does it purchase high-risk derivative instruments. EverTrust Bank is
authorized to engage in limited hedging activities for its saleable loan pipeline, however, no such hedges were in place
at March 31, 2004.  Furthermore, the Company has no commodity price risk, and only a limited amount of foreign
currency exchange rate risk as a result of holding Canadian currency in the normal course of business. For information
regarding the sensitivity to interest rate risk of the Company's interest-earning assets and interest-bearing liabilities, see
the tables under Item 1, "Business -- Lending Activities -- Loan Maturity and Repricing," "-- Investment Activities" and
"-- Deposit Activities and Other Sources of Funds -- Deposit Accounts -- Time Deposits by Maturities."

The Company has sought to reduce the exposure of its earnings and economic value 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 uses FHLB borrowings to help manage exposure to interest rates.  FHLB borrowings are
purchased with terms that correspond with the repricing timeframes of loans.

Should the Company deem it necessary to engage in additional hedging activities Board-approved policies and
procedures would be implemented which would comply with all relevant regulations.

**Liquidity and Capital Resources**

Cash flows from financing activities totaled $56.4 million during the year ended March 31, 2004 compared
to $21.6 million during 2003.  Operating activities for the year ended March 31, 2004 provided net cash of $14.8 million
compared to $6.6 million for the year ended March 31, 2003.  The Company used $93.5 million in cash for investing
during the year ended March 31, 2004, compared to $10.1 million in 2003.

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, 2003 and 2004, the Company originated $435.6 million and $498.9 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, 2003 and 2004, the Company originated  $40.0 million and $30.1 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 in both the short and long term, 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 2003 and 2004, EverTrust
Bank used these sources of funds primarily to fund loan commitments and to pay maturing certificates of deposits and
deposit withdrawals.  At March 31, 2004, EverTrust Bank had loan commitments, excluding loans in process, of $2.7
million.

At March 31, 2004, the Company had $653,000 of net unrealized gains and losses
on securities classified as available for sale, which represented one percent of
the amortized cost basis, or $66.9 million, of the related securities. Movements
in market interest rates will affect the unrealized gains and losses in these
securities. However, assuming

49

<PAGE>

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, 2004, certificates of deposit amounted to $256.4 million, or 46.9%, of the Bank's total deposits,
including $151.0 million which were scheduled to mature by March 31, 2005. Historically, the Bank has been able to
retain a significant amount of its deposits as they mature. Management of the Bank believes it has adequate resources
to fund all loan commitments by deposits and, if necessary, FHLB of Seattle advances and sale of mortgage loans and
that it can adjust the offering rates of savings certificates to retain deposits in changing interest rate environments.

**Impact of Accounting Pronouncements and Regulatory Policies**

**Recently Issued Accounting Standards**.  In May 2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments
with characteristics of both Liabilities and Equity."  The statement establishes standards for classifying and measuring
certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity
as liabilities.  SFAS 150 is effective for instruments entered into or modified after May 31, 2003.  The adoption of SFAS
No. 150 did not materially impact the Company's consolidated results of operations, financial position, or cash flows.

In April  2003, the 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 did not 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 of the Notes to Consolidated Financial Statements included in Item 8 hereof).  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

50

<PAGE>

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 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, Amend-ment of FASB Statement No. 13, and Technical Corrections.  SFAS No.145 eliminates extraordinary accounting treat-ment 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 did not 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.

51

<PAGE>**Contractual Obligations**

In the normal course of business, the Company enters into contractual obligations that meet various business
needs.  These contractual obligations include time deposits to customers, borrowings from the Federal Home Loan Bank
of Seattle, and lease obligations for facilities.  See Note 16 of the Notes to Consolidated Financial Statements included
in Item 8 of this report for additional information.  The following table summarizes the Company's long-term contractual
obligations at March 31, 2004:

|                            | Less than
One
Year | One to
Three
Years | Three to
Five
Years | Thereafter | Total   
|--------------------------- | ------------------ | ------------------ | ------------------- | ---------- | --------
|                            | (In thousands)    
|                            |                    |                    |                     |            |         
|Time deposits               | $151,000           | $60,706            | $32,877             | $11,866    | $256,449
|FHLB advances               | 65,750             | 34,250             | 16,600              | 11,931     | 128,531 
|Operating lease obligations | 1,203              | 2,389              | 1,852               | 4,350      | 9,794   
|Total                       | $217,953           | $97,345            | $51,329             | $28,147    | $394,774

**Off-Balance Sheet Arrangements**

In the normal course of business, the Company makes off-balance sheet arrangements, including credit
commitments to its customers to meet their financial needs.  These arrangements involve, to varying degrees, elements
of credit and interest rate risk not recognized in the consolidated statement of financial condition.  The Bank makes
personal, commercial, and real estate lines of credit available to customers but does not issue stand by letters of credit
or financial guarantees.

Commitments to extend credit to customers are subject to the Bank's normal credit policies and are essentially
the same as those involved in extending loans to customers.  See Note 4 of the Notes to Consolidated Financial
Statements included in Item 8 of this report for additional 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.

52

<PAGE>

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

PageReport of
  Independent Registered Public Accounting Firm
54Consolidated Statements of Financial Condition as of March 31, 2004 and 2003
55Consolidated Statements of Operations For the Years EndedMarch 31, 2004, 2003 and 2002
56Consolidated Statements of Comprehensive Income For theYears Ended March 31, 2004, 2003 and 2002
58Consolidated Statements of Changes in Stockholders' Equity For theYears Ended March 31, 2004, 2003 and 2002
59Consolidated Statements of Cash Flows For the Years EndedMarch 31, 2004, 2003 and 2002
60Notes to Consolidated Financial Statements
62

53

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard 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, 2004 and 2003, 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, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2004, in conformity with accounting principles generally accepted in the United States of America./s/Deloitte & Touche LLPMay 10, 200454
<PAGE>

|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES                     |          |         
|-------------------------------------------------------------------- | -------- | --------
|                                                                     |          |         
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                       |          |         
|MARCH 31, 2004 AND 2003                                              |          |         
|(Amounts in thousands, except share amounts)                        
|                                                                     |          |         
|ASSETS                                                               | 2004     | 2003    
|                                                                     |          |         
|ASSETS:                                                              |          |         
|Cash and cash equivalents, including interest-bearing deposits       |          |         
|of $1,000 and $27,415                                                | $14,995  | $37,259 
|Securities available for sale, amortized cost of $66,914 and $33,807 | 67,567   | 34,167  
|Securities held to maturity, fair value of $2,419 and $3,999         | 2,311    | 3,800   
|Federal Home Loan Bank stock--at cost                                | 6,650    | 6,334   
|Loans receivable, net of allowances of $9,046 and $8,979             | 661,756  | 600,200 
|Loans held for sale, fair value of $907 and $4,813                   | 886      | 4,755   
|Accrued interest receivable                                          | 3,301    | 3,280   
|Premises and equipment--net                                          | 7,206    | 9,074   
|Real estate owned                                                    | 375      |         
|Prepaid expenses and other assets                                    | 5,025    | 7,294   
|                                                                     |          |         
|TOTAL                                                                | $770,072 | $706,163
|                                                                     |          |         
|LIABILITIES AND EQUITY                                               |          |         
|                                                                     |          |         
|LIABILITIES:                                                         |          |         
|Deposit accounts                                                     | $546,388 | $508,269
|Federal Home Loan Bank advances and other borrowings                 | 128,531  | 100,984 
|Accounts payable and other liabilities                               | 4,574    | 5,215   
|                                                                     |          |         
|Total liabilities                                                    | 679,493  | 614,468 
|                                                                     |          |         
|COMMITMENTS AND CONTINGENCIES (Note 16)                              |          |         
|                                                                     |          |         
|EQUITY:                                                              |          |         
|Common stock, no par value--authorized, 73,500,000 shares;           |          |         
|outstanding, 6,890,160 and 7,252,168 shares                          | 23,819   | 30,613  
|Employee Stock Ownership Plan ("ESOP") debt                          |          | (396)   
|Retained earnings                                                    | 66,738   | 62,542  
|Shares held in trust for stock-related compensation plans            | (409)    | (1,301) 
|Accumulated other comprehensive income                               | 431      | 237     
|                                                                     |          |         
|Total equity                                                         | 90,579   | 91,695  
|                                                                     |          |         
|TOTAL                                                                | $770,072 | $706,163
|                                                                     |          |         
|                                                                     |          |         
|See notes to consolidated financial statements.                      |          |         

55

<PAGE>

---

|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES     |         |        
|---------------------------------------------------- | ------- | -------
|                                                     |         |        
|CONSOLIDATED STATEMENTS OF OPERATIONS                |         |        
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002           |         |        
|(Amounts in thousands, except share amounts)        
|                                                     |         |        
|                                                     | 2004    | 2003   
|                                                     |         |        
|INTEREST INCOME:                                     |         |        
|Loans receivable                                     | $40,588 | $42,798
|Investment securities:                               |         |        
|Taxable interest income                              | 2,113   | 2,514  
|Tax-exempt interest income                           | 151     | 205    
|Dividend income                                      | 322     | 419    
|                                                     |         |        
|Total investment securities income                   | 2,586   | 3,138  
|                                                     |         |        
|Total interest income                                | 43,174  | 45,936 
|                                                     |         |        
|INTEREST EXPENSE:                                    |         |        
|Deposit accounts                                     | 11,929  | 13,581 
|Federal Home Loan Bank advances and other
borrowings | 4,902   | 5,702  
|                                                     |         |        
|Total interest expense                               | 16,831  | 19,283 
|                                                     |         |        
|NET INTEREST INCOME BEFORE PROVISION                 |         |        
|FOR LOAN LOSSES                                      | 26,343  | 26,653 
|                                                     |         |        
|PROVISION FOR LOAN LOSSES                            | 525     | 390    
|                                                     |         |        
|NET INTEREST INCOME AFTER PROVISION                  |         |        
|FOR LOAN LOSSES                                      | 25,818  | 26,263 
|                                                     |         |        
|NONINTEREST INCOME:                                  |         |        
|Loan service fees                                    | 2,431   | 2,401  
|Gain on sale of securities and loans                 | 735     | 1,075  
|Other                                                | 3,108   | 2,271  
|                                                     |         |        
|Total noninterest income                             | 6,274   | 5,747  
|                                                     |         |        
|NONINTEREST EXPENSES:                                |         |        
|Salaries and employee benefits                       | 11,691  | 12,406 
|Occupancy and equipment                              | 2,958   | 3,103  
|Information processing costs                         | 1,491   | 1,455  
|Other                                                | 4,388   | 5,503  
|                                                     |         |        
|Total noninterest expenses                           | 20,528  | 22,467 
|                                                     |         |        
|EARNINGS BEFORE FEDERAL INCOME TAXES                 | 11,564  | 9,543  
|                                                     |         |        
|                                                     |         |        

