SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]  Annual report  pursuant to section 13 or 15 (d) of the Securities  Exchange
     Act of 1934

     For the fiscal year ended           September 30, 2003
                               -------------------------------------------------

                                                       -OR-

[ ]  Transition  report  pursuant  to  section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

     For the transition period from ___________ to _____________.

                         Commission File Number:    0-49696
                                                ---------------

                              RESERVE BANCORP, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

           Pennsylvania                                        23-3102103
-------------------------------------                     ----------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                             Identification No.)

2000 Mt. Troy Road, Pittsburgh, Pennsylvania                     15212
---------------------------------------------            -----------------------
(Address of Principal Executive Offices)                       (Zip Code)

Issuer's Telephone Number, Including Area Code:      (412) 322-6107
                                                   -------------------

Securities registered under Section 12(b) of the Exchange Act:     None
                                                                -----------

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
YES      NO  X .
    ---     ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent fiscal year:  $4.0 million.

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant, based on the last sale price of the registrant's Common Stock
on December 12, 2003, was $10.9 million (578,407 shares at $18.80 per share).

         As of December 12, 2003, there were 711,950  outstanding shares of  the
registrant's Common Stock.

         Transitional Small Business  Disclosure Format (check one):
                                  YES      NO  X
                                      ---     ---

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year ended
     September 30, 2003. (Part II)
2.   Portions  of  the  Proxy   Statement   for  the  2004  Annual   Meeting  of
     Stockholders. (Part III)

<PAGE>

                                     PART I

Forward-Looking Statements

         Reserve  Bancorp,  Inc.  (the  "Company")  may from  time to time  make
written or oral "forward looking statements",  including statements contained in
the Company's  filings with the  Securities and Exchange  Commission  (including
this Annual Report on Form 10-KSB and the exhibits  thereto),  in its reports to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in,  monetary  and fiscal  policies and
laws,  including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the  perceived  overall  value of these  products  and  services  by  users,
including the features, pricing and quality as compared to competitors' products
and services;  the impact of changes in financial services' laws and regulations
(including  laws   concerning   taxes,   banking,   securities  and  insurance);
technological  changes;  acquisitions;  changes in consumer  spending and saving
habits;  and the  success of the Company at managing  the risks  resulting  from
these factors.

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

Item 1.  Description of Business

General

         The Company is a Pennsylvania corporation organized in December 2001 at
the  direction of Mt. Troy Bank (the "Bank") to acquire all of the capital stock
that  the  Bank  issued  in its  conversion  from the  mutual  to stock  form of
ownership  (the  "Conversion").  On  April  5,  2002,  the  Bank  completed  the
Conversion and became a wholly owned subsidiary of the Company. The Company is a
unitary savings and loan holding company and conducts no significant business or
operations  of its own other than  holding all of the  outstanding  stock of the
Bank and  investing the  Company's  portion of the net proceeds  obtained in the
Conversion.

         References  to the Company or  Registrant in this Annual Report on Form
10-KSB generally refer to the Company and the Bank, unless the context otherwise
indicates.

         The Bank is a federally  chartered stock savings bank  headquartered in
Reserve  Township,  near  Pittsburgh,  Pennsylvania.  The  Bank  is  subject  to
examination  and  comprehensive  regulation by the Office of Thrift  Supervision
("OTS")  and its  deposits  are  federally  insured by the  Savings  Association
Insurance Fund  ("SAIF").  The Bank is a member of and owns capital stock in the
FHLB of Pittsburgh, which is one of the 12 regional banks in the FHLB System.

<PAGE>

Market Area and Competition

         The Bank  operates  from its main  office  in  Reserve  Township,  near
Pittsburgh,  Pennsylvania.  The Bank's primary market area is Allegheny  County,
Pennsylvania.  The Bank  faces  substantial  competition  in its  attraction  of
deposits,  which  are its  primary  source  of  funds  for  lending,  and in the
origination  of  consumer,   real  estate,  and  commercial  loans.  The  Bank's
competition for deposits and loans historically has come from local and regional
commercial banks, thrift  institutions,  and credit unions located in the Bank's
primary market area. The Bank also competes with mortgage banking  companies for
real estate loans,  and commercial  banks and savings  institutions for consumer
loans;  and faces  competition  for  investor  funds from mutual fund  accounts,
short-term money funds and corporate and government securities.

Lending Activities

         General.  The Bank primarily originates home mortgages and construction
loans  for its  own  portfolio.  The  Bank's  loan  portfolio  is  predominantly
comprised of one- to four-family  residential  real estate loans,  most of which
have fixed rates of interest.

                                        3

<PAGE>

         Loan   Portfolio   Composition.   The  following   table  analyzes  the
composition  of the  Bank's  loan  portfolio  by  loan  category  at  the  dates
indicated.

<TABLE>
<CAPTION>
                                                                       At September 30,
                                                  ---------------------------------------------------
                                                           2003                        2002
                                                  --------------------------- -----------------------
                                                    Amount       Percent       Amount        Percent
                                                    ------       -------       ------        -------
                                                             (Dollars in Thousands)
<S>                                              <C>            <C>          <C>            <C>
Type of Loans:
--------------
First mortgage loans:
  One- to four family residential.........         $24,927         64.63%      $25,910         68.79%
  Multi-family.............................            248          0.64           264          0.70
  Construction.............................          5,543         14.37         4,935         13.10
  Commercial real estate...................          3,684          9.55         2,756          7.32

Home equity and second mortgage............          2,209          5.73         2,632          6.99

Consumer loans:
  Secured.................................             265          0.69           330          0.88
  Unsecured................................            185          0.48           217          0.58
  Share loans..............................            118          0.31           136          0.36

Commercial business loans..................          1,389          3.60           484          1.28
                                                   -------        ------       -------        ------

Total loans................................         38,568        100.00%       37,664        100.00%
                                                                  ======                      ======
Plus:
   Real estate owned.......................             59                           -
Less:
  Undisbursed portions of
      construction loans...................          3,478                       2,385
  Net deferred loan origination fees.......             69                         182
  Allowance for loan losses................            193                          80
                                                   -------                     -------

Total loans, net...........................        $34,887                     $35,017
                                                   =======                     =======
</TABLE>

                                        4

<PAGE>

         Loan Maturity Schedule.  The following table sets forth the maturity or
repricing of Bank's loan  portfolio at September 30, 2003.  Demand loans,  loans
having no stated maturity and overdrafts are shown as due in one year or less.

<TABLE>
<CAPTION>
                                                 Home Equity
                                                 and Second                Commercial
                              First Mortgage    Mortgage Loans   Consumer   Business    Total
                              --------------    --------------   --------   --------    -----
                                                          (In Thousands)
<S>                              <C>              <C>            <C>        <C>        <C>
Amounts Due:
Within 1 Year...............       $ 3,426          $   635        $149       $1,389     $5,599

After 1 year:
  1 to 3 years..............         3,720              191         179            -      4,090
  3 to 5 years..............         1,255              528         188            -      1,971
  5 to 10 years.............         5,463              429          52            -      5,944
  10 to 20 years............        15,719              426           -            -     16,145
  Over 20 years.............         4,819                -           -            -      4,819
                                   -------           ------        ----       ------    -------
Total due after one year....        30,976            1,574         419            -     32,969
                                   -------           ------        ----       ------    -------
Total amount due............       $34,402           $2,209        $568       $1,389    $38,568
                                   =======           ======        ====       ======    =======
</TABLE>


         The  following  table  sets  forth  the  dollar  amount of all loans at
September 30, 2003 due after September 30, 2004, which have fixed interest rates
and which have floating or adjustable interest rates.


                                                         Floating or
                                          Fixed Rates  Adjustable Rates  Total
                                          -----------  ----------------  -----
                                                        (In Thousands)
First Mortgage.......................        $30,815            $161     $30,976
Home Equity and Second Mortgage......          1,063             511       1,574
Consumer.............................            419               -         419
Commercial Business..................              -               -           -
                                             -------            ----     -------
  Total..............................        $32,297            $672     $32,969
                                             =======            ====     =======

         Residential  Lending.  The Bank's primary lending activity  consists of
the origination of one- to four-family mortgage loans, the majority of which are
secured by property  located in Allegheny  County,  Pennsylvania.  The Bank will
generally  originate a mortgage loan in an amount up to 95% of the lesser of the
appraised  value or selling  price of a  mortgaged  property,  however,  private
mortgage  insurance for the borrower is usually  required on the amount financed
in excess of 80%.

