EXHIBIT 13

<PAGE>
                             STEELTON BANCORP, INC.



                       2000 ANNUAL REPORT TO STOCKHOLDERS





<PAGE>


                             STEELTON BANCORP, INC.
                                  ANNUAL REPORT




TABLE OF CONTENTS

                                                                         Page
                                                                         ----

Letter to Stockholders......................................................1

Corporate Profile and Stock Price Information...............................2

Selected Financial Ratios and Other Data....................................3

Management's Discussion and Analysis........................................4

Independent Auditor's Report..............................................F-1

Consolidated Financial Statements.........................................F-2

Notes to Consolidated Financial Statements................................F-6

Corporate Information..............................................Back Cover

                                        i

<PAGE>






To Our Stockholders:

On behalf of our Board of Directors and employees, we are pleased to present the
2000  Annual   Report  to   Stockholders   of  Steelton   Bancorp,   Inc.   (the
"Corporation").  The  Corporation  is the parent  holding  company of  Mechanics
Savings Bank (the "Bank").

For the fiscal year ended December 31, 2000, the Corporation  earned $288,000 or
$.84 per share.  This  represents a 58% increase over net income of $182,000 for
the  fiscal  year  ended  December  31,  1999.  The  increase  in net income was
primarily  attributable  to a  higher  level  of  mortgage  and  consumer  loans
outstanding.

At December 31,  2000,  the  Corporation's  assets  totaled  $60.7  million,  as
compared to $53.9  million at December 31, 1999.  Stockholders'  equity was $6.6
million or $20.92 per share at December 31, 2000.

We are pleased to announce that the Bank has completed new parking facilities at
our  main  office  in  Steelton   and  will  soon  open  the  long   anticipated
drive-through window and 24-hour full service ATM.

Our  first  full  year as a public  company  was an  eventful  one.  In spite of
interest rate increases by the Federal Reserve,  we were able to improve our net
earnings  over the  previous  year.  We expect 2001 to be eventful as well as we
cope with a high cost of funds and  relatively  low margin  mortgage  loans.  We
thank you for your loyal  support and we invite you to avail  yourselves  of the
many services we now offer.  The goal of your Board of Directors and  management
is to continuously strive to enhance your investment in the Corporation.

Sincerely,


/s/Harold E. Stremmel

Harold E. Stremmel
President and Chief Executive Officer


                                        1
<PAGE>

CORPORATE PROFILE

         Steelton  Bancorp,  Inc. (the  "Corporation") is the parent company for
Mechanics   Savings  Bank  (the  "Bank").   The  Corporation  was  formed  as  a
Pennsylvania  corporation  in  February  1999 at the  direction  of the  Bank in
connection  with the Bank's  conversion from a mutual to stock form of ownership
(the "Conversion").  The Corporation acquired all of the capital stock issued by
the Bank upon its conversion. On July 8, 1999, the Bank completed its conversion
in connection with a $3.85 million initial public offering of the  Corporation's
common stock.  The  Corporation  is a unitary  savings and loan holding  company
which, under existing laws, generally is not restricted in the types of business
activities  in which it may engage  provided  that the Bank  retains a specified
amount of its assets in  housing-related  investments.  At the present time, the
Corporation conducts no significant business or operations of its own other than
holding all of the outstanding stock of the Bank and investing the Corporation's
portion of the net proceeds obtained in the Conversion.

         The Bank,  founded in 1900 under the name "Mechanics  Building and Loan
Association   of  Steelton,"  is  a   federally-chartered   stock  savings  bank
headquartered in Steelton,  Pennsylvania. The Bank is subject to examination and
comprehensive regulation by the Office of Thrift Supervision (the "OTS") and its
deposits are federally  insured by the Savings  Association  Insurance Fund (the
"SAIF"),  as  administered  by the Federal Deposit  Insurance  Corporation  (the
"FDIC") . The Bank is a member of, and owns  capital  stock in, the Federal Home
Loan Bank (the "FHLB") of  Pittsburgh,  one of the twelve  regional banks in the
FHLB system.