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|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES |           |          
|------------------------------------------------ | --------- | ---------
|                                                 |           |          
|CONSOLIDATED STATEMENTS OF OPERATIONS            |           |          
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002       |           |          
|(Amounts in thousands, except share amounts)    
|                                                 |           |          
|                                                 | 2004      | 2003     
|                                                 |           |          
|EARNINGS BEFORE FEDERAL INCOME TAXES             | $11,564   | $9,543   
|                                                 |           |          
|FEDERAL INCOME TAXES:                            |           |          
|Current                                          | 3,316     | 1,958    
|Deferred                                         | 1,202     | 744      
|                                                 |           |          
|Total federal income taxes                       | 4,518     | 2,702    
|                                                 |           |          
|NET INCOME                                       | $7,046    | $6,841   
|                                                 |           |          
|NET INCOME PER COMMON SHARE--Basic               | $1.01     | $0.96    
|                                                 |           |          
|NET INCOME PER COMMON SHARE--Diluted             | $0.95     | $0.90    
|                                                 |           |          
|WEIGHTED-AVERAGE SHARES                          |           |          
|OUTSTANDING--Basic                               | 6,943,808 | 7,118,797
|                                                 |           |          
|WEIGHTED-AVERAGE SHARES                          |           |          
|OUTSTANDING--Diluted                             | 7,443,547 | 7,582,503
|                                                 |           |          
|                                                 |           |          
|See notes to consolidated financial statements.  |           |          

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|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES                  |        |        |       
|----------------------------------------------------------------- | ------ | ------ | ------
|                                                                  |        |        |       
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                   |        |       
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002                        |        |        |       
|(Amounts in thousands)                                           
|                                                                  |        |        |       
|                                                                  | 2004   | 2003   | 2002  
|                                                                  |        |        |       
|NET INCOME                                                        | $7,046 | $6,841 | $5,579
|                                                                  |        |        |       
|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  $115, $(42),
and $(2)            | 223    | (82)   | (4)   
|Less adjustment for gains included in net income,                 |        |        |       
|net of income tax benefit of $(15), $(29), and
$(9)               | (29)   | (55)   | (17)  
|                                                                  |        |        |       
|Other comprehensive (loss) income                                 | 194    | (137)  | (21)  
|                                                                  |        |        |       
|COMPREHENSIVE INCOME                                              | $7,240 | $6,704 | $5,558
|                                                                  |        |        |       
|                                                                  |        |        |       
|See notes to consolidated financial statements.                   |        |        |       

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|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES            |              |          |          |          |              |               |               |            
|----------------------------------------------------------- | ------------ | -------- | -------- | -------- | ------------ | ------------- | ------------- | -----------
|                                                            |              |          |          |          |              |               |               |            
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'  EQUITY |              |          |         
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002                  |              |          |          |          |              |               |               |            
|(Amounts in thousands, except share amounts)               
|                                                            |              |          |          |          |              |               |               |            
|                                                            |              |          |          |          |              | Shares Held   |               | Accumulated
|                                                            |              |          |          |          |              | in Trust for  |               | Other      
|                                                            |              |          | Debt     |          |              | Stock-Related | Comprehensive
|                                                            | Common Stock | Related  | Retained |          | Compensation | Income        |               |            
|                                                            | Shares       | Amount   | to ESOP  | Earnings |              | Plans         |               | (Loss)     
|                                                            |              |          |          |          |              |               |               |            
|BALANCE--April 1, 2001                                      | 10,887,364   | $68,940  | $(1,188) | $55,033  |              | $(3,034)      |               | $395       
|                                                            |              |          |          |          |              |               |               |            
|Common stock repurchased                                    | (3,131,511)  | (31,701) |          |          |              |               |               |            
|Repayment of ESOP debt                                      |              |          | 396      |          |              |               |               |            
|ESOP activity--change in value of                           |              |          |          |          |              |               |               |            
|shares committed to be released                             |              | 151      |          |          |              |               |               |            
|Amortization of compensation                                |              |          |          |          |              |               |               |            
|related to MRP                                              |              |          |          |          |              | 867           |               |            
|Net income                                                  |              |          |          | 5,579    |              |               |               |            
|Dividends paid                                              |              |          |          | (2,593)  |              |               |               |            
|Other comprehensive loss--net of                            |              |          |          |          |              |               |               |            
|income taxes                                                |              |          |          |          |              |               |               | (21)       
|                                                            |              |          |          |          |              |               |               |            
|BALANCE--March 31, 2002                                     | 7,755,853    | 37,390   | (792)    | 58,019   |              | (2,167)       |               | 374        
|                                                            |              |          |          |          |              |               |               |            
|Common stock repurchased                                    | (563,239)    | (7,664)  |          |          |              |               |               |            
|Common stock options exercised                              | 59,554       | 479      |          |          |              |               |               |            
|Tax benefit from stock      options exercised               |              | 143      |          |          |              |               |               |            
|Repayment of ESOP debt                                      |              |          | 396      |          |              |               |               |            
|ESOP activity--change in value of                           |              |          |          |          |              |               |               |            
|shares committed to be released                             |              | 265      |          |          |              |               |               |            
|Amortization of compensation                                |              |          |          |          |              |               |               |            
|related to MRP                                              |              |          |          |          |              | 866           |               |            
|Net income                                                  |              |          |          | 6,841    |              |               |               |            
|Dividends paid                                              |              |          |          | (2,318)  |              |               |               |            
|Other comprehensive loss--net of                            |              |          |          |          |              |               |               |            
|income taxes                                                |              |          |          |          |              |               |               | (137)      
|                                                            |              |          |          |          |              |               |               |            
|BALANCE--March 31, 2003                                     | 7,252,168    | 30,613   | (396)    | 62,542   |              | (1,301)       |               | 237        
|                                                            |              |          |          |          |              |               |               |            
|Common stock repurchased                                    | (465,186)    | (9,258)  |          |          |              |               |               |            
|Common stock options exercised                              | 103,178      | 977      |          |          |              |               |               |            
|Tax benefit from stock       options exercised              |              | 1,034    |          |          |              |               |               |            
|Repayment of ESOP debt                                      |              |          | 396      |          |              |               |               |            
|ESOP activity--change in value of                           |              |          |          |          |              |               |               |            
|shares committed to be released                             |              | 453      |          |          |              |               |               |            
|Amortization of compensation                                |              |          |          |          |              |               |               |            
|related to MRP                                              |              |          |          |          |              | 892           |               |            
|Net income                                                  |              |          |          | 7,046    |              |               |               |            
|Dividends paid                                              |              |          |          | (2,850)  |              |               |               |            
|Other comprehensive gain--net of                            |              |          |          |          |              |               |               |            
|income taxes                                                |              |          |          |          |              |               |               | 194        
|                                                            |              |          |          |          |              |               |               |            
|BALANCE--March 31, 2004                                     | 6,890,160    | $23,819  | $ -      | $66,738  |              | $(409)        |               | $431       
|                                                            |              |          |          |          |              |               |               |            
|                                                            |              |          |          |          |              |               |               |            
|See notes to consolidated financial statements.             |              |          |          |          |             

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|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES          |           |          
|--------------------------------------------------------- | --------- | ---------
|                                                          |           |          
|CONSOLIDATED STATEMENTS OF CASH FLOWS                     |           |          
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002                |           |          
|(Amount in thousands)                                    
|                                                          |           |          
|                                                          | 2004      | 2003     
|                                                          |           |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                     |           |          
|Net income                                                | $7,046    | $6,841   
|Adjustments to reconcile net income to net cash           |           |          
|provided by operating activities:                         |           |          
|Depreciation and amortization of premises                 |           |          
|and equipment                                             | 1,575     | 1,726    
|Dividends on Federal Home Loan Bank stock and             |           |          
|accretion of investment security discounts                | (541)     | (607)    
|Loss (gain) on sale of premises and equipment and         |           |          
|real estate owned                                         | (424)     | (78)     
|Loss (gain) on impairment of investment
securities        |           | 156      
|Amortization of investment security premiums              | 487       | 103      
|Loss on limited partnership                               |           | 631      
|Provision for losses on loans                             | 525       | 390      
|Amortization of deferred loan fees and costs              | (2,949)   | (2,328)  
|Loan fees deferred                                        | 2,700     | 2,730    
|Proceeds from sale of loans                               | 30,853    | 55,349   
|Loans originated for sale                                 | (26,984)  | (59,479) 
|Deferred taxes                                            | 1,202     | 744      
|Amortization of compensation related to MRP               | 892       | 866      
|Changes in operating assets and liabilities:              |           |          
|Accrued interest receivable                               | (21)      | 358      
|Prepaid expenses and other assets                         | 1,080     | (1,969)  
|Accounts payable and other liabilities                    | (641)     | 1,179    
|                                                          |           |          
|Net cash provided by operating activities                 | 14,800    | 6,612    
|                                                          |           |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                     |           |          
|Proceeds from maturities of securities available for sale | 25,109    | 18,804   
|Proceeds from maturities of securities held to maturity   | 1,496     | 1,158    
|Proceeds from sale of securities available for sale       | 8,722     | 27,145   
|Purchases of securities available for sale                | (67,207)  | (30,464) 
|Purchases of Federal Home Loan Bank stock                 |           |          
|Loan principal payments                                   | 410,046   | 349,769  
|Loans originated or acquired                              | (471,878) | (376,115)
|Proceeds from sales of reacquired assets and              |           |          
|real estate owned                                         |           | 587      
|Investment in real estate owned                           | (375)     |          
|Investment in limited partnership                         | (112)     | (419)    
|Net additions (reductions) to premises and equipment      | 717       | (589)    
|                                                          |           |          
|Net cash used in investing activities                     | (93,482)  | (10,124) 
|                                                          |           |          
|BALANCE                                                   | (78,682)  | (3,512)  

(Continued)