         The Bank  originates  fixed rate mortgage  loans for its own portfolio.
The fixed rate mortgage  loans have terms of ten to thirty  years.  Although the
Bank currently  originates loans only for its own portfolio,  the Bank generally
makes  its fixed  rate  mortgage  loans to meet the  secondary  mortgage  market
standards of the Federal Home Loan Mortgage Corporation ("FHLMC"). The Bank also
makes some non- conforming loans in order to meet the needs of its community and
customers.

         Substantially all of the Bank's  residential  mortgages include "due on
sale" clauses,  which are provisions giving the Bank the right to declare a loan
immediately  payable if the borrower sells or otherwise transfers an interest in
the property to a third party.  Property  appraisals on real estate securing the
Bank's  single-family  residential loans are made by state certified or licensed
independent appraisers approved by

                                        5

<PAGE>

the Board of Directors.  Appraisals are performed in accordance  with applicable
regulations  and policies.  The Bank requires  title  insurance  policies on all
first mortgage real estate loans originated.  All property secured loans require
fire and casualty insurance.  Loans made on property located in designated flood
zones require minimum flood insurance coverage based on the amount of the loan.

         Construction  Lending.  The  Bank  originates  construction  loans  for
single-family  residential  properties in the Bank's  market area.  Construction
loans are made to local  builders  on a  speculative  basis  and to  owners  for
construction of their primary residences.  The Bank generally limits residential
construction  loans  for  speculative  purposes  to not more  than two units per
builder.  At September 30, 2003, the Bank had 25 construction  loans outstanding
with an aggregate balance of approximately  $5.5 million,  or 14.4% of the total
loan portfolio.  Of such amount,  approximately  $3.5 million was undisbursed at
September 30, 2003.

         Construction lending is generally considered to involve a higher degree
of credit risk than long-term permanent financing of residential properties. The
Bank's  risk of loss  on a  construction  loan is  dependent  largely  upon  the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  and  the  estimated  cost  of  construction.  If the  estimate  of
construction  cost and the  marketability of the property upon completion of the
project prove to be inaccurate,  the Bank may be compelled to advance additional
funds to  complete  the  construction.  Furthermore,  if the final  value of the
completed  property is less than the estimated amount, the value of the property
might not be sufficient to assure the repayment of the loan.

         Commercial  Real Estate Loans.  The Bank originates a limited number of
commercial  real  estate   mortgage  loans,   including  loans  on  multi-family
dwellings, retail/service space, and other income-producing properties. The Bank
requires  no less than 20%  downpayment  or equity for  commercial  real  estate
mortgage loans. Typically these loans are made with fixed rates of interest with
terms of up to fifteen  years.  Essentially  all of the Bank's  commercial  real
estate loans are within the Bank's market area and all are within  Pennsylvania.
As of September 30, 2003, the Bank had commercial  real estate loans,  totalling
$3.7  million or 9.6% of the Bank's  total loan  portfolio.  The Bank's  largest
commercial real estate loan had a balance of approximately $493,000 on September
30, 2003 and was secured by a warehouse located in the Bank's market area.

         Commercial  real  estate  loans  generally  are  considered  to  entail
significantly  greater risk than that which is involved  with single family real
estate  lending.  The  repayment  of these loans  typically  is dependent on the
successful  operations and income stream of the  commercial  real estate and the
borrower.  These risks can be significantly affected by economic conditions.  In
addition,  commercial  real  estate  lending  generally  requires  substantially
greater  evaluation and oversight  efforts  compared to residential  real estate
lending.

         Home Equity and Second Mortgage Loans.  Home equity and second mortgage
loans are  originated  in the Bank's  market area and have  maturities  of up to
fifteen  years.   Outside   professionals  are  generally  employed  to  conduct
appraisals for loans over $50,000. At September 30, 2003, the Bank's home equity
and second mortgage loans totaled $2.2 million, or 5.7% of total loans.

         Consumer  Loans.  At September  30, 2003,  consumer  loans  amounted to
approximately $568,000 or 1.5% of the Bank's total loan portfolio, most of which
are auto  loans.  Consumer  loans also  consist of personal  loans  (unsecured),
savings secured loans (share loans) and personal lines of credit. Consumer loans
are originated in the Bank's market area and generally have  maturities of up to
five  years.  For share  loans,  the Bank will  generally  lend up to 90% of the
account balance.

                                        6

<PAGE>

         Consumer loans  generally have shorter terms and higher  interest rates
than residential loans. The consumer loan market can be helpful in improving the
spread  between  average  loan  yield  and  costs of funds  and at the same time
improve the matching of the rate sensitive assets and liabilities.

         Consumer loans entail greater risks than  residential  mortgage  loans,
particularly  consumer  loans  secured by  rapidly  depreciable  assets  such as
automobiles  or  loans  that are  unsecured.  In these  cases,  any  repossessed
collateral from a defaulted loan may not provide an adequate source of repayment
of the outstanding loan balance,  since there is a greater likelihood of damage,
loss or  depreciation  of the  underlying  collateral.  Further,  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. Finally, the application of various federal laws, including
federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on consumer loans in the event of a default.

         The  underwriting  standards  employed by the Bank for  consumer  loans
include a determination  of the applicant's  credit history and an assessment of
the  applicant's  ability  to meet  existing  obligations  and  payments  on the
proposed loan. The stability of the applicant's monthly income may be determined
by   verification  of  gross  monthly  income  from  primary   employment,   and
additionally  from any  verifiable  secondary  income.  Creditworthiness  of the
applicant is of primary  consideration;  however,  the underwriting process also
includes a comparison of the value of the collateral in relation to the proposed
loan  amount.  The Bank's  president  is  authorized  to approve  consumer  loan
applications  up to $10,000.  Consumer  loans over  $10,000 are  approved by the
Board of Directors.

         Commercial  Business Loans (Secured Lines of Credit).  At September 30,
2003, the outstanding balance of commercial business loans originated as secured
lines of credit  amounted to  approximately  $1.4  million or 3.6% of the Bank's
total loan  portfolio  as compared  to  $484,000 at the prior year end date.  At
September 30, 2003, there was an additional amount of approximately $1.2 million
remaining available to be drawn from these lines of credit.  These type of loans
are generally  originated to local  builders for new  construction  projects and
working capital purposes. The increase in the outstanding balance was due to the
strong interest expressed by builders for this type of loan product.

         Loans to One Borrower.  Under federal law, savings  institutions  have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the  institution's  unimpaired  capital and
surplus. Accordingly, as of September 30, 2003, the Bank's loans to one borrower
limit was approximately $1,414,000.

         Loan  Originations,  Purchases and  Solicitation  and  Processing.  The
Bank's  customary  sources  of  loan  applications   include  repeat  customers,
real-estate  broker  referrals,  builders  and  "walk-in"  customers.  The  Bank
generally  does not  purchase  loans,  except for a few  commercial  real estate
participation interests from local financial institutions secured by real estate
in its market area.

         The  Bank  periodically   purchases   participation  loans  from  local
financial  institutions and sells participation  interest in loans in connection
with  commercial real estate loans and  construction  loans that would otherwise
exceed the Bank's  loan-to-one-borrower  limit.  At September 30, 2003, the Bank
had  approximately  $990,000,  or 2.6% of its total loan portfolio,  in purchase
participation loans consisting  primarily of commercial real estate loans in its
market area.

         Loan  Commitments.  The Bank gives written  commitments  to prospective
borrowers on all  residential,  commercial  and  speculative  construction  real
estate loans.  Generally,  the commitment requires acceptance within thirty days
of the date of the issuance. The total amount of the Bank's commitments to

                                        7

<PAGE>

extend  credit for  mortgage and consumer  loans as of September  30, 2003,  was
approximately $536,000 excluding commitments on lines of credit.

         Loan Origination and Other Loan Fees. In addition to interest earned on
loans, the Bank may receive loan origination and commitment fees for originating
or purchasing  certain loans.  Except for  construction,  commercial real estate
loans and  balloon  mortgage  loans,  the Bank  generally  does not charge  loan
origination fees or points on loans.

         The Bank also  receives  other fees and  charges  relating  to existing
loans,  which include late  charges,  and fees  collected in  connection  with a
change in borrower or other loan modifications.  These fees and charges have not
constituted a material source of income.

Non-Performing Loans and Problem Assets

         Collection Procedures.  The borrower is notified by mail when a loan is
thirty days delinquent.  If the delinquency  continues,  subsequent  efforts are
made to contact the delinquent  borrower and a second collection notice is sent.
When a loan is  ninety  days  delinquent,  it is  referred  to an  attorney  for
repossession and foreclosure.  All reasonable  attempts are made to collect from
borrowers prior to referral to an attorney for collection. In certain instances,
the Bank may modify the loan or grant a limited  moratorium  on loan payments to
enable the borrower to reorganize his financial affairs and the Bank attempts to
work  with  the  borrower  to  establish  a  repayment   schedule  to  cure  the
delinquency.