         The Bank  operates a  traditional  savings  bank  business,  attracting
deposits  accounts from the general  public and using those  deposits,  together
with other funds,  primarily to originate and invest in loans secured by one- to
four-family residential real estate.

STOCK PRICE INFORMATION

         The  Corporation's  common  stock has been  traded on the  OTC-Bulletin
Board under the trading  symbol of "SELO" since it commenced  trading on July 9,
1999. The following  table reflects the high and low bids for the  Corporation's
common stock during the quarters indicated.  The quotations reflect inter-dealer
prices,  without retail  mark-up,  mark-down or commission and may not represent
actual  transactions.  The following  quotations  and cash  dividends  have been
adjusted to take into account a 5% stock dividend declared in November 2000.

                                                              Cash Dividends
1999                                         High       Low      per share
----                                        ------     -----  --------------
Third Quarter (beginning July 9, 1999)....  $10.48    $10.00         --
Fourth Quarter............................  $10.48     $8.33      $0.08
2000
----
First Quarter.............................  $10.26     $8.28         --
Second Quarter............................  $10.43     $8.84      $0.08
Third Quarter.............................  $12.02    $10.21         --
Fourth Quarter............................  $12.88    $10.89      $0.08

                                       2
<PAGE>

         The number of stockholders of record of common stock as of February 28,
2000,  was  approximately  177.  This does not  reflect the number of persons or
entities who held stock in nominee or "street"  name through  various  brokerage
firms.  At  February  28,  2000,  there were  349,259  shares  outstanding.  The
Corporation's ability to pay dividends to stockholders is largely dependent upon
the dividends it receives from the Bank.  The Bank may not declare or pay a cash
dividend  on any of its stock if the  effect  thereof  would  cause  the  Bank's
regulatory  capital  to be  reduced  below  (1)  the  amount  required  for  the
liquidation  account  established in connection with the Conversion,  or (2) the
regulatory requirements imposed by the OTS.


SELECTED FINANCIAL RATIOS AND OTHER DATA



                                                   At or For the Years Ended
                                                         December 31,
                                                 ----------------------------
                                                  2000      1999        1998
                                                  ----      ----        ----
Return on average assets......................    0.50%      0.38%      0.25%
Return on average equity......................    4.28       3.84       2.77
Average equity to average assets .............   11.58      10.00       9.14
Equity to assets at period end................   10.94      12.57       8.91
Dividend payout ratio.........................   18.72      16.93         --
Average interest-earning assets to average
    interest-bearing liabilities..............  112.67     107.42     106.37
Net interest rate spread(1)...................    2.15       2.57       2.58
Net interest margin(2)........................    2.76       2.89       2.88
Non-performing loans to total loans...........    0.59       1.65       1.16
Allowance for loan losses to total loans......    0.38       0.53       0.60
Allowance for loan losses to non-
   performing loans...........................   63.56      31.92      51.55

-------------------
(1)  Represents  the  difference  between the average yield on  interest-earning
     assets and the average cost of interest-bearing liabilities.
(2)  Net interest income as a percentage of average interest-earning assets.


                                        3
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

         The following is a discussion of the financial condition and results of
operations of the  Corporation  and the Bank,  and should be read in conjunction
with the accompanying Consolidated Financial Statements.

FORWARD - LOOKING STATEMENTS

         This document contains statements that project the future operations of
the Corporation which involve risks and uncertainties.  The Corporation's actual
results  may  differ   significantly   from  the  results   discussed  in  these
forward-looking   statements.    Statements   concerning   future   performance,
developments,  events,  expectations  for growth and market  forecasts,  and any
other guidance on future periods,  constitute  forward-looking  statements which
are  subject to a number of risks and  uncertainties,  including  interest  rate
fluctuations  and  government  and  regulatory  actions which might cause actual
results to differ materially from stated expectations or estimates.