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|EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES |           |         
|------------------------------------------------ | --------- | --------
|                                                 |           |         
|CONSOLIDATED STATEMENTS OF CASH FLOWS            |           |         
|YEARS ENDED MARCH 31, 2004, 2003, AND 2002       |           |         
|(Amount in thousands)                           
|                                                 |           |         
|                                                 | 2004      | 2003    
|                                                 |           |         
|BALANCE                                          | $(78,682) | $(3,512)
|                                                 |           |         
|CASH FLOWS FROM FINANCING ACTIVITIES:            |           |         
|Net increase in deposit accounts                 | 38,119    | 58,658  
|Repurchase shares of common stock                | (8,805)   | (7,399) 
|Proceeds from stock options exercised            | 977       | 479     
|Tax benefit from stock options exercised         | 1,034     | 143     
|Dividends paid on common stock                   | (2,850)   | (2,318) 
|Repayment of loan to ESOP                        | 396       | 396     
|Proceeds from other borrowings                   |           |         
|Repayment of other borrowings                    |           | (12,050)
|Proceeds from Federal Home Loan Bank advances    | 151,300   | 43,800  
|Repayments of Federal Home Loan Bank advances    | (123,753) | (60,104)
|                                                 |           |         
|Net cash provided by financing activities        | 56,418    | 21,605  
|                                                 |           |         
|NET (DECREASE) INCREASE IN CASH AND              |           |         
|CASH EQUIVALENTS                                 | (22,264)  | 18,093  
|                                                 |           |         
|CASH AND CASH EQUIVALENTS:                       |           |         
|Beginning of year                                | 37,259    | 19,166  
|                                                 |           |         
|End of year                                      | $14,995   | $37,259 
|                                                 |           |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW            |           |         
|INFORMATION--Cash paid during the year for:      |           |         
|Interest on deposits                             | $11,931   | $13,655 
|                                                 |           |         
|Federal income taxes                             | $2,495    | $2,355  
|                                                 |           |         
|Interest on borrowings                           | $4,937    | $5,740  
|                                                 |           |         
|SUPPLEMENTAL DISCLOSURES OF NONCASH              |           |         
|INVESTING AND FINANCING ACTIVITIES--             |           |         
|Real estate acquired through foreclosure         | $375      | $ -     
|                                                 |           |         
|                                                 |           |         
|See notes to consolidated financial statements.  |           |         

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EVERTRUST FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2004, 2003, and 2002

---

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation-The consolidated financial statements include EverTrust Financial Group, Inc. and subsidiaries (the "Company"). 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. 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 10 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 also operates a real estate loan production office in Tacoma, Washington, and began operations in the state of Oregon in September 2003, with the opening of a Commercial Real Estate lending office in Portland, Oregon. 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, Bellevue, 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 $8,153,000 and $961,000 at March 31, 2004 and 2003, 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 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.

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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 discounted 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. The Company derives the loss percentage factors for problem graded loans using regulatory guidelines and, for pass graded loans, by using estimated credit losses over the upcoming 12 months based on the annual rate of charge-offs experienced both by the Company and industry-wide over the previous three years on similar loans, adjusted for current trends, including 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.

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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, 2004 and 2003.

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. During fiscal year 2004, the Company contracted with a third-party vendor to value its servicing rights and compared the results to its own valuation model. The Company anticipates continuing to use the third-party vendor as a basis for comparison in future periods.

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 both March 31, 2004 and 2003, is $-0-.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

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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 $1,308,964 and $1,196,464 at March 31, 2004 and 2003, 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    

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

The Company periodically reviews premises and equipment for impairment. If identified, an impairment loss is recognized through a charge to earnings based on the fair value of the property.Income Taxes-Income taxes are accounted for using the liability method. A deferred tax asset or liability is determined based on the enacted tax rates that will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company's income tax returns. The deferred tax provision for the year is equal to the change in the deferred tax liability, net of deferred tax asset, from the beginning to the end of the year. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

For tax purposes, the Company reports income and expenses using the accrual method of accounting and files a consolidated tax return that includes all of its subsidiaries.Earnings Per Share-Earnings per share ("EPS") is computed using the weighted-average number of common and diluted shares outstanding during the period. Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The only reconciling items affecting the calculation of EPS are the inclusion of stock options and restricted stock awards, which increase the shares outstanding in diluted EPS by 499,739, 463,706, and 267,370 for the years ended March 31, 2004, 2003, and 2002, respectively. In December 2003, the Company's Board of Directors approved a three-for-two stock split for the shareholders of record on January 2, 2004, payable on January 16, 2004. The Company's stock began trading on post-split numbers January 20, 2004. All share numbers have been restated to reflect the split.Employee Stock Ownership Plan-The Company sponsors a leveraged Employee Stock Ownership Plan ("ESOP"). As shares are released from collateral, compensation expense is recorded equal to the then current market price of the shares, and the shares become outstanding for purposes of EPS calculations. Cash dividends on allocated shares are recorded as a reduction of retained earnings and paid directly to plan participants or distributed directly to participants' accounts. Cash dividends on unallocated shares are recorded as a reduction of debt and accrued interest. The release of shares and related compensation expense from the Company's ESOP plan on December 31, 2003, relieved all

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remaining ESOP liability. At this time, the Company has no plans to make additional contributions to the ESOP. 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, totaling 1,047,849 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 1,347,937 common shares of the Company. Options issued and outstanding are adjusted to reflect any 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 $274,943 for 2004, $307,000 for 2003, and $289,000 for 2002. Net income per share would have decreased by $.03 for basic and $.04 for diluted in 2004. Net income per share for both basic and diluted would have decreased by $.04 in 2003, and $.04 per share in 2002. 

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:

|                        | 2004          | 2003            | 2002           
|----------------------- | ------------- | --------------- | ---------------
|                        |               |                 |                
|Annual dividend yield   | 1.96 to 1.97% | 2.35 to 2.51%   | 2.82 to 2.99%  
|Expected volatility     | 17.39%        | 17.12 to 17.53% | 17.56 to 18.07%
|Risk-free interest rate | 2.98 to 3.17% | 3.61 to 5.05%   | 4.82 to 5.27%  
|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):

|                            | 2004   | 2003   | 2002  
|--------------------------- | ------ | ------ | ------
|                            |        |        |       
|Net income:                 |        |        |       
|As reported                 | $7,046 | $6,841 | $5,579
|Compensation expense        | (275)  | (307)  | (289) 
|Pro forma                   | 6,771  | 6,534  | 5,290 
|                            |        |        |       
|Basic earnings per share:   |        |        |       
|As reported                 | 1.01   | 0.96   | 0.65  
|Pro forma                   | 0.98   | 0.92   | 0.61  
|                            |        |        |       
|Diluted earnings per share: |        |        |       
|As reported                 | 0.95   | 0.90   | 0.63  
|Pro forma                   | 0.91   | 0.86   | 0.59  

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Use of Estimates-The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the financial statements. The Company uses significant estimates in determining reported reserves and allowances for loan losses, mortgage servicing rights, real estate owned, and the valuation allowance related to the net deferred tax asset.Recently Issued Accounting Standards-In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The statement establishes standards for classifying and measuring certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity as liabilities. SFAS No. 150 is effective for instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not materially impact the Company's consolidated results of operations, financial position, or cash flows. 

In April 2003, the 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 September 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not 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 (Note 1). SFAS No. 148 did not require the Company to change to the fair value-based method of accounting for stock-based compensation.

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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 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 were 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 did not 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

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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 2003 and 2002 consolidated financial statements to conform with the classifications used in 2004.

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):

|                                       |           |  | Gross      |            | Gross  |  |           
|-------------------------------------- | --------- |  | ---------- | ---------- | ------ |  | ----------
|                                       | Amortized |  | Unrealized | Unrealized |        | 
|                                       | Cost      |  | Gains      |            | Losses |  | Fair Value
|                                       |           |  |            |            |        |  |           
|2004:                                  |           |  |            |            |        |  |           
|Debt securities:                       |           |  |            |            |        |  |           
|U.S. government agency securities due: |           |  |            |            |        |  |           
|Within one year                        | $5,023    |  | $71        |            | $    - |  | $5,094    
|After one year through five years      | 22,502    |  | 177        |            | (4)    |  | 22,675    
|                                       |           |  |            |            |        |  |           
|                                       | 27,525    |  | 248        |            | (4)    |  | 27,769    
|                                       |           |  |            |            |        |  |           
|Municipal obligations due:             |           |  |            |            |        |  |           
|Within one year                        | 415       |  | 8          |            |        |  | 423       
|After one year through five years      | 195       |  | 8          |            |        |  | 203       
|After 10 years                         | 1,321     |  |            |            |        |  | 1,321     
|                                       |           |  |            |            |        |  |           
|                                       | 1,931     |  | 16         |            |        |  | 1,947     
|                                       |           |  |            |            |        |  |           
|                                       |           |  |            |            |        |  |           
|Mortgage-backed securities due:        |           |  |            |            |        |  |           
|Within one year                        | 463       |  | 6          |            |        |  | 469       
|After one year through five years      | 8,327     |  | 52         |            | (5)    |  | 8,374     
|After five years through 10 years      | 16,956    |  | 224        |            | (17)   |  | 17,163    
|After 10 years                         | 11,697    |  | 143        |            | (23)   |  | 11,817    
|                                       |           |  |            |            |        |  |           
|                                       | 37,443    |  | 425        |            | (45)   |  | 37,823    
|                                       |           |  |            |            |        |  |           
|Equity securities:                     |           |  |            |            |        |  |           
|Mutual funds                           | 13        |  |            |            |        |  | 13        
|Other stock                            | 2         |  | 13         |            |        |  | 15        
|                                       |           |  |            |            |        |  |           
|                                       | 15        |  | 13         |            |        |  | 28        
|                                       |           |  |            |            |        |  |           
|                                       | $66,914   |  | $702       |            | $(49)  |  | $67,567   

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|                                       |           |  | Gross      |            | Gross  |  |           
|-------------------------------------- | --------- |  | ---------- | ---------- | ------ |  | ----------
|                                       | Amortized |  | Unrealized | Unrealized |        | 
|                                       | Cost      |  | Gains      |            | Losses |  | 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   

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 $80,566, $480,072, and $153,831 for the years ended March 31, 2004, 2003, and 2002, respectively. Gross realized losses on the sale of securities available for sale were $124,221, $564,139, and $128,006 for the years ended March 31, 2004, 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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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):

|                                       |           |  | Gross      |  | Gross          |           
|-------------------------------------- | --------- |  | ---------- |  | -------------- | ----------
|                                       | Amortized |  | Unrealized |  | Unrealized     |           
|                                       | Cost      |  | Gains      |  | Losses         | Fair Value
|                                       |           |  |            |  |                |           
|2004:                                  |           |  |            |  |                |           
|Debt securities:                       |           |  |            |  |                |           
|U.S. government agency securities due: |           |  |            |  |                |           
|Within one year                        | $1,001    |  | $56        |  | $            - | $1,057    
|                                       |           |  |            |  |                |           
|Municipal obligations due:             |           |  |            |  |                |           
|Within one year                        | 720       |  | 18         |  |                | 738       
|After one year through five years      | 295       |  | 11         |  |                | 306       
|                                       |           |  |            |  |                |           
|                                       | 1,015     |  | 29         |  |                | 1,044     
|                                       |           |  |            |  |                |           
|Mortgage-backed securities due:        |           |  |            |  |                |           
|After 10 years                         | 295       |  | 23         |  |                | 318       
|                                       |           |  |            |  |                |           
|                                       | 295       |  | 23         |  |                | 318       
|                                       |           |  |            |  |                |           
|                                       | $2,311    |  | $108       |  | $            - | $2,419    