         As to mortgage loans, if a foreclosure  action is taken and the loan is
not  reinstated,  paid in full or  refinanced,  the property is sold at judicial
sale at which  the Bank may be the  buyer if there  are no  adequate  offers  to
satisfy the debt. Any property  acquired as the result of foreclosure or by deed
in lieu of  foreclosure  is  classified as real estate owned ("REO") until it is
sold or otherwise disposed of by the Bank. When REO is acquired,  it is recorded
at the lower of the unpaid  principal  balance of the  related  loan or its fair
market value less estimated selling costs. The initial writedown of the property
is charged to the allowance for loan losses.  Adjustments  to the carrying value
of the properties that result from  subsequent  declines in value are charged to
operations in the period in which the declines occur. At September 30, 2003, the
Bank held $59,000 in real estate owned.

         Loans are reviewed on a regular  basis and are placed on a  non-accrual
status when they are more than ninety days delinquent.  Loans may be placed on a
non-accrual status at any time if, in the opinion of management,  the collection
of additional  interest is doubtful.  Interest  accrued and unpaid at the time a
loan is placed  on  non-accrual  status  is  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income,  depending  on the  assessment  of the  ultimate
collectibility  of the loan. At September 30, 2003,  the Bank had  approximately
$42,000 of loans that were held on a non-accrual basis.

         Non-Performing   Assets.  The  following  table  provides   information
regarding the Bank's non- performing loans and other non-performing assets as of
the end of each of the last two fiscal years. As of each of the dates indicated,
the Bank did not have any  troubled  debt  restructurings  within the meaning of
Statement of Financial  Accounting  Standards  ("SFAS") 15 and no impaired loans
within the meaning of SFAS 114, as amended by SFAS 118.

                                        8

<PAGE>

<TABLE>
<CAPTION>
                                                                   At September 30,
                                                                   ----------------
                                                                    2003     2002
                                                                    ----     ----

                                                               (Dollars in Thousands)
<S>                                                              <C>        <C>
Loans accounted for on a non-accrual basis:
  First Mortgage ...............................................   $    42    $384
  Home Equity and Second Mortgage ..............................         -       -
  Consumer .....................................................         -       1
  Commercial Business ..........................................         -       -
                                                                   -------    ----
    Total ......................................................   $    42    $385
                                                                   =======    ====

Accruing loans which are contractually past due 90 days or more:
  First Mortgage ...............................................   $    18    $  -
  Home Equity and Second Mortgage ..............................         -       -
  Consumer .....................................................         -       -
  Commercial Business...........................................         -       -
                                                                   -------    ----
    Total ......................................................   $    18    $  -
                                                                   =======    ====

Total non-performing loans .....................................   $    60    $385
                                                                   =======    ====

Real estate owned ..............................................   $    59    $  -
                                                                   =======    ====

Other non-performing assets ....................................   $     -    $  -
                                                                   =======    ====

Total non-performing assets ....................................   $   119    $385
                                                                   =======    ====

Total non-performing loans to net loans ........................      0.17%   1.10%
                                                                   =======    ====

Total non-performing loans to total assets .....................      0.09%   0.64%
                                                                   =======    ====

Total non-performing assets to total assets ....................      0.17%   0.64%
                                                                   =======    ====
</TABLE>


         For the year ended  September  30,  2003,  the amount of interest  that
would have been recorded on loans accounted for on a non-accrual  basis if those
loans had been current  according to the original loan agreements for the entire
period was $1,362.  This amount was not included in the Bank's  interest  income
for the  period.  The  amount of  interest  income on loans  accounted  for on a
non-accrual  basis that was included in income  during the year ended  September
30, 2003 was $1,527.

         Classified Assets.  Management, in compliance with OTS guidelines,  has
instituted an internal  loan review  program,  whereby  loans are  classified as
special  mention,  substandard,  doubtful or loss.  When a loan is classified as
substandard or doubtful, management is required to establish a valuation reserve
for loan losses in an amount considered  prudent by management.  When management
classifies  a portion  of a loan as loss,  a  reserve  equal to 100% of the loss
amount is required to be established or the loan is to be charged-off.

         An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or the collateral  pledged,  if
any. Substandard assets include those characterized by the

                                       9

<PAGE>

distinct  possibility that the insured institution will sustain some loss if the
deficiencies  are not corrected.  Assets  classified as doubtful have all of the
weaknesses   inherent   in  those   classified   substandard,   with  the  added
characteristic  that the  weaknesses  present make  collection or liquidation in
full,  highly  questionable and improbable,  on the basis of currently  existing
facts,  conditions,  and values.  Assets classified as loss are those considered
uncollectible  and of so little value that their  continuance  as assets without
the  establishment of a specific loss reserve is not warranted.  Assets which do
not currently expose the insured  institution to a sufficient  degree of risk to
warrant  classification  in one of the  aforementioned  categories  but  possess
credit  deficiencies  or  potential  weaknesses  are  required to be  designated
special mention by management.

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy of the  allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory  agencies as part of their examination  process.  At
September 30, 2003, the Bank had  approximately  $72,000 of loans  classified as
"substandard," $60,000 of loans classified as "doubtful" and no loans classified
as "loss."

         Allowance for Loan Losses. The allowance for loan losses is a valuation
account that reflects the Bank's  evaluation of the losses known and inherent in
its loan portfolio that are both probable and reasonable to estimate  associated
both with lending  activities and particular  problem assets. The Bank maintains
the allowance  through  provisions for loan losses that are charged to income in
the period they are  established.  The Bank charges  losses on loans against the
allowance for loan losses when it believes the  collection of loan  principal is
unlikely.  Recoveries  on loans  previously  charged-off  are added  back to the
allowance.

         The Bank's  evaluation  of the  appropriate  amount to provide for loan
losses  includes  separate  review of all loans on which the  collectibility  of
principal may not be reasonably assured. The Bank evaluates all classified loans
individually  and bases its  determination of a loss factor on the likelihood of
collectibility  of  principal  including  consideration  of  the  value  of  the
underlying  collateral  securing the loan.  Larger loans,  which would generally
include  multi-family   mortgages,   other  commercial  real  estate  loans  and
construction  loans, are also generally  evaluated for impairment  individually.
The  Bank  also  segregates  loans  by loan  category  as part of its  allowance
evaluation, and evaluates homogenous loans as a group.

         Although there may be other factors that also warrant  consideration in
maintaining  an  allowance  at a level  sufficient  to provide for  probable and
reasonably  estimable  losses,  the Bank  considers  the  following  factors  in
connection with its determination of appropriate loss factors and as part of its
overall evaluation of the allowance for loan losses:

     o    its historical loan loss experience;
     o    internal analysis of credit quality;
     o    general levels of non-performing loans and delinquencies;
     o    changes in loan concentrations by loan category;
     o    current estimated collateral values;
     o    peer group information;
     o    evaluation   of   credit   quality   conducted   in  bank   regulatory
          examinations; and
     o    economic and market trends impacting the Bank's lending area.

         In  recent   years,   the  Bank's   charge-offs   have  been  low  and,
consequently,  additions to the  allowance  have been more  reflective  of other
factors.

                                       10

<PAGE>

         This evaluation is inherently  subjective as it requires estimates that
are susceptible to significant  revisions as more information  becomes available
or as future events  change.  Future  additions to the allowance for loan losses
may  be  necessary  if  economic  and  other  conditions  in the  future  differ
substantially from the current operating environment. In addition, the OTS as an
integral part of its examination  process,  periodically reviews the Bank's loan
and foreclosed real estate  portfolios and the related allowance for loan losses
and valuation allowance for foreclosed real estate. The OTS may require the Bank
to  increase  the  allowance  for loan  losses or the  valuation  allowance  for
foreclosed real estate based on its review of information  available at the time
of the examination, which would negatively affect the Bank's earnings.

         It is the Bank's  policy to review its loan  portfolio,  in  accordance
with  regulatory  classification  procedures,  on at  least a  quarterly  basis.
Additionally,  the Bank maintains a program of reviewing loan applications prior
to making the loan and immediately after loans are made in an effort to maintain
loan quality.