FINANCIAL CONDITION

         Assets increased $6.8 million or 13% to reach $60.7 million at December
31, 2000,  compared  with $53.9  million at the end of 1999.  The balance  sheet
growth was attributable to loan growth primarily funded through  borrowings from
the Federal Home Loan Bank.  Management intends to limit net loan growth in 2000
and use available  funds to pay-down some of the Bank's higher cost  borrowings.
Cash levels  declined in 2000 as 1999  levels were built up in  anticipation  of
potential  extraordinary  needs associated with the year 2000 transition.  Other
assets  reflected an increase  attributable to the investment in Bank-owned life
insurance.

SUMMARY OF 2000 PERFORMANCE

         Performance  highlights  for 2000 included a 58% increase in net income
attributable in part to strong growth in earning assets. Average loans increased
by $9.0 million or 32% in 2000. This growth contributed to a 17% increase in net
interest  income  despite  a  reduced  net  yield on  interest-  earning  assets
attributable  to the higher interest rate  environment  throughout most of 2000.
Improved asset yields did not keep pace with increasing cost of funds.

         While loans  demonstrated  strong growth during the year,  the level of
problem loans actually  declined and were .59% of total loans at the end of 2000
compared with 1.65% at December 31, 1999. As a result of the lower level of risk
inherent  in the  portfolio,  the  allowance  for  loan  losses  expressed  as a
percentage of loans  declined from .53% at the end of 1999 to .38% at the end of
2000.

         Noninterest  sources of  revenue  showed  strong  growth  during  2000,
primarily due to investment in Bank-owned  life insurance.  Noninterest  expense
increased 11%,  primarily due to higher  personnel  costs  associated with merit
increases, increased staffing and newly implemented benefit programs.

                                        4
<PAGE>

         Capital  measures  remained  strong and well in excess of the threshold
required  for "Well  Capitalized"  designation.  During  2000,  the  Corporation
repurchased  approximately  58,000  shares for treasury  and benefit  plans at a
total cost of $650,000.  All share amounts were restated to reflect the 5% stock
dividend declared in November of 2000 and paid in February 2001.

NET INTEREST INCOME

         The most significant source of revenue (85%) for the Corporation is net
interest  income,  which is  determined by (i) the  difference  between rates of
interest the Bank earns on its interest-  earning  assets and the rates the Bank
pays on  interest-bearing  liabilities  (interest  rate  spread),  and  (ii) the
relative amounts of interest-earning  assets and  interest-bearing  liabilities.
Net  interest  income is heavily  impacted by  competition,  the  interest  rate
environment and the level and composition of the Corporation's  interest-earning
assets and interest-bearing liabilities.


                                        5
<PAGE>

AVERAGE BALANCE SHEET

         The following table sets forth a summary of average  balances of assets
and liabilities as well as average yield and cost information.  Average balances
are based upon month-end balances, however, the Corporation does not believe the
use of month-end balances differs significantly from an average based upon daily
balances. There have been no tax equivalent adjustments made to yields.

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                              -------------------------------------------------------------------------------
                                                           2000                                         1999
                                              ----------------------------------       --------------------------------------

                                              ---------- ----------- -----------       --------------------------------------
(dollars in thousands)                          Average                 Average              Average                  Average
                                                Balance    Interest    Yld/Cost              Balance     Interest    Yld/Cost
                                              ---------- ----------- -----------       --------------------------------------
<S>                                           <C>          <C>        <C>                  <C>           <C>       <C>
Interest-earning assets:
  Loans receivable(1)                           $37,034      $2,978       8.04%              $28,035       $2,267      8.09%
  Investment securities:
    Taxable                                      14,048         924       6.58%               11,864          745      6.28%
    Non-taxable                                   1,925          91       4.73%                1,663           78      4.69%
  Other interest-earning assets                   2,156         152       7.05%                3,491          152      4.35%
                                             ---------- ----------- -----------       --------------------------------------
  Total interest-earning assets                 $55,163      $4,145       7.51%              $45,053       $3,242      7.20%
                                                        ----------- -----------                     ------------------------
Noninterest-earning assets                        2,945                                        2,395
                                             ----------                               --------------
     Total assets                               $58,108                                      $47,448
                                             ==========                               ==============