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|                                       |           |  | Gross      |  | Gross       |           
|-------------------------------------- | --------- |  | ---------- |  | ----------- | ----------
|                                       | Amortized |  | Unrealized |  | Unrealized  |           
|                                       | Cost      |  | Gains      |  | Losses      | 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    

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 $3,954,202 and $3,200,000 and a market value of $4,037,458 and $3,286,497 were pledged to secure public deposits at March 31, 2004 and 2003, 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):

|                                                     | 2004        | 2003      
|---------------------------------------------------- | ----------- | ----------
|                                                     |             |           
|Commercial construction                              | $
45,786    | $
33,577  
|Commercial real estate                               | 287,046     | 264,313   
|Multifamily construction                             | 23,727      | 8,325     
|Multifamily residential                              | 184,525     | 158,554   
|Business loans                                       | 23,878      | 40,407    
|One to four family construction and land development | 64,963      | 57,601    
|Consumer:                                            |             |           
|Home equity and second mortgages                     | 21,513      | 23,006    
|Credit cards                                         | 900         | 712       
|Other installment loans                              | 2,410       | 3,263     
|One to four family residential                       | 20,353      | 23,968    
|                                                     |             |           
|                                                     | 675,101     | 613,726   
|Less:                                                |             |           
|Deferred loan fees and other                         | (4,299)     | (4,547)   
|Reserve for loan losses                              | (9,046)     | (8,979)   
|                                                     |             |           
|                                                     | (13,345)    | (13,526)  
|                                                     |             |           
|Loans receivable--net                                | $
661,756   | $
600,200 
|                                                     |             |           
|Loans held for sale                                  | $       886 | $   
4,755

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. The Bank also started operations in Oregon during 2003, with a commercial lending office in Portland. 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, 2004, the composition of the loan portfolio was as follows (in thousands):

|                                     |  | Fixed    | Adjustable |          
|------------------------------------ |  | -------- | ---------- | ---------
|Term to Maturity or Rate
Adjustment  |  | Rate     | Rate       | Total    
|                                     |  |          |            |          
|Due within one year                  |  | $
11,660 | $
335,485  | $
347,145
|After one year through three
years   |  | 20,507   | 169,435    | 189,942  
|After three years through
five years |  | 35,948   | 76,582     | 112,530  
|After five years through 15
years    |  | 14,288   | 7,560      | 21,848   
|After 15 years                       |  | 3,633    | 3          | 3,636    
|                                     |  |          |            |          
|                                     |  | $
86,036 | $
589,065  | $
675,101

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

Outstanding commitments to borrowers for loans totaled $11,443,580 and $7,767,000 at March 31, 2004 and 2003, respectively.

The Bank serviced loans for others totaling $269,885,856 and $225,424,589 as of March 31, 2004 and 2003, respectively.

The Company and its banking subsidiary have granted loans to officers and directors of the Company and related interests. These loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectibility. The aggregate dollar amount of these loans was $3.1 million and $2.9 million at March 31, 2004 and 2003, 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):

|                                                           | 2004    | 2003    | 2002   
|---------------------------------------------------------- | ------- | ------- | -------
|                                                           |         |         |        
|Balance, beginning of year                                 | $
8,979 | $
8,754 | $
7,439
|Provision for loan losses                                  | 525     | 390     | 1,500  
|Loans charged off, net of recoveries of $71, $-0-, and $40 | (458)   | (165)   | (185)  
|                                                           |         |         |        
|Balance, end of year                                       | $
9,046 | $
8,979 | $
8,754

The average balance of impaired loans during 2004, 2003, and 2002 was $1,088,000, $58,000, and $952,000, respectively, and the Company recognized $6,300, $2,800, and $164,000 of related interest income during 2004, 2003, and 2002, 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):



|                                 | 2004    | 2003    
|-------------------------------- | ------- | --------
|                                 |         |         
|Loans with allocated reserves    | $       | $      -
|Loans without allocated reserves | 3,973   | 24      
|                                 |         |         
|                                 | $
3,973 | $
24    
|                                 |         |         
|Loans on nonaccrual status       | $
3,973 | $
24    

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6.  PREMISES AND EQUIPMENT

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

|                                               | 2004      | 2003     
|---------------------------------------------- | --------- | ---------
|                                               |           |          
|Land                                           | $  
1,325 | $  
1,491
|Buildings (including leasehold improvements)   | 6,843     | 7,510    
|Furniture, fixtures, and automobiles           | 10,402    | 10,357   
|                                               |           |          
|                                               | 18,570    | 19,358   
|Less accumulated depreciation and amortization | (11,364)  | (10,284) 
|                                               |           |          
|                                               | $  
7,206 | $  
9,074

7.  DEPOSIT ACCOUNTS

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

|                                | 2004 | 2003        
|------------------------------- | ---- | ------------
|                                |      |             
|                                |      | Weighted-   
|                                |      | Average
Rate
|                                |      |             
|Noninterest-bearing
accounts    |      | -
%         
|Savings accounts                |      | 0.6         
|Checking accounts               |      | 1.0         
|Money market accounts           |      | 1.3         
|Time deposits by original
term: |      |             
|One to 11 months                |      | 1.4         
|12 to 23 months                 |      | 1.8         
|24 to 35 months                 |      | 2.9         
|36 to 59 months                 |      | 3.9         
|60 months and beyond            |      | 5.3         
|                                |      |             
|                                |      | 3.0         
|                                |      |             
|                                |      | 2.0
%       

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

|Year Ending |  |          
|----------- |  | ---------
|March 31    |  |          
|            |  |          
|2005        |  | $
151,000
|2006        |  | 47,706   
|2007        |  | 13,000   
|2008        |  | 20,691   
|2009        |  | 12,186   
|Thereafter  |  | 11,866   
|            |  |          
|            |  | $
256,449

Included in deposits are time deposits greater than or equal to $100,000 of $96,439,000 and $94,498,000 at March 31, 2004 and 2003, respectively. Interest on time deposits greater than or equal to

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$100,000 totaled $3,131,000, $3,308,000, and $2,732,000 for the years ended March 31, 2004, 2003, and 2002, 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):

|                                     | 2004       |               | 2003
|------------------------------------ | ---------- | ------------- | ----
|                                     |            |               |     
|                                     |            | Interest
Rate |     
|                                     | Amount     | Ranges        |     
|                                     |            |               |     
|Nonamortizing:                       |            |               |     
|Due within one year                  | $  
65,750 | 1.10-6.32%    |     
|After one year through two
years     | 17,900     | 4.01-7.27     |     
|After two years through three
years  | 16,350     | 4.34-6.62     |     
|After three years through
five years | 16,600     | 4.80-7.39     |     
|After five years through 10
years    | 9,650      | 5.18-6.78     |     
|After 10 years                       | 1,700      | 6.40-6.93     |     
|Amortizing:                          |            |               |     
|After 10 years                       | 581        | 8.19          |     
|                                     |            |               |     
|                                     | $
128,531  |               |     

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

At March 31, 2004 and 2003, the Bank had available unsecured lines of credit with commercial banks totaling $47,000,000, 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, 2004 or 2003, on the lines of credit with the commercial banks.

At March 31, 2004 and 2003, the Bank had no outstanding repurchase agreements with securities dealers.

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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, 2004 and 2003, 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):

|                                     | 2004    | 2003    | 2002   
|------------------------------------ | ------- | ------- | -------
|                                     |         |         |        
|Income tax expense at statutory rate | $
4,047 | $
3,340 | $
2,861
|Income tax effect of:                |         |         |        
|Tax-exempt interest                  | (77)    | (98)    | (107)  
|Low income housing tax credit        |         | (217)   | (217)  
|Valuation allowance                  | 450     | 257     | 140    
|Other--net                           | 98      | (580)   | (82)   
|                                     |         |         |        
|Income tax expense at effective rate | $
4,518 | $
2,702 | $
2,595

In accounting for deferred tax assets, 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.

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

|                                | 2004       | 2003       
|------------------------------- | ---------- | -----------
|                                |            |            
|Deferred tax liabilities:       |            |            
|Loan origination fees and costs | $     (94) | $     
(24)
|Prepaid expenses                | (124)      | (134)      
|FHLB dividends                  | (931)      | (821)      
|Depreciation                    | (131)      | (38)       
|Other--net                      | (193)      | (52)       
|Unrealized gain on securities   | (229)      | (122)      
|                                |            |            
|                                | (1,702)    | (1,191)    
|                                |            |            
|Deferred tax assets:            |            |            
|Deferred compensation           | 340        | 422        
|Bad debt deduction              | 3,126      | 3,102      
|Accrued vacation                | 112        | 120        
|Charitable contribution         | 1,309      | 1,590      
|                                |            |            
|                                | 4,887      | 5,234      
|                                |            |            
|                                | 3,185      | 4,043      
|Valuation allowance             | (848)      | (397)      
|                                |            |            
|Net deferred tax asset          | $
2,337    | $
3,646    

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 $203,664, $212,189, and $171,609 for 2004, 2003, and 2002, respectively.Defined Benefit Plan-The Company's noncontributory defined benefit plan was terminated effective December 31, 1999, with the establishment of the ESOP. As a result of the termination of the Company's noncontributory defined benefit plan, the remaining portion of the pension liability was reversed against compensation expense, resulting in a curtailment gain of $547,000. Prior to termination on December 31, 1999, the Company's funding policy was to contribute amounts to its pension plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974. The actuarial cost method used to compute the pension contribution is the projected unit cost method. Information presented below reflects a measurement date of December 31, 2003, 2002, and 2001.

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

|                              | 2003 | 2002 | 2001 
|----------------------------- | ---- | ---- | -----
|                              |      |      |      
|Assumed discount rate         | N/A  | N/A  | 8.0 %
|Rate of compensation increase | N/A  | N/A  | N/A  
|Expected return on assets     | N/A  | N/A  | 8.0  

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

|                                      | 2003   | 2002    | 2001       
|------------------------------------- | ------ | ------- | -----------
|                                      |        |         |            
|Benefit obligation--beginning of year | $    - | $    
- | $  1,650   
|                                      |        |         |            
|Actuarial loss                        |        |         | (44)       
|Interest cost                         |        |         | 66         
|Benefits paid                         |        |         | (1,668)    
|Expenses                              |        |         | (4)        
|                                      |        |         |            
|Benefit obligation--end of year       | $   
- | $   
-  | $         -

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

|                                        | 2003    | 2002   | 2001       
|--------------------------------------- | ------- | ------ | -----------
|                                        |         |        |            
|Fair value of assets--beginning of year | $    
- | $   
- | $  1,650   
|                                        |         |        |            
|Actual return on assets                 |         |        | 22         
|Benefits paid                           |         |        | (1,668)    
|Expenses                                |         |        | (4)        
|                                        |         |        |            
|Fair value of assets--end of year       | $   
-  | $  
-  | $         -

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

|                            | 2003   | 2002   | 2001  
|--------------------------- | ------ | ------ | ------
|                            |        |        |       
|Funded status               | $    - | $   
- | $   
-
|Unrecognized net loss       |        |        |       
|Curtailment gain recognized |        |        |       
|                            |        |        |       
|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):

|                          | 2003     | 2002     | 2001   
|------------------------- | -------- | -------- | -------
|                          |          |          |        
|Interest cost             | $      - | $      - | $     -
|Service cost              |          |          |        
|Expected return on assets |          |          |        
|                          |          |          |        
|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 $ 0 and $395,957 at March 31, 2004 and 2003, respectively.