         The following table sets forth  information  with respect to the Bank's
allowance for loan losses at the dates indicated:

<TABLE>
<CAPTION>
                                                                 At September 30,
                                                            -------------------------
                                                              2003             2002
                                                            -------           -------
                                                              (Dollars in Thousands)
<S>                                                       <C>              <C>
Allowance balance (at beginning of period)................. $   182          $    166
                                                            -------           -------
Provision for loan losses..................................      18                18
                                                            -------           -------
Charge-offs:
  First Mortgage...........................................       7                 -
  Home Equity and Second Mortgage..........................       -                 -
  Consumer.................................................       -                 3
  Commercial Business......................................       -                 -
                                                            -------           -------
Total charge-offs..........................................       7                 3
Recoveries.................................................       -                 1
                                                            -------           -------
Net (charge-offs) recoveries...............................      (7)               (2)
                                                            -------           -------
Allowance balance (at end of period)....................... $   193           $   182
                                                            =======           =======

Total loans outstanding.................................... $38,568           $37,664
                                                            =======           =======

Average loans outstanding.................................. $34,586           $38,493
                                                            =======           =======
Allowance for loan losses as a percent of total loans
outstanding................................................    0.50%             0.48%
                                                            =======           =======
Net loans charged off as a percent of average loans
outstanding................................................    0.02%             0.01%
                                                            =======           =======
</TABLE>

         Allocation of Allowance for Loan Losses. The following table sets forth
the  allocation of the Bank's  allowance  for loan losses by collateral  and the
percent of loans in each category to total loans  receivable,  net, at the dates
indicated. Management determines the allocation of the Bank's allowance for loan
losses  based  on its  assessment  of the  risk  characteristics  of  each  loan
category.  The change in allocation of the allowance  from period to period also
reflects the relative balances at year end of each loan category. The portion of
the loan loss  allowance  allocated to each loan category does not represent the
total  available for losses which may occur within the loan  category  since the
total loan loss allowance is a

                                       11

<PAGE>

valuation  reserve  applicable to the entire loan  portfolio.  The allocation is
subject to change as management's assessment of the risk characteristics of each
loan category may change from time to time.



                                                At September 30,
                                    ------------------------------------------
                                           2003                  2002
                                    --------------------  --------------------
                                              Percent of            Percent of
                                               Loans to              Loans to
                                     Amount  Total Loans  Amount   Total Loans
                                     ------  -----------  ------   -----------
                                                 (Dollars in Thousands)

At end of period allocated to:
First Mortgage.......................  $172       88.1%     $168        92.3%
Home Equity and Second Mortgage......    14        7.2         7         3.9
Consumer.............................     4        3.1         6         3.3
Commercial Business..................     3        1.6         1         0.5
                                       ----      -----      ----       -----
Total allowance......................  $193      100.0%     $182       100.0%
                                       ====      =====      ====       =====

Investment Activities

         General. Federally chartered savings banks have the authority to invest
in various  types of liquid  assets,  including  United  States  Government  and
government  agency  obligations,  securities  of various  federal  agencies  and
government-sponsored    entities   (including   securities   collateralized   by
mortgages),  certificates of deposits of insured banks and savings institutions,
municipal securities and corporate debt securities.

         SFAS No. 115,  "Accounting  for Certain  Investments in Debt and Equity
Securities,"  requires  that  securities be  categorized  as "held to maturity,"
"trading securities" or "available for sale," based on management's intent as to
the ultimate  disposition of each security.  SFAS No. 115 allows debt securities
to be classified  as "held to maturity" and reported in financial  statements at
amortized cost only if the reporting  entity has the positive intent and ability
to hold these securities to maturity.  Securities that might be sold in response
to changes in market interest rates, changes in the security's  prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity."

         The Company does not currently use or maintain a trading account.  Debt
and equity  securities  not  classified as "held to maturity" are  classified as
"available  for  sale."  These  securities  are  reported  at  fair  value,  and
unrealized  gains and losses on the  securities  are excluded  from earnings and
reported,  net of deferred taxes, as a separate component of equity. The Company
consults  with  an  outside   investment  advisor  in  managing  its  investment
portfolio.

         All of the Company's  securities carry market risk insofar as increases
in  market  rates of  interest  may  cause a  decrease  in their  market  value.
Investments  in  securities  are made  based on  certain  considerations,  which
include the  interest  rate,  tax  considerations,  yield,  settlement  date and
maturity of the security, the Company's liquidity position, and anticipated cash
needs and  sources.  The effect  that the  proposed  security  would have on the
Company's  credit  and  interest  rate  risk  and  risk-based  capital  is  also
considered.  The Company purchases securities to provide necessary liquidity for
day-to-day  operations,  and when funds  available  for  investment  exceed loan
demand.

         The investment policy of the Company, which is established by the Board
of  Directors,  is designed to foster  earnings  and  liquidity  within  prudent
interest rate risk guidelines, while complementing lending

                                       12

<PAGE>

activities.  Generally,  the Company's  investment  policy is to invest funds in
various  categories  of  securities  and  maturities  based  upon the  Company's
liquidity  needs,  asset/liability  management  policies,   investment  quality,
marketability  and performance  objectives.  The Board of Directors  reviews the
Company's securities portfolio on a monthly basis.

         The  Company's  securities  classified  as  held  to  maturity  totaled
approximately  $8.2 million at September 30, 2003,  and  consisted  primarily of
approximately $2.0 million in municipal obligations,  $745,000 in corporate bond
obligations,  $1.5 million in government agency  obligations and $3.9 million of
mortgage-backed    securities.    The   Company's   securities   classified   as
available-for-sale  totaled  $22.4  million at  September  30,  2003,  including
approximately  $178,000 in municipal  obligations,  $2.0  million in  government
agency obligations,  $9.0 million in corporate bond obligations, $8.1 million of
mortgage- backed securities and $3.1 million in equity securities.

         The Company does not  participate  in hedging  programs,  interest rate
swaps, or other  activities  involving the use of off-balance  sheet  derivative
financial instruments.  Further, the Company does not invest in securities which
are not rated investment grade.

         The various obligations held in the Company's securities portfolio have
varying  characteristics  as to rate,  maturity  and call  provisions.  Callable
securities  totaled  approximately  $3.5 million at September 30, 2003,  and the
Company's investment yield could be reduced if these securities are called prior
to maturity.

         Mortgage-backed  Securities.  Mortgage-backed  securities  represent  a
participation  interest  in a  pool  of  one-  to  four-family  or  multi-family
mortgages,  although  the Company  focuses its  investments  on  mortgage-backed
securities secured by one- to four-family mortgages.

         The mortgage  originators use  intermediaries  (generally United States
Government agencies and government-sponsored  enterprises) to pool and repackage
the  participation  interests in the form of securities,  with investors such as
the Company receiving the principal and interest payments on the mortgages. Such
United States Government agencies and government-sponsored enterprises guarantee
the payment of principal and interest to investors.

         Mortgage-backed  securities are typically  issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates  that  are  within  a  specific  range  and  have  varying
maturities.   The  life  of  a   mortgage-backed   pass-through   security  thus
approximates the life of the underlying  mortgages.  The  characteristics of the
underlying pool of mortgages,  i.e.,  fixed-rate or adjustable-rate,  as well as
prepayment  risk,  are  passed  on to the  certificate  holder.  Mortgage-backed
securities are generally referred to as mortgage  participation  certificates or
pass-through  certificates.  The Company's  mortgage-backed  securities  consist
primarily of securities issued by the Government  National Mortgage  Association
("GNMA" or "Ginnie Mae"), the Federal Home Loan Mortgage Corporation ("FHLMC" or
"Freddie Mac") and the Federal National Mortgage  Association ("FNMA" or "Fannie
Mae").  Mortgage-backed  securities generally yield less than the mortgage loans
underlying  such  securities  because  of their  payment  guarantees  or  credit
enhancements which offer nominal credit risk to the security holder.

         At September 30, 2003, the Company's mortgage-backed securities totaled
$12.0 million.

         Expected  maturities will differ from  contractual  maturities  because
borrowers may prepay obligations with and without prepayment penalties.

                                       13

<PAGE>

         Other Securities. Other securities held by the Company at September 30,
2003  consist  of  equity  securities   including   FHLMC/FNMA  stock  totalling
approximately  $397,000 a mortgage  securities mutual fund investment  totalling
approximately  $2.0  million,   $757,000  in  corporate  stock  and  a  $675,000
investment in FHLB of  Pittsburgh  common stock (this amount is not shown in the
securities portfolio). As a member of the FHLB of Pittsburgh,  ownership of FHLB
of Pittsburgh common shares is required.  The mortgage securities mutual fund is
composed of FHLMC,  FNMA and GNMA  mortgage-backed  related  securities and U.S.
Treasury  obligations,  and is  considered  a  prudent  investment  because  the
underlying  mortgages  are high  quality,  the  shares  owned are liquid and the
income  generates  a  sufficient   return  on  assets  within   acceptable  risk
limitations.  The other equity securities provide diversification and complement
the Company's overall investment strategy.

Securities Portfolio

         The  following  table sets forth the  carrying  value of the  Company's
securities portfolio at the dates indicated.


                                                         At September 30,
                                                         ----------------
                                                          2003      2002
                                                         -------   -------
                                                          (In Thousands)

Securities Held to Maturity:
----------------------------

Government National Mortgage Association ............   $   879   $ 1,146
Federal Home Loan Mortgage Corporation ..............         2         4
Federal National Mortgage Association ...............     3,049     5,742
Municipal bonds .....................................     2,040     1,890
Government agency ...................................     1,516     2,422
Corporate bonds .....................................       745     1,093
                                                        -------   -------

  Total securities held to maturity .................     8,231    12,297
                                                        -------   -------

Securities available for sale (at fair value):
----------------------------------------------

U.S. Government and government agency obligations....     2,004     1,524
Government National Mortgage Association ............         -       123
Federal Home Loan Mortgage Corporation ..............       332       790
Federal National Mortgage Association ...............     7,731     1,752
Corporate bonds .....................................     9,032     1,210
Municipal bonds .....................................       178       536
Mortgage securities mutual fund .....................     1,983     2,271
FHLMC/FNMA stock ....................................       397       439
Corporate stock .....................................       757         -
                                                        -------   -------
 Total securities available for sale ................    22,414     8,645
                                                        -------   -------

    Total ...........................................   $30,645   $20,942
                                                        =======   =======

                                       14

<PAGE>

         Carrying Values, Yields and Maturities.  The following table sets forth
certain information  regarding the carrying values,  weighted average yields and
maturities of the Bank's investment and mortgage-backed  securities portfolio at
September 30, 2003.

<TABLE>
<CAPTION>
                                                               At September 30, 2003
                           -------------------------------------------------------------------------------------------------------
                                                                                        More than
                           One Year or Less  One to Five Years  Five to Ten Years       Ten Years      Total Investment Securities
                           ----------------  -----------------  -----------------   -----------------  ---------------------------
                           Carrying Average   Carrying Average   Carrying  Average   Carrying Average    Carrying Average  Market
                            Value    Yield      Value   Yield      Value    Yield     Value   Yield       Value   Yield   Value
                            -----    -----      -----   -----      -----    -----     -----   -----       -----   -----   -----
                                                              (Dollars in Thousands)
<S>                        <C>       <C>       <C>      <C>      <C>        <C>     <C>        <C>      <C>        <C>   <C>
U.S. government agency
    securities...........   $    -       -%     $1,516   5.04%    $1,741     4.81%   $   264    6.13%    $ 3,521    5.00% $ 3,619

Mortgage-backed
    securities...........        -       -          17   8.35      1,353    10.48     10,623    5.10      11,993    5.71   12,060

Corporate bonds..........    2,629    6.84       5,627   6.71          -        -      1,521    5.24       9,777    6.51    9,820

Municipal bonds..........        -       -         623   3.71        189     4.50      1,407    4.96       2,030    4.72    2,351

Mortgage securities
    mutual fund .........    1,983    2.32           -      -          -        -          -       -       1,983    2.32    1,983

FHLMC/FNMA Stock.........      397    2.82          -       -          -        -          -       -         397    2.82      397
Corporate Stock..........      756    2.04          -       -          -        -          -       -         756    2.04      756
                            ------              ------            ------             -------             -------          -------

  Total..................   $5,765    4.38%     $7,783   6.14%    $3,283     7.12%   $13,815    5.11%    $30,646    4.92% $30,986
                            ======    ====      ======   ====     ======     ====    =======    ====     =======    ====  =======
</TABLE>

                                       15

<PAGE>

Sources of Funds

         General.  Deposits are the major source of the Bank's funds for lending
and other investment purposes. In addition, the Bank derives funds from loan and
mortgage-backed securities principal repayments, and proceeds from the maturity,
call and sale of mortgage-backed securities and investment securities.  Loan and
mortgage-backed  securities  payments are a relatively  stable  source of funds,
while deposit inflows are significantly influenced by general interest rates and
money  market  conditions.  Borrowings  (principally  from  the  FHLB)  are also
periodically  used to supplement the amount of funds for lending and investment.
At September 30, 2003, the Company had $8.4 million in FHLB borrowings.

         Deposits.  The Bank's current deposit products include  certificates of
deposit  accounts  ranging in terms  from three  months to five years as well as
checking,  savings,  money  market,  club  accounts  and  individual  retirement
accounts  ("IRAs").  Deposit  account  terms vary,  primarily as to the required
minimum balance amount, the amount of time that the funds must remain on deposit
and the  applicable  interest  rate. A majority of deposits  are in  fixed-term,
market-rate certificate accounts.

         Deposits are obtained primarily from residents of Allegheny County. The
Bank uses  traditional  methods of  advertising  to attract  new  customers  and
deposits,  including print media, direct mail and inserts included with customer
statements.  The Bank does not utilize the services of deposit brokers. The Bank
occasionally offers premiums or incentives for opening accounts.

         The  determination of interest rates is based upon a number of factors,
including:  (1) the need for funds based on loan demand,  current  maturities of
deposits and other cash flow needs;  (2) a current survey of a selected group of
competitors'  rates for similar  products;  (3) the Bank's current cost of funds
and its yield on  assets;  and (4) the  alternate  cost of funds on a  wholesale
basis,  in  particular  the cost of advances from the FHLB.  Interest  rates are
reviewed and set by the  President  and the Board of Directors at semi-  monthly
meetings.

         The Bank has a significant percentage of certificates of deposit in its
deposit  portfolio  (42.3% at September 30, 2003). The Bank's liquidity could be
reduced if a significant  amount of certificates  of deposit,  maturing within a
short  period  of  time,  were  not  renewed.  A  significant   portion  of  the
certificates  of deposit  remain  with the Bank  after they  mature and the Bank
believes  that this  will  continue.  However,  the need to  retain  these  time
deposits could result in an increase in the Bank's cost of funds.

         Deposits in the Bank as of September  30,  2003,  were  represented  by
various types of savings programs described below.

                                       16

<PAGE>


                                                  Balance at       Percentage of
Category                   Interest Rate(1)   September 30, 2003  Total Deposits
--------                   ----------------   ------------------  --------------
                                            (Dollars in Thousands)
NOW Accounts(2)                  0.87%                 $ 7,606             15.1%
Savings Accounts                 2.00                   21,498             42.6

Certificates of Deposit(3):
1.00-1.99%                       1.56                    2,414              4.8
2.00-2.99%                       2.50                    4,933              9.8
3.00-3.99%                       3.42                    6,535             12.9
4.00-4.99%                       4.17                    3,034              6.0
5.00-5.99%                       5.23                    2,514              5.0
6.00-6.99%                       6.44                      904              1.8
7.00-7.99%                       7.40                    1,030              2.0
                                                       -------            -----
     Total                       2.45                  $50,468            100.0%
                                                       =======            =====
---------------
(1)  Weighted average rate as of September 30, 2003.
(2)  Includes money market accounts.
(3)  Includes  jumbo  certificates  of  deposit  of $5.9  million.  See table of
     maturities of certificates of deposit of $100,000 or more.

         The following table sets forth the aggregate maturities of certificates
of deposit at September 30, 2003.


                                                   (In Thousands)
              2004....................                 $10,618
              2005....................                   4,478
              2006....................                   3,515
              2007....................                     723
              2008....................                   2,030
                                                       -------
                Total                                  $21,364
                                                       =======

         The  following  table  shows the amount of the Bank's  certificates  of
deposit of $100,000 or more by time remaining until maturity as of September 30,
2003.


                                                       Certificates
        Maturity Period                                 of Deposit
        ---------------                                 ----------
                                                      (In Thousands)
        Within three months.....................          $  800
        Three through six months................             628
        Six through twelve months...............             523
        Over twelve months......................           3,991
                                                           -----
                                                          $5,942
                                                          ======

         Borrowings.  Deposits are the primary  source of funds of the Company's
lending and investment  activities and for its general  business  purposes.  The
Company,  as  the  need  arises  or  in  order  to  take  advantage  of  funding
opportunities, borrows funds in the form of advances from the FHLB to supplement
its  supply of  loanable  funds  and to meet  deposit  withdrawal  requirements.
Advances from the FHLB are typically secured by the Bank's stock in the FHLB and
a portion of the Bank's  residential  mortgage loans and may be secured by other
assets,  mainly  securities  which are  obligations of or guaranteed by the U.S.
Government.  The  Bank has a line of  credit  for $4.0  million  from the  FHLB,
maturing January 31, 2004

                                       17

<PAGE>

with an interest rate of 1.31% at September 30, 2003. The Bank had draws of $1.2
million  and $0 on  this  line  of  credit  at  September  30,  2003  and  2002,
respectively.