Shares held by the ESOP at March 31, 2004, are as follows:

|             | Number   
|------------ | ---------
|             | of Shares
|Allocated:   |          
|Vested       | 289,864  
|Nonvested    | 47,904   
|             |          
|             | 337,768  
|             |          
|Nonallocated |          
|             |          
|             | 337,768  

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

|             |           |                      | Average   
|------------ | --------- | -------------------- | ----------
|             | Number    | Price Range          | Price     
|             | of Shares | Per Share            | Per
Share 
|Allocated:   |           |                      |           
|Vested       | 177,354   | $                 
- | $        -
|Nonvested    | 23,029    |                      |           
|             |           |                      |           
|             | 200,383   |                      |           
|             |           |                      |           
|Nonallocated | 49,227    | 7.25 - 7.37          | 7.35      
|             |           |                      |           
|             | 249,610   |                      |           

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Shares held by the ESOP increased by 162 during the year ended March 31, 2004, 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, 2004, 2003, and 2002, were $641,715, $700,847, and $546,739, respectively. Deferred Compensation Plan-The Company 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, 2004 and 2003, the liability for accumulated deferred compensation was $1,006,000 and $1,240,000, 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 totaled $55,000, $69,000, and $84,000 in 2004, 2003, and 2002, 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 539,175 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 $892,000 for the year ended March 31, 2004, and $866,000 for the years ended March 31, 2003 and 2002.

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, totaling 1,047,849 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 1,347,937 common shares of the Company. Options issued and outstanding are adjusted to reflect any subsequent 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:

|                                      |           |  | Weighted-     |  |               | Weighted- 
|------------------------------------- | --------- |  | ------------- |  | ------------- | ----------
|                                      | Number of |  | Average
Price |  | Average
Issue
|                                      | Option    |  | of
Option     |  |               | Date      
|                                      | Shares    |  | Shares        |  |               | Fair
Value
|                                      |           |  |               |  |               |           
|Balance at March 31, 2001             | 1,047,849 |  | $
8.04        |  |               |           
|                                      |           |  |               |  |               |           
|Granted                               | 153,750   |  | 10.43         |  |               | $
10.43   
|Exercised                             |           |  |               |  |               |           
|Cancelled                             |           |  |               |  |               |           
|                                      |           |  |               |  |               |           
|Balance at March 31, 2002             | 1,201,599 |  | 8.35          |  |               |           
|                                      |           |  |               |  |               |           
|Granted                               | 85,621    |  | 14.17         |  |               | 14.17     
|Exercised                             | (59,554)  |  | 8.22          |  |               | 8.22      
|Cancelled                             | (48,525)  |  | 8.04          |  |               | 8.04      
|                                      |           |  |               |  |               |           
|Balance at March 31, 2003             | 1,179,141 |  | 8.79          |  |               |           
|                                      |           |  |               |  |               |           
|Granted                               | 63,122    |  | 16.65         |  |               | 16.65     
|Exercised                             | (103,178) |  | 9.47          |  |               | 9.47      
|Cancelled                             | (42,624)  |  | 10.86         |  |               | 10.86     
|                                      |           |  |               |  |               |           
|Balance at March 31, 2004             | 1,096,461 |  | 9.10          |  |               |           
|                                      |           |  |               |  |               |           
|Options exercisable at March 31, 2004 | 763,978   |  |               |  |               |           

Financial data pertaining to outstanding stock options is as follows:

|           |  |           |  | Weighted-   |  | Weighted-     |               |             |               | Weighted-     
|---------- |  | --------- |  | ----------- |  | ------------- | ------------- | ----------- | ------------- | --------------
|           |  |           |  | Average     |  | Average       |               |             |               | Average       
|Ranges of  |  | Number of |  | Remaining   |  | Exercise      |               | Number of   |               | Exercise
Price
|Exercise   |  | Option    |  | Contractual |  | Price of      |               | Exercisable |               | of
Exercisable
|Prices     |  | Shares    |  | Life        |  | Option
Shares | Option
Shares |             | Option
Shares
|           |  |           |  |             |  |               |               |             |               |               
|$   8.04   |  | 885,518   |  | 6.4
years   |  | $
8.04        |               | 705,782     |               | $
8.04        
|9.50-16.67 |  | 210,943   |  | 8.3
years   |  | 13.53         |               | 58,196      |               | 12.59         
|           |  |           |  |             |  |               |               |             |               |               
|           |  | 1,096,461 |  | 6.8
years   |  | $
9.10        |               | 763,978     |               | $
8.39        

At March 31, 2004, the Company had an aggregate of 88,744 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.

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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. Adjustable loans have various interest rate adjustment limitations and are generally indexed to U.S. Treasury rates or LIBOR. As of March 31, 2004 and 2003, adjustable rate loans held for investment totaled $589,065,000 and $524,567,000, respectively. Fixed rate loans held for investment totaled $86,036,000 and $89,159,000 at March 31, 2004 and 2003, respectively.

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

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. The Company has no material derivatives.

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, 2004, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of March 31, 2004 and 2003, 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:

|                                          |         |       |                   |             |                   |       |   | To Be Categorized
|----------------------------------------- | ------- | ----- | ----------------- | ----------- | ----------------- | ----- | - | -----------------
|                                          |         |       |                   |             |                   |       |   | as Well          
|                                          |         |       |                   |             |                   |       |   | Capitalized Under
|                                          |         |       |                   | For Capital | Prompt Corrective
|                                          | Actual  |       | Adequacy Purposes |             | Action Provision 
|                                          |         |       |                   |             |                   |       |   |                  
|                                          | Amount  | Ratio |                   | Amount      |                   | Ratio |   | Amount           
|                                          |         |       |                   |             |                   |       |   |                  
|As of March 31, 2004 (in thousands):      |         |       |                   |             |                   |       |   |                  
|Total capital (to risk-weighted assets):  |         |       |                   |             |                   |       |   |                  
|Company                                   | $98,721 | 14.0% | >                 | $56,412     | >                 | 8.0%  | > | $70,515          
|Bank                                      | 79,205  | 11.5  |                   | 55,099      |                   | 8.0   |   | 68,874           
|                                          |         |       |                   |             |                   |       |   |                  
|Tier I capital (to risk-weighted assets): |         |       |                   |             |                   |       |   |                  
|Company                                   | 90,097  | 12.8  | >                 | 28,155      | >                 | 4.0   | > | N/A              
|Bank                                      | 70,581  | 10.2  |                   | 27,679      |                   | 4.0   |   | 41,518           
|                                          |         |       |                   |             |                   |       |   |                  
|Tier I capital (to average assets):       |         |       |                   |             |                   |       |   |                  
|Company                                   | 90,097  | 11.8  | >                 | 30,541      | >                 | 4.0   | > | N/A              
|Bank                                      | 70,581  | 9.4   |                   | 30,034      |                   | 4.0   |   | 37,543           
|                                          |         |       |                   |             |                   |       |   |                  
|As of March 31, 2003 (in thousands):      |         |       |                   |             |                   |       |   |                  
|Total capital (to risk-weighted assets):  |         |       |                   |             |                   |       |   |                  
|Company                                   | $98,587 | 16.1% | >                 | $48,987     | >                 | 8.0%  | > | $61,324          
|Bank                                      | 77,744  | 12.9  |                   | 48,213      |                   | 8.0   |   | 60,267           
|                                          |         |       |                   |             |                   |       |   |                  
|Tier I capital (to risk-weighted assets): |         |       |                   |             |                   |       |   |                  
|Company                                   | 91,042  | 14.8  | >                 | 24,606      | >                 | 4.0   | > | N/A              
|Bank                                      | 70,199  | 11.7  |                   | 24,000      |                   | 4.0   |   | 35,999           
|                                          |         |       |                   |             |                   |       |   |                  
|Tier I capital (to average assets):       |         |       |                   |             |                   |       |   |                  
|Company                                   | 91,042  | 12.8  | >                 | 28,451      | >                 | 4.0   | > | N/A              
|Bank                                      | 70,199  | 10.1  |                   | 27,802      |                   | 4.0   |   | 34,752           
|                                          |         |       |                   |             |                   |       |   |                  

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):

|                                | 2004     | 2003      
|------------------------------- | -------- | ----------
|                                |          |           
|                                | Carrying |           
|                                | Amount   | Fair Value
|                                |          |           
|Financial assets:               |          |           
|Cash and cash equivalents       | $
14,995 | $
14,995  
|Securities available for sale   | 67,567   | 67,567    
|Securities held to maturity     | 2,311    | 2,419     
|Loans held for sale             | 886      | 907       
|Loans receivable                | 661,756  | 689,530   
|Federal Home Loan Bank stock    | 6,650    | 6,650     
|                                |          |           
|                                | 754,165  | 782,068   
|                                |          |           
|Financial liabilities:          |          |           
|Deposit accounts                | 546,388  | 551,507   
|Federal Home Loan Bank
advances |          |           
|and other borrowings            | 128,531  | 135,723   
|                                |          |           
|                                | 674,919  | 687,230   
|                                |          |           
|Net financial instruments       | $
79,246 | $
94,838  

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, 2004 and 2003: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 carrying amount of $886,300 and $2,955,309 at March 31, 2004 and 2003, have a fair value of $906,765 and $3,019,309, respectively, representing the fair value of such commitments. At March 31, 2004 and 2003, the Company's loan commitments amounted to $132,557,371 and $108,315,740, respectively.