         The following  table sets forth certain  information  regarding  Bank's
borrowed funds.


                                                        Year Ended September 30,
                                                        ------------------------
                                                            2003         2002
                                                           ------       ------
FHLB Advances:                                            (Dollars in Thousands)
Average balance outstanding.........................       $7,018       $1,651
Maximum amount outstanding
  at any month-end during the period................        9,489        5,000
Balance outstanding at end of period................        8,378        4,883
Weighted average interest rate during the period....        3.19%        3.59%
Weighted average interest rate at end of period.....        2.84%        3.59%

Subsidiary Activity

         The Bank is permitted to invest its assets in the capital  stock of, or
originate secured or unsecured loans to, subsidiary corporations.

Personnel

         As of September 30, 2003,  the Bank had eight  full-time  employees and
one  part-time  employee.  The  employees  are not  represented  by a collective
bargaining  unit.  The Bank believes its  relationship  with its employees to be
satisfactory.

Regulation

         Set forth below is a brief  description  of certain laws that relate to
the regulation of the Bank and the Company.  The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.  The Bank and the Company operate in a highly  regulated  industry.
The U.S.  government  could adopt  regulations  or enact laws which restrict the
operations of the Bank and/or the Company or impose burdensome requirements upon
one or both of them.  This could  reduce the  profitability  of the Bank and the
Company and could impair the value of the Bank's  franchise which could hurt the
trading price of the Company's common stock.

Recent Legislation to Curtail Corporate Accounting Irregularities.

         On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
of 2002 (the "Act").  The  Securities  and Exchange  Commission  (the "SEC") has
promulgated certain regulations pursuant to the Act and will continue to propose
additional implementing or clarifying regulations as necessary in furtherance of
the  Act.  The  passage  of the Act and the  implementation  of new  regulations
subject  publicly-traded  companies to additional and more cumbersome  reporting
regulations  and disclosure.  Implementation  of and compliance with the Act and
corresponding regulations will likely increase the Company's expenses.

Financial Modernization Legislation

         The  Gramm-Leach-Bliley  Financial  Services  Modernization Act of 1999
(the "GLB  Act")  repealed  the  prohibitions  against  bank  affiliations  with
securities and insurance firms. The GLB Act authorizes

                                       18

<PAGE>

qualifying  bank holding  companies to become  financial  holding  companies and
thereby  affiliate with securities  firms and insurance  companies and engage in
other activities that are financial in nature.  The GLB Act defines financial in
nature to include securities underwriting, dealing and market making; sponsoring
mutual  funds and  investment  companies;  insurance  underwriting  and  agency;
merchant banking  activities,  and activities that the Federal Reserve Board has
determined to be closely related to banking. A qualifying national bank also may
engage,  subject to limitations on investment,  in activities that are financial
in nature,  other  than  insurance  underwriting,  insurance  company  portfolio
investment,  real  estate  development,  and real estate  investment,  through a
financial subsidiary of the bank.

         The GLB Act  repeals the  "unitary  savings  and loan  holding  company
exemption"  from the  restrictions  imposed by the Home  Owners' Loan Act on the
business  activities  of savings and loan holding  companies.  As a result,  any
savings and loan holding  company formed after May 4, 1999, such as the Company,
is subject to statutory and regulatory restrictions on its business activities.

         In addition,  the GLB Act imposes  significant  new  financial  privacy
obligations and reporting requirements on all financial institutions,  including
federal savings banks.  Specifically,  the statute, among other things, requires
financial  institutions  (a) to establish  privacy policies and disclose them to
customers both at the  commencement of a customer  relationship and on an annual
basis  and  (b) to  permit  customers  to opt out of a  financial  institution's
disclosure of financial information to nonaffiliated third parties.

         Furthermore, the GLB Act also enacts significant changes to the Federal
Home Loan Bank System.  The GLB Act expands the permissible uses of Federal Home
Loan Bank advances by community  financial  institutions  (under $500 million in
assets) to include  funding  loans to small  businesses,  small  farms and small
agri-  businesses.  The GLB Act also makes membership in a regional Federal Home
Loan Bank voluntary for federal savings banks.

Regulation of Reserve Bancorp, Inc.

         General.  The Company is a savings and loan holding  company within the
meaning of Section 10(o) of the Home Owners' Loan Act. The Company is registered
as a savings  and loan  holding  company and files  reports  with the OTS and is
subject to  regulation  and  examination  by the OTS. In  addition,  the OTS has
enforcement   authority  over  the  Company  and  any  non-savings   institution
subsidiaries.  This permits the OTS to restrict or prohibit  activities  that it
determines  to be a  serious  risk to the  Bank.  This  regulation  is  intended
primarily  for the  protection  of the  depositors  and not for the  benefit  of
stockholders of the Company

         Activities  Restrictions.  As a savings and loan holding company formed
after May 4, 1999, the Company is not a  grandfathered  unitary savings and loan
holding company under the GLB Act. As a result, the Company (and its non-savings
institution  subsidiaries,  if any exist in the future) is subject to  statutory
and regulatory  restrictions on its business activities.  Under the Home Owners'
Loan Act, as amended by the GLB Act, the  nonbanking  activities  of the Company
are restricted to certain activities specified by OTS regulation,  which include
performing  services  and  holding  properties  used  by a  savings  institution
subsidiary,  activities  authorized for savings and loan holding companies as of
March 5, 1987, and nonbanking activities  permissible for bank holding companies
pursuant to the Bank Holding  Company Act of 1956 (the "BHC Act") or  authorized
for financial holding companies pursuant to the GLB Act. Furthermore, no company
may  acquire  control of the Bank  unless the  acquiring  company  was a unitary
savings and loan holding company on May 4, 1999 (or became a unitary savings and
loan holding company pursuant to an application  pending as of that date) or the
company is only engaged in activities that are

                                       19

<PAGE>

permitted  for  multiple  savings and loan holding  companies  or for  financial
holding companies under the BHC Act as amended by the GLB Act.

         Mergers and Acquisitions. The Company must obtain approval from the OTS
before acquiring more than 5% of the voting stock of another savings institution
or savings and loan holding  company or acquiring such an institution or holding
company by merger,  consolidation  or purchase of its assets.  In  evaluating an
application for the Company to acquire control of a savings institution, the OTS
would  consider the financial and managerial  resources and future  prospects of
the Company and the target  institution,  the effect of the  acquisition  on the
risk to the insurance  funds, the convenience and the needs of the community and
competitive factors.

Regulation of Mt. Troy Bank

         General. As a federally chartered,  SAIF-insured savings bank, the Bank
is subject to extensive  regulation by the OTS and the FDIC.  Lending activities
and  other  investments  must  comply  with  federal  statutory  and  regulatory
requirements.  The Bank is also subject to reserve  requirements  of the Federal
Reserve System.  Federal regulation and supervision  establishes a comprehensive
framework  of  activities  in which an  institution  can engage and is  intended
primarily  for the  protection  of the  SAIF  and  depositors.  This  regulatory
structure gives the regulatory  authorities  extensive  discretion in connection
with their  supervisory  and enforcement  activities and  examination  policies,
including  policies  regarding the classification of assets and the level of the
allowance for loan losses.

         The OTS regularly  examines the Bank and prepares reports to the Bank's
Board of Directors on deficiencies,  if any, found in its operations. The Bank's
relationship with its depositors and borrowers is also regulated by federal law,
especially in such matters as the ownership of savings accounts and the form and
content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities and financial  condition,  and must obtain regulatory approvals prior
to entering into certain  transactions  such as mergers with or  acquisitions of
other financial institutions.  Any change in applicable statutory and regulatory
requirements,  whether by the OTS, the FDIC or the United States Congress, could
have  a  material  adverse  impact  on the  Company  and  the  Bank,  and  their
operations.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total  adjusted  assets,  (2) "Tier 1" or "core"  capital equal to at
least 4% (3% if the institution has received the highest  possible rating on its
most recent  examination) of total adjusted assets,  and (3) risk-based  capital
equal to 8% of total risk-weighted  assets. The Bank is in compliance with these
regulatory capital standards.