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                                                         | 2004     | 2003    
|                                                               |          |         
|ASSETS:                                                        |          |         
|Cash and cash equivalents, including interest-bearing          |          |         
|deposits of $6,434 and $10,851                                 | $
6,461  | $
10,869
|Securities available for sale, amortized cost of $113
and $553 | 113      | 553     
|Loans receivable, net of allowances of $-0-                    | 5,422    | 4,000   
|Accrued interest receivable                                    | 16       | 16      
|Premises and equipment--net                                    | 73       | 95      
|Investment in subsidiaries:                                    |          |         
|Bank subsidiary                                                | 71,063   | 70,851  
|Other subsidiaries                                             | 1,871    | 1,871   
|Prepaid expenses and other assets                              | 6,796    | 5,213   
|                                                               |          |         
|TOTAL                                                          | $
91,815 | $
93,468
|                                                               |          |         
|LIABILITIES AND EQUITY                                         |          |         
|                                                               |          |         
|LIABILITIES:                                                   |          |         
|Accounts payable and other liabilities                         | $
1,236  | $
1,773 
|                                                               |          |         
|EQUITY:                                                        |          |         
|Common stock                                                   | 23,819   | 30,613  
|ESOP debt                                                      |          | (396)   
|Retained earnings                                              | 66,738   | 62,542  
|Shares held in trust for stock-related compensation
plans      | (409)    | (1,301) 
|Accumulated other comprehensive income                         | 431      | 237     
|                                                               |          |         
|Total equity                                                   | 90,579   | 91,695  
|                                                               |          |         
|TOTAL                                                          | $
91,815 | $
93,468

86

<PAGE>

---

|STATEMENTS OF OPERATIONS                           |         |         |          
|-------------------------------------------------- | ------- | ------- | ---------
|                                                   |         |         |          
|                                                   | 2004    | 2003    | 2002     
|                                                   |         |         |          
|INCOME:                                            |         |         |          
|Interest from investment securities                | $  
159 | $  
234 | $   
933 
|Dividend from bank subsidiary                      | 8,992   | 9,300   | 16,700   
|Interest and other income                          | 35      | 30      |          
|                                                   |         |         |          
|Total income                                       | 9,186   | 9,564   | 17,633   
|                                                   |         |         |          
|OTHER EXPENSE:                                     |         |         |          
|Salary and employee benefits                       | 1,948   | 1,993   | 1,853    
|Occupancy and equipment                            | 77      | 85      | 80       
|Information processing costs                       |         |         | 3        
|Other--net                                         | 500     | 533     | 411      
|                                                   |         |         |          
|Total other expense                                | 2,525   | 2,611   | 2,347    
|                                                   |         |         |          
|Income before federal income taxes and             |         |         |          
|equity in undistributed net income
of subsidiaries | 6,661   | 6,953   | 15,286   
|                                                   |         |         |          
|FEDERAL INCOME TAXES                               | (367)   | (674)   | (369)    
|                                                   |         |         |          
|Income before equity in undistributed
net          |         |         |          
|income of subsidiaries                             | 7,028   | 7,627   | 15,655   
|                                                   |         |         |          
|EQUITY IN UNDISTRIBUTED NET INCOME                 |         |         |          
|OF SUBSIDIARIES                                    | 18      | (786)   | (10,076) 
|                                                   |         |         |          
|NET INCOME                                         | $
7,046 | $
6,841 | $  
5,579

87

<PAGE>

---

|STATEMENTS OF CASH FLOWS                            |               |              |              
|--------------------------------------------------- | ------------- | ------------ | -------------
|                                                    |               |              |              
|                                                    | 2004          | 2003         | 2002         
|                                                    |               |              |              
|CASH FLOWS FROM OPERATING ACTIVITIES:               |               |              |              
|Net income                                          | $
7,046       | $
6,841      | $
5,579      
|Adjustments to reconcile net income to net
cash     |               |              |              
|provided by operating activities:                   |               |              |              
|Accretion of investment security
discounts          |               |              | (22)         
|Amortization of investment security
premiums        |               |              | 4            
|Depreciation and amortization of premises           |               |              |              
|and equipment                                       | 22            | 23           | 20           
|Equity in undistributed income of
subsidiaries      | (18)          | 786          | 10,076       
|Amortization of compensation related to
MRP         | 892           | 866          | 867          
|Changes in operating assets and
liabilities:        |               |              |              
|Accrued interest receivable                         |               | (16)         | 102          
|Prepaid expenses and other assets                   | (1,567)       | (1,069)      | (494)        
|Accounts payable and other liabilities              | (537)         | 33           | 34           
|                                                    |               |              |              
|Net cash provided by operating
activities           | 5,838         | 7,464        | 16,166       
|                                                    |               |              |              
|CASH FLOWS FROM INVESTING ACTIVITIES:               |               |              |              
|Proceeds from maturities of securities
available    |               |              |              
|for sale                                            |               |              | 3,068        
|Proceeds from sale of securities available
for sale | 4,127         | 3,756        | 11,108       
|Purchases of securities available for sale          | (3,687)       | (4,209)      | (4,709)      
|Loans originated or acquired                        | (7,698)       | (4,000)      |              
|Loan principal prepayments                          | 6,276         |              |              
|Contribution from (to) MB Cap                       |               | 1            | 4            
|Contribution from (to) I-Pro                        |               |              | (1)          
|Contribution from (to) the Bank                     | (16)          | 28           | 11           
|Net additions to premises and equipment             |               | (4)          | (44)         
|                                                    |               |              |              
|Net cash (used in) provided by
investing activities | (998)         | (4,428)      | 9,437        
|                                                    |               |              |              
|CASH FLOWS FROM FINANCING ACTIVITIES:               |               |              |              
|Repurchase shares of common stock                   | (8,805)       | (7,399)      | (31,550)     
|Tax benefit from stock options exercised            | 1,034         | 143          |              
|Proceeds from stock options exercised               | 977           | 479          |              
|Dividends paid on common stock                      | (2,850)       | (2,318)      | (2,593)      
|Repayment of loan to ESOP                           | 396           | 396          | 396          
|                                                    |               |              |              
|Net cash used in financing
activities               | (9,248)       | (8,699)      | (33,747)     
|                                                    |               |              |              
|NET (DECREASE) IN CASH AND CASH                     |               |              |              
|EQUIVALENTS                                         | (4,408)       | (5,663)      | (8,144)      
|                                                    |               |              |              
|CASH AND CASH EQUIVALENTS:                          |               |              |              
|Beginning of year                                   | 10,869        | 16,532       | 24,676       
|                                                    |               |              |              
|End of year                                         | $
6,461       | $
10,869     | $
16,532     
|                                                    |               |              |              
|SUPPLEMENTAL DISCLOSURES OF CASH                    |               |              |              
|FLOW INFORMATION--Cash paid during                  |               |              |              
|the year for federal income taxes                   | $           - | $         
- | $          
-

88

<PAGE>

---

Under Washington State banking regulations, the Bank is limited as to the ability to declare or pay dividends to the Company up to the amount of the Bank's net profits then on hand.

16.  LEASE COMMITMENTS, CONTINGENCIES, AND GUARANTEES

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

|2005       |  | $
1,203
|---------- |  | -------
|2006       |  | 1,290  
|2007       |  | 1,099  
|2008       |  | 941    
|2009       |  | 911    
|Thereafter |  | 4,350  
|           |  |        
|           |  | $
9,794

Rent expense for the years ended March 31, 2004, 2003, and 2002, totaled $1,127,000, $1,102,000, and $995,000, 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, 2004.

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. Beginning April 1, 2003, the Company began managing the activities of EverTrust Bank under the following lines of business: Business and private banking (including ETAM), the real estate lending group, and the retail banking division. Prior to April 1, 2003, the Company tracked EverTrust Bank under two lines of business, the Bank's retail division and the Bank's business banking group. Results for 2003 and 2002 remain in the original format as an accurate restatement is not possible. MB Cap and the holding company, which includes earnings from subsidiaries and investment in subsidiaries, have been included in Other for all years presented, as their operating results are not significant when taken on an individual basis. The principal activities of each legal entity are described in Note 1. Each entity is managed by an executive team responsible for sales, marketing, operations, and certain administrative functions. Back office support is provided to each entity for credit administration, information systems, finance, and human resources.

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

89

<PAGE>

---

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

|                            |  | 2004        
|--------------------------- |  | ------------
|                            |  | The
Bank's  
|                            |  | Business and
|                            |  | Private     
|                            |  | Banking     
|                            |  | Group       
|                            |  |             
|Condensed income
statement: |  |             
|Net interest income
after   |  |             
|provision for loan
losses   |  | $ 
2,538    
|Noninterest income          |  | 1,576       
|Noninterest expenses        |  | 4,269       
|                            |  |             
|Income
before income taxes  |  | (155)       
|                            |  |             
|Income taxes                |  | (54)        
|                            |  |             
|Net income                  |  | $   
 (101) 
|                            |  |             
|Total assets                |  | $
50,162    

|                                                    | 2003       
|--------------------------------------------------- | -----------
|                                                    |            
|                                                    | The        
|                                                    | Bank's     
|                                                    | Retail     
|                                                    | Division   
|                                                    |            
|Condensed income statement:                         |            
|Net interest income after
provision for loan losses | $  23,645  
|Noninterest income                                  | 5,294      
|Noninterest expenses                                | 16,211     
|                                                    |            
|Income before income
taxes                          | 12,728     
|                                                    |            
|Income taxes                                        | 3,615      
|                                                    |            
|Net income                                          | $     9,113
|                                                    |            
|Total assets                                        | $
628,653  
|                                                    |            
|(1) Formerly Commercial Bank of
Everett             |            

90

<PAGE>

---

|                                        | 2002      
|--------------------------------------- | ----------
|                                        |           
|                                        | The       
|                                        | Bank's    
|                                        | Retail    
|                                        | Division  
|                                        |           
|Condensed income statement:             |           
|Net interest income after               |           
|provision for loan losses               | $  21,653 
|Noninterest income                      | 2,986     
|Noninterest expenses                    | 15,568    
|                                        |           
|Income before income
taxes              | 9,071     
|                                        |           
|Income taxes                            | 2,786     
|                                        |           
|Net income                              | $   
6,285
|                                        |           
|Total assets                            | $
618,725 
|                                        |           
|(1) Formerly Commercial Bank
of Everett |           

91

<PAGE>

---

18.  SELECTED QUARTERLY FINANCIAL DATA (unaudited)

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

|                                     | 2004    
|------------------------------------ | --------
|                                     |         
|                                     | First   
|                                     | Quarter 
|                                     |         
|Interest income                      | $
11,076
|Interest expense                     | 4,381   
|                                     |         
|Net interest income
before           |         
|provision for loan
losses            | 6,695   
|                                     |         
|Provision for loan losses            | 175     
|                                     |         
|Net interest income
after            |         
|provision for loans
losses           | 6,520   
|                                     |         
|Noninterest income                   | 1,644   
|Noninterest expenses                 | 5,205   
|                                     |         
|Earnings before federal              |         
|income taxes                         | 2,959   
|                                     |         
|Federal income taxes                 | 994     
|                                     |         
|Net income                           | $
1,965 
|                                     |         
|Net income per common share--Basic   | $  
0.28
|                                     |         
|Net income per common
share--Diluted | $  
0.26