         In addition,  the OTS may require that a savings institution that has a
risk-based  capital  ratio  of less  than  8%,  a ratio  of  Tier 1  capital  to
risk-weighted  assets  of less  than 4% or a ratio  of Tier 1  capital  to total
adjusted  assets of less than 4% (3% if the institution has received the highest
rating on its most recent  examination)  take  certain  action to  increase  its
capital ratios. If the savings  institution's capital is significantly below the
minimum  required  levels of capital or if it is  unsuccessful in increasing its
capital ratios, the OTS may restrict its activities.

         For  purposes  of the OTS  capital  regulations,  tangible  capital  is
defined as core capital less all intangible  assets except for certain  mortgage
servicing  rights.  Tier 1 or core  capital is  defined as common  stockholders'
equity,  noncumulative  perpetual preferred stock and related surplus,  minority
interests in the

                                       20

<PAGE>

equity  accounts  of  consolidated  subsidiaries,  and  certain  nonwithdrawable
accounts and pledged  deposits of mutual savings  banks.  The Bank does not have
any  nonwithdrawable  accounts or pledged deposits.  Tier 1 and core capital are
reduced by an  institution's  intangible  assets,  with limited  exceptions  for
certain  mortgage and  nonmortgage  servicing  rights and purchased  credit card
relationships.  Both core and tangible  capital are further reduced by an amount
equal  to  the   savings   institution's   debt  and   equity   investments   in
"nonincludable"  subsidiaries  engaged in activities not permissible to national
banks other than  subsidiaries  engaged in  activities  undertaken  as agent for
customers  or  in  mortgage   banking   activities  and  subsidiary   depository
institutions or their holding companies.

         The risk-based capital standard for savings  institutions  requires the
maintenance of total capital of 8% of risk-weighted assets. Total capital equals
the sum of core and  supplementary  capital.  The  components  of  supplementary
capital  include,  among other  items,  cumulative  perpetual  preferred  stock,
perpetual   subordinated   debt,   mandatory   convertible   subordinated  debt,
intermediate-term  preferred stock, the portion of the allowance for loan losses
not  designated  for specific loan losses and up to 45% of  unrealized  gains on
equity  securities.  The  portion  of the  allowance  for loan and lease  losses
includable  in  supplementary  capital  is  limited  to a  maximum  of  1.25% of
risk-weighted assets. Overall,  supplementary capital is limited to 100% of core
capital.  For purposes of  determining  total capital,  a savings  institution's
assets are reduced by the amount of capital instruments held by other depository
institutions  pursuant  to  reciprocal  arrangements  and by the  amount  of the
institution's  equity  investments  (other  than  those  deducted  from core and
tangible   capital)   and  its  high   loan-to-value   ratio   land   loans  and
non-residential construction loans.

         A savings  institution's  risk-based  capital  requirement  is measured
against risk-weighted assets, which equal the sum of each on-balance-sheet asset
and the  credit-equivalent  amount of each  off-balance-  sheet item after being
multiplied by an assigned risk weight. These risk weights range from 0% for cash
to 100% for delinquent loans, property acquired through foreclosure,  commercial
loans, and other assets.

         OTS rules  require a deduction  from  capital for savings  institutions
with certain levels of interest rate risk. The OTS calculates the sensitivity of
an institution's  net portfolio value based on data submitted by the institution
in a schedule to its quarterly  Thrift  Financial  Report and using the interest
rate risk measurement  model adopted by the OTS. The amount of the interest rate
risk component, if any, deducted from an institution's total capital is based on
the institution's  Thrift Financial Report filed two quarters  earlier.  The OTS
has indefinitely  postponed  implementation of the interest rate risk component,
and the Bank has not been  required to determine  whether it will be required to
deduct an interest rate risk component from capital.

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

         A  savings  institution  that is a  subsidiary  of a  savings  and loan
holding company, such as the Bank, must file an application or a notice with the
OTS at least  thirty  days  before  making a  capital  distribution.  A  savings
institution   must  file  an  application   for  prior  approval  of  a  capital
distribution  if:  (i) it is not  eligible  for  expedited  treatment  under the
applications  processing  rules of the OTS; (ii) the total amount of all capital
distributions,  including the proposed capital distribution,  for the applicable
calendar year would exceed an amount equal to the savings  bank's net income for
that year to date plus the  institution's  retained net income for the preceding
two  years;  (iii) it would not  adequately  be  capitalized  after the  capital
distribution;  or (iv) the distribution  would violate an agreement with the OTS
or applicable regulations.

                                       21

<PAGE>

         The  Bank  is  required  to  file  a  capital  distribution  notice  or
application  with the OTS before  paying any  dividend to the  Company  However,
capital distributions by the Company, as a savings and loan holding company, are
not subject to the OTS capital distribution rules.

         The OTS may  disapprove a notice or deny an  application  for a capital
distribution if: (i) the savings institution would be undercapitalized following
the capital  distribution;  (ii) the proposed capital distribution raises safety
and  soundness  concerns;  or (iii) the  capital  distribution  would  violate a
prohibition  contained in any statute,  regulation or agreement.  In addition, a
federal  savings  institution  cannot  distribute  regulatory  capital  that  is
required for its liquidation account.

         Qualified Thrift Lender Test. Federal savings  institutions must meet a
qualified  thrift  lender  ("QTL")  test or they become  subject to the business
activity  restrictions  and branching  rules  applicable to national  banks.  To
qualify as a QTL, a savings  institution  must  either (i) be deemed a "domestic
building and loan association" under the Internal Revenue Code by maintaining at
least 60% of its total  assets in  specified  types of assets,  including  cash,
certain  government  securities,  loans  secured by and other assets  related to
residential real property,  educational loans and investments in premises of the
institution or (ii) satisfy the statutory QTL test set forth in the Home Owners'
Loan Act by  maintaining  at least  65% of its  "portfolio  assets"  in  certain
"Qualified Thrift  Investments"  (defined to include  residential  mortgages and
related equity investments,  certain mortgage-related securities, small business
loans,  student  loans and  credit  card  loans,  and 50% of  certain  community
development loans). For purposes of the statutory QTL test, portfolio assets are
defined  as  total  assets  minus  intangible  assets,   property  used  by  the
institution in conducting its business,  and liquid assets equal to 20% of total
assets.  A savings  institution  must  maintain its status as a QTL on a monthly
basis in at least nine out of every twelve months.  The Bank met the QTL test as
of  September  30,  2003 and in each of the last twelve  months and,  therefore,
qualifies as a QTL

         Transactions with Affiliates.  Generally,  federal banking law requires
that  transactions  between a savings  institution or its  subsidiaries  and its
affiliates  must  be on  terms  as  favorable  to  the  savings  institution  as
comparable transactions with non-affiliates. In addition, certain types of these
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by  affiliates  in order to  receive  loans  from the  savings  institution.  In
addition,  a savings  institution may not extend credit to any affiliate engaged
in  activities  not  permissible  for a bank  holding  company  or  acquire  the
securities of any affiliate that is not a subsidiary. The OTS has the discretion
to treat  subsidiaries  of savings  institutions as affiliates on a case-by-case
basis.

         Community  Reinvestment  Act.  Under  the  Community  Reinvestment  Act
("CRA"),  every  insured  depository  institution,  including  the  Bank,  has a
continuing  and  affirmative  obligation  consistent  with its  safe  and  sound
operation to help meet the credit needs of its entire  community,  including low
and moderate income  neighborhoods.  The CRA does not establish specific lending
requirements  or  programs  for  financial  institutions  nor  does it  limit an
institution's  discretion  to develop the types of products and services that it
believes are best suited to its particular  community.  The CRA requires the OTS
to assess the depository institution's record of meeting the credit needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications by such  institution,  such as a merger or the  establishment  of a
branch by the Bank. An unsatisfactory  CRA examination rating may be used as the
basis  for the  denial  of an  application  by the  OTS.  The  Bank  received  a
"satisfactory" overall rating in its most recent CRA examination.

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Pittsburgh, which is one of twelve regional FHLBs. Each FHLB serves as a reserve
or  central  bank for its  members  within  its  assigned  region.  It is funded
primarily from funds deposited by financial institutions and proceeds derived

                                       22

<PAGE>

from the sale of consolidated  obligations of the FHLB System. It makes loans to
members  pursuant  to  policies  and  procedures  established  by the  board  of
directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Pittsburgh  in an amount  equal to the  greater of 1% of our  aggregate
unpaid   residential   mortgage  loans,  home  purchase   contracts  or  similar
obligations  at the  beginning  of each year or 5% of FHLB  advances.  We are in
compliance  with this  requirement.  The FHLB  imposes  various  limitations  on
advances  such as limiting  the amount of certain  types of real estate  related
collateral to 30% of a member's capital and limiting total advances to a member.