92

<PAGE>

---

|                                     | 2003    
|------------------------------------ | --------
|                                     |         
|                                     | First   
|                                     | Quarter 
|                                     |         
|Interest income                      | $
11,704
|Interest expense                     | 4,952   
|                                     |         
|Net interest income
before           |         
|provision for loan
losses            | 6,752   
|                                     |         
|Provision for loan losses            | 190     
|                                     |         
|Net interest income
after            |         
|provision for loans
losses           | 6,562   
|                                     |         
|Noninterest income                   | 1,124   
|Noninterest expenses                 | 5,412   
|                                     |         
|Earnings before federal              |         
|income taxes                         | 2,274   
|                                     |         
|Federal income taxes                 | 643     
|                                     |         
|Net income                           | $
1,631 
|                                     |         
|Net income per common share--Basic   | $  
0.23
|                                     |         
|Net income per common
share--Diluted | $  
0.21

93

<PAGE>

---

|                                     | 2002    
|------------------------------------ | --------
|                                     |         
|                                     | First   
|                                     | Quarter 
|                                     |         
|Interest income                      | $
11,786
|Interest expense                     | 5,657   
|                                     |         
|Net interest income
before           |         
|provision for loan
losses            | 6,129   
|                                     |         
|Provision for loan losses            | 250     
|                                     |         
|Net interest income
after            |         
|provision for loans
losses           | 5,879   
|                                     |         
|Noninterest income                   | 685     
|Noninterest expenses                 | 4,585   
|                                     |         
|Earnings before federal              |         
|income taxes                         | 1,979   
|                                     |         
|Federal income taxes                 | 598     
|                                     |         
|Net income                           | $
1,381 
|                                     |         
|Net income per common share--Basic   | $  
0.14
|                                     |         
|Net income per common
share--Diluted | $  
0.13

94

<PAGE>

Not applicable.

**Item 9A.  Controls and Procedures******

(a) Evaluation of Disclosure 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)-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934 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 as of the end of the period covered by this 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
Securities and Exchange Act of 1934 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, 2004, the Corporation 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 10.  Directors and Executive Officers of the Registrant**

The information contained under the section captioned "Proposal I -- Election of Directors" is included in the
Company's Definitive Proxy Statement for the 2004 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                | 2004            | EverTrust                       
|                   
|                    |                 |                                 
|Michael B. Hansen   | 62              | Chairman of the Board, President
|                    |                 | and Chief Executive Officer     
|                   
|Michael R. Deller   | 53              | Executive Vice President        
|                   
|Jeffrey R. Mitchell | 45              | Senior Vice President, Chief    
|                    |                 | Financial Officer               
|                    |                 |                                 
|Lorelei Christenson | 50              | Senior Vice President and       
|                    |                 | Corporate Secretary             
|                   
|Philip Mitterling   | 46              | Treasurer                       
|                   
|Robert L. Nall      | 48              | --                              
|                    |                 |                                 

95

<PAGE>

Biographical Information

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

*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.

**Audit Committee Financial Expert**

The Audit Committee of the Company is composed of Directors Thomas J. Gaffney (Chairman), William J.
Rucker, Louis H. Mills and Robert G. Wolfe.  Each member of the Audit Committee is "independent" as defined in the
Nasdaq Stock Market listing standards.  The Company's Board of Directors has designated Directors Gaffney, Mills,
and Wolfe as the Audit Committee financial experts, as defined in the SEC's Regulation S-K.  Directors Gaffney, Mills
and  Wolfe are independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A promulgated under the Exchange
Act.

**Code of Ethics**

The Board of Directors adopted a Code of Ethics for the Company's officers (including its senior financial
officers), directors, and employees.  The Code of Ethics requires the Company's officers, directors, and employees to
maintain the highest standards of professional conduct.  A copy of the Code of Ethics is available, without charge,
through the Company's website at www.EVRTonline.com/ethics or by writing to us at: EverTrust Financial Group, Inc.,
2707 Colby Avenue, Suite 600, Everett, Washington 98201.

**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.

96

<PAGE>

**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.

**Equity Compensation Plan Information.**  The following table summarizes share and exercise price
information about the Company's equity compensation plans as of March 31, 2004.

|                                   |                        |                     | (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                        | 1,096,461              | $9.10               | 88,744                    
|Restricted stock plan              | 539,175                | 8.04                | --                        
|                                   |                        |                     |                           
|Equity compensation plans not      |                        |                     |                           
|approved by security holders:      | NA                     | NA                  | NA                        
|Total                              | 1,635,636              | $8.75               | 88,744                    
|                                   |                        |                    

(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.  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.

97

<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      
| |     | 31.1    
| |     | 31.2    
| |     | 32      

_______________

|(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.          
|(4) | Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended March 31, 2003.

None.

98

<PAGE>

|                      |                          | EVERTRUST FINANCIAL GROUP, INC.    
|--------------------- | ------------------------ | -----------------------------------
|                     
|                     
|Date:  June
  8, 2004 | By:/s/ Michael
B. Hansen
|                      |                          | Michael B. Hansen                  
|                      |                          | Chairman of the Board and President
|                      |                          | (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 8, 2004
|Michael B. Hansen       | Chief Executive Officer and              
|                        | Director (Principal Executive             |             
|                        | Officer)                                  |             
|                       
|                        |                                           |             
|/s/ Jeffrey R. Mitchell | Senior Vice President and Chief Financial | June 8, 2004
|Jeffrey R. Mitchell     | Officer (Principal Financial             
|                        | and Accounting Officer)                   |             
|                        |                                           |             
|/s/ Margaret B. Bavasi  | Director                                  | June 8, 2004
|Margaret B. Bavasi     
|                       
|                       
|/s/ Thomas R. Collins   | Director                                  | June 8, 2004
|Thomas R. Collins      
|                       
|                       
|/s/ Michael R. Deller   | Director                                  | June 8, 2004
|Michael R. Deller      
|                       
|                       
|/s/ Thomas J. Gaffney   | Director                                  | June 8, 2004
|Thomas J. Gaffney      
|                       
|                       
|/s/ R. Michael Kight    | Director                                  | June 8, 2004
|R. Michael Kight       
|                       
|                       
|                        |                                           |             
|/s/ George S. Newland   | Director                                  | June 8, 2004
|George S. Newland      
|                       
|                       
|/s/ William J. Rucker   | Director                                  | June 8, 2004
|William J. Rucker       |                                           |             
|                        |                                           |             
|/s/ Louis H. Mills      | Director                                  | June 8, 2004
|Louis H. Mills          |                                           |             
|                        |                                           |             
|/s/ Robert G. Wolfe     | Director                                  | June 8, 2004
|Robert G. Wolfe         |                                           |             

99

<PAGE>

**Exhibit 10.7**

**Amended Employment Agreement with Jeffrey R. Mitchell**





<PAGE>

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT



This is a Second Amendment to Employment Agreement attached as Exhibit A dated September 30, 1999 (the "Agreement") as amended by Amendment to Employment Agreement dated April 28, 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; and



WHEREAS, the Board of Directors of the company and the Board of Directors of the Bank (collectively, the "Board of Directors") and Employee desire to amend said Employment Agreement; and



WHEREAS, the Board of Directors has approved the authorization and execution of this Second Amendment of Agreement with 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.        Deletion of First Amendment.  The First Amendment dated April 28, 2003, is deleted in its entirety.



2.      Paragraph 2 of the Agreement, entitled "Term".  Paragraph 2 of the Agreement, entitled "Term" is amended to read as follows:

> The term of this Agreement will be until February 24, 2005.  Beginning on February 24, 2005, 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.



3.        Paragraph 7(d) of the Agreement, entitled "Change In Control".  Paragraph 7(d) of the Agreement, entitled "Change In Control" is amended to read as follows:



> In the event of a Change in Control which occurs at any time after the Effective Date while the Employee is employed under this Agreement, irrespective of whether or not Employee is terminated, the Company and Bank shall jointly pay to the Employee a lump sum, in cash, within twenty-five (25) days after the Change in Control in an amount equal to:

1

<PAGE>

| | 1. | One hundred fifty percent (150%) of the Employee's base compensation ("Monthly Salary") paid to the Employee during the twelve (12) full months prior to the Change in Control; and            | 
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |   
| | 2. | One hundred fifty percent (150%) of the Employee's average bonus ("Year End Bonus") paid to Employee during the five (5) fiscal years of the Company and Bank preceding the Change in Control. | 



> In addition, the Company and Bank shall jointly provide to 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 Employee and his dependents and beneficiaries who would have been eligible for such benefits, on terms substantially as favorable to the Employee, including amounts of coverage, deductibles and other costs to him as if there had been no Change in Control, irrespective of whether or not Employee is involuntarily terminated.
> 
> In the event Employee is entitled to the benefits payable under this Section 7(d), Employee shall not be entitled to any benefits under Section 7(a), even if there is both a Change in Control and an Involuntary Termination.



4.        Paragraph 9 of the Agreement, entitled "Non-Competition", subparagraph (a).  Paragraph 9 of the Agreement, entitled "Non-Competition", Subparagraph (a) is amended to read as follows:

> Upon termination of Employee's employment hereunder except
> pursuant to Section 7(a) hereof and except in the case of a Change in Control,
> 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 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) or (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

2

<PAGE>



> other remedies available to the Bank and/or Company for
> such breach or threatened breach, including the recovery of damages from
> Employee.



5.        Paragraph 10 of the Agreement, entitled "Solicitation and/or Providing Services After Termination".  A new Paragraph 10 is added to the Agreement as follows:

10.        Solicitation and/or Providing Services After Termination.

> Employee agrees that, in addition to any other limitations, for a period of eighteen (18) months after termination of his employment under this Agreement, for whatever reason:
> (a)      Employee will not, on behalf of himself or on behalf of any other person, firm, corporation, or other entity solicit or 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;
> (b)      Employee will not directly encourage or solicit any employee of the Bank and/or Company to leave such employment for any reason, nor assist others in so soliciting or encouraging employees of the Bank and/or Company to leave.