         The FHLBs are required to provide funds for the  resolution of troubled
savings  institutions  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.

         Federal  Reserve  System.  The  Federal  Reserve  System  requires  all
depository institutions to maintain  non-interest-bearing  reserves at specified
levels against their checking  accounts and non-personal  certificate  accounts.
The balances maintained to meet the reserve  requirements imposed by the Federal
Reserve System may be used to satisfy liquidity requirements.

         Savings  institutions have authority to borrow from the Federal Reserve
System "discount  window," but Federal Reserve System policy generally  requires
savings  institutions  to exhaust all other sources  before  borrowing  from the
Federal Reserve System.

Item 2. Description of Property

(a)      Properties

         The Bank's main  office is located at 2000 Mt.  Troy Road,  Pittsburgh,
Pennsylvania.  The following table sets forth  information  regarding the Bank's
office, including the net book value of the office and its equipment.


                      Year Facility       Leased or         Net Book Value at
Office Location          Opened             Owned          September 30, 2003
---------------          ------             -----          ------------------

Main Office               1973              Owned               $281,411

(b)      Investment Policies

         See "Item 1.  Description of Business" above for a general  description
of the Bank's  investment  policies and any  regulatory  or Board of  Directors'
percentage  of assets  limitations  regarding  certain  investments.  The Bank's
investments are primarily  acquired to produce  income,  and to a lesser extent,
possible capital gain.

         (1)  Investments in Real Estate or Interests in Real Estate.  See "Item
1.  Description  of Business - Lending  Activities and - Bank  Regulation,"  and
"Item 2. Description of Property."

         (2) Investments in Real Estate  Mortgages.  See "Item 1. Description of
Business - Lending Activities and - Bank Regulation."

                                       23

<PAGE>

         (3)  Investments  in  Securities  of or Interests in Persons  Primarily
Engaged  in Real  Estate  Activities.  See "Item 1.  Description  of  Business -
Lending Activities and - Bank Regulation."

(c)      Description of Real Estate and Operating Data

         Not Applicable.

Item 3. Legal Proceedings

         There are various  claims and lawsuits in which the Company or the Bank
are  periodically  involved,  such as  claims  to  enforce  liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the Bank's business. In the opinion of management,  no material loss
is expected from any of such pending claims or lawsuits.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

         The  information  contained  under the section  captioned  "Stock Price
Information" of the Company's  Annual Report to Stockholders for the fiscal year
ended  September  30,  2003 (the  "Annual  Report")  is  incorporated  herein by
reference.

Item 6. Management's Discussion and Analysis or Plan of Operation

         The  information  contained under the section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Annual Report is incorporated herein by reference.

Item 7. Financial Statements

         The   Company's   financial   statements   listed  under  Item  13  are
incorporated herein by reference.

Item 8.  Changes  in  and  Disagreements  with  Accountants  On  Accounting  and
         Financial Disclosure

         Not applicable.

Item 8A. Controls and Procedures

         (a) Evaluation of disclosure  controls and  procedures.  Based on their
evaluation of the Company's  disclosure  controls and  procedures (as defined in
Rule 13a-15(e) under the Securities  Exchange Act of 1934 (the "Exchange Act")),
the Company's  principal  executive officer and principal financial officer have
concluded that as of the end of the period covered by this Annual Report on Form
10-KSB such  disclosure  controls and  procedures  are  effective to ensure that
information required to be disclosed by the

                                       24

<PAGE>

Company in reports that it files or submits  under the Exchange Act is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
Securities and Exchange Commission rules and forms.

         (b) Changes in internal  control over financial  reporting.  During the
last  quarter of the year  under  report,  there was no change in the  Company's
internal control over financial  reporting that has materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
        with Section 16(a) of the Exchange Act

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I -  Election  of
Directors"  in  the  Company's   Proxy  Statement  for  the  Annual  Meeting  of
Stockholders   for  the  Fiscal  Year  ended  September  30,  2003  (the  "Proxy
Statement") is incorporated herein by reference.

         The Company has not adopted a code of ethics  because its common  stock
trades on the OTC  Bulletin  Board,  and thus the  Company is not subject to the
requirements of any stock exchange to have adopted such a code.

Item 10. Executive Compensation

         The  information  contained under the section  captioned  "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         (a)      Security Ownership of Certain Beneficial Owners

         Information  required by this item is incorporated  herein by reference
to the first chart in the section captioned "Proposal I - Election of Directors"
in the Proxy Statement.

         (b)      Security Ownership of Management

         Information  required by this item is incorporated  herein by reference
to the first chart in the section captioned "Proposal I - Election of Directors"
in the Proxy Statement.

         (c) Management of the Company knows of no  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.

                                       25

<PAGE>

          (d)     Securities Authorized for Issuance Under  Equity  Compensation
               Plans

         Set forth below is information as of September 30, 2003 with respect to
compensation  plans under which equity  securities of the Company are authorized
for issuance.

<TABLE>
<CAPTION>
                                        EQUITY COMPENSATION PLAN INFORMATION

                                               (a)                    (b)                        (c)
                                                                                        Number of securities
                                      Number of securities      Weighted-average        remaining available for
                                        to be issued upon      exercise price of         future issuance under
                                           exercise of            outstanding             equity compensation
                                      outstanding options,     options, warrants      plans (excluding securities
                                      warrants and rights         and rights           reflected in column (a))
                                      --------------------        -----------          ------------------------
<S>                                       <C>                     <C>                        <C>
Equity compensation plans
  approved by shareholders.........          37,875                  $17.00                     37,875
Equity compensation plans
  not approved
  by shareholders..................              --                      --                         --
                                             ------                  ------                     ------
     TOTAL........................           37,875                  $17.00                     37,875
                                             ======                  ======                     ======
</TABLE>

Item 12. Certain Relationships and Related Transactions

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.

Item 13. Exhibits, List, and Reports on Form 8-K

         (a) Listed below are all  financial  statements  and exhibits  filed as
part of this report.

         1. The consolidated statements of financial condition of the Company as
of  September  30,  2003 and 2002 and the  related  consolidated  statements  of
income,  stockholders' equity, and cash flows for the years then ended, together
with the related notes and the independent auditors' report.

         2. The following  Financial Statement Schedule is filed as part of this
report:


                                       26

<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Reserve Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of Reserve Bancorp,
Inc. and subsidiary  (the  "Company") as of September 30, 2002 and 2001, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for the years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Reserve  Bancorp,  Inc. and
subsidiary  as of  September  30,  2002  and  2001,  and the  results  of  their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.


/s/ Stokes & Hinds, LLC

November 8, 2002
Pittsburgh, Pennsylvania

                                       27

<PAGE>


         3. The following  exhibits are included in this Report or  incorporated
herein by reference:

            (a) List of Exhibits:

                    3(i) Articles of Incorporation of Reserve Bancorp, Inc. *
                    3(ii) Bylaws of Reserve Bancorp, Inc. *
                    13   Annual Report to Stockholders for the fiscal year ended
                         September 30, 2003
                    21   Subsidiaries of the Company (See Item 1. Description of
                         Business)
                    23   Consent of Parente Randolph, LLC
                    31   Certification   pursuant   to   Section   302   of  the
                         Sarbanes-Oxley Act of 2002
                    32   Certification   pursuant   to   Section   906   of  the
                         Sarbanes-Oxley Act of 2002

---------------
*    Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2 (File No. 333- 75212 filed with the SEC on December 14, 2001.

     (b) Reports on Form 8-K:

     On August 21, 2003 the Company filed a Current Report on Form 8-K issuing a
     press release to report earnings for the quarter ended June 30, 2003.

                                       28

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized  as of
December 23, 2003.

                                     RESERVE BANCORP, INC.


                                     By:      /s/ Richard A. Sinewe
                                              ----------------------------------
                                              Richard A. Sinewe
                                              President
                                              (Duly Authorized Representative)

         Pursuant to the requirement of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of December 23, 2003.



/s/ Richard A. Sinewe             /s/ David P. Butler
-------------------------------   ----------------------------------------------
Richard A. Sinewe                 David P. Butler
President and Director            Chairman of the Board


/s/ Timothy Schneider             /s/ Robert B. Shust
-------------------------------   ----------------------------------------------
Timothy Schneider                 Robert B. Shust
Director                          Vice Chairman of the Board, Secretary and
                                  Director



/s/ Brian S. Allen                /s/ Robert B. Kastan
-------------------------------   ----------------------------------------------
Brian S. Allen                    Robert B. Kastan
Director                          Treasurer/Controller
                                  (Principal Accounting and Financial Officer)