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

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

|EVERTRUST FINANCIAL GROUP, INC. EVERTRUST BANK | EMPLOYEE                                                            
|---------------------------------------------- | --------------------------------------------------------------------
|                                               |                                                                     
|                                               |                                                                     
|/s/ Lorelei Christenson                        | /s/ Jeffrey R. Mitchell                                             
|Lorelei Christenson
Corporate Secretary        | Jeffrey R. MitchellSenior Vice President and Chief Financial Officer
|                                               |                                                                     
|3
<PAGE>                                      
|                                               |                                                                     
|/s/ Lou Mills                                  |                                                                     
|Lou MillsCompensation Committee Chair          |                                                                     





4

<PAGE>



******Exhibit 10.8**

**Amended Employment Agreement with Robert L. Nall**



SECOND AMENDMENT TO EMPLOYMENT AGREEMENT



This is a Second Amendment to Employment Agreement attached as Exhibit A dated September 30, 1999 (the "Agreement") as amended by Amendment to Employment Agreement dated April 28, 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; and



WHEREAS, the Board of Directors of the company and the Board of Directors of the Bank (collectively, the "Board of Directors") and Employee desire to amend said Employment Agreement; and



WHEREAS, the Board of Directors has approved the authorization and execution of this Second Amendment of Agreement with 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.        Deletion of First Amendment.  The First Amendment dated April 28, 2003, is deleted in its entirety.



2.       Paragraph 2 of the Agreement, entitled "Term".  Paragraph 2 of the Agreement, entitled "Term" is amended to read as follows:

> The term of this Agreement will be until February 24, 2005.  Beginning on February 24, 2005, 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.



3.        Paragraph 7(d) of the Agreement, entitled "Change In Control".  Paragraph 7(d) of the Agreement, entitled "Change In Control" is amended to read as follows:



> In the event of a Change in Control which occurs at any time after the Effective Date while the Employee is employed under this Agreement, irrespective of whether or not Employee is terminated, the Company and Bank shall jointly pay to the Employee a lump sum, in cash, within twenty-five (25) days after the Change in Control in an amount equal to:

1

<PAGE>

| | 1. | One hundred fifty percent (150%) of the Employee's base compensation ("Monthly Salary") paid to the Employee during the twelve (12) full months prior to the Change in Control; and            | 
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |   
| | 2. | One hundred fifty percent (150%) of the Employee's average bonus ("Year End Bonus") paid to Employee during the five (5) fiscal years of the Company and Bank preceding the Change in Control. | 



> In addition, the Company and Bank shall jointly provide to 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 Employee and his dependents and beneficiaries who would have been eligible for such benefits, on terms substantially as favorable to the Employee, including amounts of coverage, deductibles and other costs to him as if there had been no Change in Control, irrespective of whether or not Employee is involuntarily terminated.
> 
> In the event Employee is entitled to the benefits payable under this Section 7(d), Employee shall not be entitled to any benefits under Section 7(a), even if there is both a Change in Control and an Involuntary Termination.



4.        Paragraph 9 of the Agreement, entitled "Non-Competition", subparagraph (a).  Paragraph 9 of the Agreement, entitled "Non-Competition", Subparagraph (a) is amended to read as follows:

> Upon termination of Employee's employment hereunder except
> pursuant to Section 7(a) hereof and except in the case of a Change in Control,
> 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 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) or (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

2

<PAGE>

> other remedies available to the Bank and/or Company for such
> breach or threatened breach, including the recovery of damages from Employee.



5.        Paragraph 10 of the Agreement, entitled "Solicitation and/or Providing Services After Termination".  A new Paragraph 10 is added to the Agreement as follows:

10.       Solicitation and/or Providing Services After Termination.

> Employee agrees that, in addition to any other limitations, for a period of eighteen (18) months after termination of his employment under this Agreement, for whatever reason:
> (a)      Employee will not, on behalf of himself or on behalf of any other person, firm, corporation, or other entity solicit or 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;
> (b)      Employee will not directly encourage or solicit any employee of the Bank and/or Company to leave such employment for any reason, nor assist others in so soliciting or encouraging employees of the Bank and/or Company to leave.

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

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

|EVERTRUST FINANCIAL GROUP, INC. EVERTRUST BANK | EMPLOYEE                                                  
|---------------------------------------------- | ----------------------------------------------------------
|                                               |                                                           
|                                               |                                                           
|/s/ Lorelei Christenson                        | /s/ Robert Nall                                           
|Lorelei Christenson
Corporate Secretary        | Robert NallSenior Vice President and Chief
Lending Officer
|                                               |                                                           
|3
<PAGE>                                      
|                                               |                                                           
|/s/ Lou Mills                                  |                                                           
|Lou MillsCompensation Committee Chair          |                                                           





4

<PAGE>

**Exhibit 10.9**

**Employment Agreement with Philip Mitterling**





EMPLOYMENT AGREEMENT BETWEEN
PHILIP MITTERLING AND EVERTRUST FINANCIAL GROUP, INC.
WITH REFERENCE TO A CHANGE IN CONTROL

This is an Amendment in its entirety of that certain Employment Agreement dated March 24, 2003, by and between EVERTRUST FINANCIAL GROUP, INC. (the "Company") and PHILIP MITTERLING (the "Employee").



In the event of a Change in Control which occurs at any time after the effective date of this Agreement while the Employee is employed under this Agreement, irrespective of whether or not Employee is terminated, the Company shall pay to Employee a lump sum, in cash, within twenty-five (25) days after the Change in Control in an amount equal to one hundred fifty percent (150%) of the Employee's base compensation ("Monthly Salary") paid to the Employee during the twelve (12) months prior to the Change in Control.



For purposes of this Agreement, the term "Change in Control" means:  (1) an offeror other than the Company purchases shares of stock of the Company 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 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 of a 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 Section 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities of the Company representing 25% or more of the combined voting power of the Company's outstanding securities; (5) individuals who are members of the board of directors of the Company immediately following the Effective Date (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 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 Company is not the resulting entity, or a transaction at the completion of which the former stockholders of the acquired corporation become the 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 Company.

1

<PAGE>



The term "Effective Date" means the date of this Agreement.



The term of this Agreement will be until February 24, 2005.  Beginning on February 24, 2005, 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.



Section 280G of the Internal Revenue code provides that severance payments that equal or exceed three times the individual's base amount are deemed to be "excess parachute payments" if they are conditioned upon a Change in Control.  Individuals receiving parachute payments in excess of 2.99 times their base amount are subject to a 20% excise tax on the amount of such payments.  If excess parachute payments are made, EverTrust would not be entitled to deduct the amount of such excess payments. Therefore, this Agreement process that severance payments that are subject to a change in control will be reduced as much as necessary to ensure that no amounts payable to the Employee will be considered excess parachute payments.





|/s/ Philip Mitterling                 |     
|------------------------------------- | ----
|PHILIP MITTERLING,
Treasurer          | Date
|                                      |     
|                                      |     
|                                      |     
|/s/ Lori Christenson                  |     
|LORI CHRISTENSON, Corporate Secretary | Date
|                                      |     
|                                      |     
|                                      |     
|/s/ Lou Mills                         |     
|LOU MILLS, Compensation Committee     | Date

2

<PAGE>



**Exhibit 10.10**

**Amended Employment Agreement with Philip Mitterling**

<PAGE>

Employment Agreement Between Philip Mitterling & EverTrust Financial Group, Inc.

In the event that Philip Mitterling (the "employee") is involuntarily terminated solely because of a "change in control" of EverTrust Financial Group (as defined below), he shall be entitled to receive 2.99 times his average annual base salary (excluding any bonuses) during the five-year period prior to the effective date of the change in control. If the employee does not have 5 years of service, the average of the actual number of years of service will be used to make this calculation.  The maximum benefit will be distributed in the form of a lump sum cash payment within 30 days of the effective date of the involuntary termination.

For the purpose of this agreement, a "change in control" is defined as having occurred when, among other things, a person other than EverTrust purchases shares of EverTrust Financial Group, Inc.'s common stock under a tender or exchange offer for the shares; any person, as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, is or becomes the beneficial owner, directly or indirectly, of securities of EverTrust representing 25% or more of the combined voting power of EverTrust's then outstanding securities; the membership of the Board of Directors changes as the result of a contested election; or shareholders of EverTrust approve a merger, consolidation, sale or disposition of all or substantially all of EverTrust's assets, or a plan of partial or complete liquidation.

The term of this Agreement shall be a period of one-year commencing on the Effective Date.  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 give 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.  References herein to the term of this Agreement shall refer to both such initial term and such extended terms.

Section 280G of the Internal Revenue Code provides that severance payments that equal or exceed three times the individuals base amount are deemed to be "excess parachute payments" if they are conditioned upon a change in control.  Individuals receiving parachute payments in excess of 2.99 times their base amount are subject to a 20 % excise tax on the amount of such payments.  If excess parachute payments are made, EverTrust would not be entitled to deduct the amount of such excess payments.  Therefore, this agreement provides that severance payment that are subject to a change in control will be reduces as much as necessary to ensure that no amounts payable to the employee will be considered excess parachute payments.

1

<PAGE>



|/s/ Philip Mitterling                     | 03/24/03
|----------------------------------------- | --------
|Philip Mitterling,
Treasurer              | Date    
|                                          |         
|                                          |         
|                                          |         
|/s/ William J. Rucker                     | 03/24/03
|William J. Rucker, Compensation Committee | Date    
|                                          |         
|                                          |         
|                                          |         
|/s/ Lori Christenson                      | 03/24/03
|Lori Christenson, Corporate
  Secretary   | Date    

2

<PAGE>



|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>**

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 10, 2004, appearing in the Annual Report on Form 10-K
of EverTrust Financial Group, Inc.  for the year ended March 31, 2004.

/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Seattle, Washington
June 7, 2004

<PAGE>

**Exhibit 31.1
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 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 report;
|                     |                                                                                                                                                                                                                                                                                                           
|3.                   | Based on my knowledge, the financial statements, and other financial information included in this 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 report;                   
|                     |                                                                                                                                                                                                                                                                                                           
|4.                   | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:                                                                            
|                     |                                                                                                                                                                                                                                                                                                           
|                     | a)                                                                                                                                                                                                                                                                                                        
|                    
|                     | b)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | c)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|5.                   | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | a)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | b)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|Date: June
  8, 2004

/s/Michael B. Hansen
                                                                                                           
Michael B. Hansen
                                                                                                           
Chief Executive Officer

<PAGE>

**Exhibit 31.2
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 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 report;
|                     |                                                                                                                                                                                                                                                                                                           
|3.                   | Based on my knowledge, the financial statements, and other financial information included in this 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 report;                   
|                     |                                                                                                                                                                                                                                                                                                           
|4.                   | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:                                                                            
|                     |                                                                                                                                                                                                                                                                                                           
|                     | a)                                                                                                                                                                                                                                                                                                        
|                    
|                     | b)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | c)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|5.                   | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | a)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|                     | b)                                                                                                                                                                                                                                                                                                        
|                     |                                                                                                                                                                                                                                                                                                           
|Date: June
  8, 2004

/s/Jeffrey R. Mitchell
                                                                                                           
Jeffrey R. Mitchell
                                                                                                           
Chief Financial Officer

<PAGE>

| | (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.

<PAGE>