Interest-bearing liabilities:
  NOW/Money market                               $2,998         $54       1.80%               $5,685          $68      1.20%
  Savings                                         5,194         139       2.68%                4,392          115      2.62%
  Certificates of deposit                        23,355       1,352       5.79%               21,209        1,169      5.51%
  Other liabilities                              17,412       1,080       6.20%               10,656          589      5.53%
                                             ---------- ----------- -----------       --------------------------------------
     Total interest-bearing liabilities         $48,959      $2,625       5.36%              $41,942       $1,941      4.63%
                                                        -----------                                 -------------
Noninterest-bearing liabilities                   2,420                                          763
Stockholders' Equity                              6,729                                        4,743
                                             ----------                               --------------
     Total Liabilities and
          Stockholders' Equity                  $58,108                                      $47,448
                                             ==========                               ==============

Net interest income/spread(2)                                $1,520       2.15%                            $1,301      2.57%
                                                        ----------- -----------                     ------------------------
Net yield on interest-earning assets(3)                                   2.76%                                        2.89%
                                                                    -----------                                  -----------
Ratio of average interest-earning assets to
  average interest-bearing liabilities                                  112.67%                                      107.42%
                                                                    -----------                                  -----------
</TABLE>

--------------------
(1)  Average balances include non-accrual loans.
(2)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest- earning assets.

                                        6
<PAGE>

RATE/VOLUME ANALYSIS

         The table below sets forth certain information regarding changes in the
Corporation's  interest income and interest  expense for the periods  indicated.
For each category of interest-earning  assets and interest-bearing  liabilities,
information  is  provided  on  changes  attributable  to (i)  changes  in volume
(changes in average  volume  multiplied  by last year's  rate);  (ii) changes in
rates (changes in rate multiplied by last year's average volume);  (iii) changes
in rate-volume (changes in rate multiplied by the change in average volume).

<TABLE>
<CAPTION>
                                                                  2000 Compared to 1999
                                                     -----------------------------------------------
                                                               Increase(Decrease) Due To:
                                                     -----------------------------------------------
                                                                                 Rate/
(in thousands)                                          Volume       Rate       Volume      Total
                                                     ------------ ----------- ----------------------
<S>                                                      <C>         <C>          <C>       <C>
Interest income:
  Loans receivable                                           $728        ($13)        ($4)      $711
  Investment Securities:
    Taxable                                                   137          35           7        179
    Non-Taxable                                                12           1           0         13
  Other interest-earning assets                               (58)         94         (36)         0
                                                     ------------ ----------- ----------------------
    Total interest-earning assets                            $819        $117        ($33)      $903

Interest expense:
  NOW/Money market                                           ($32)        $34        ($16)      ($14)
  Savings                                                      21           3           0         24
  Certificates of deposit                                     118          59           6        183
  Other liabilities                                           373          72          46        491
                                                     ------------ ----------- ----------------------
     Total interest-bearing liabilities                      $481        $168         $36       $684
                                                     ------------ ----------- ----------------------
Net change in interest income                                $338        ($50)       ($69)      $219
                                                     ============ =========== ======================
</TABLE>

         As demonstrated by the above tables, a $10.0 million or 22% increase in
earning assets led to an $819,000 increase in interest income. Similarly, a $7.0
million or 16.7%  increase in interest-  bearing  liabilities  led to a $481,000
increase in interest  expense.  The net  improvement  attributable to volume was
offset   by  the   unfavorable   impact  of   higher   interest   rates  on  the
liability-sensitive  balance sheet to result in net  improvement  of $219,000 or
17% in net interest income.

MARKET RISK ANALYSIS

         Qualitative  Analysis.  Because the  majority of the Bank's  assets and
liabilities  are  sensitive  to  changes in  interest  rates,  the  Bank's  most
significant form of market risk is interest rate risk.

                                        7
<PAGE>

         An asset or liability is interest rate sensitive within a specific time
period if it will  mature or  reprice  within  that time  period.  If the Bank's
assets  mature  or  reprice  more  quickly  or  to a  greater  extent  than  its
liabilities, the Bank's net portfolio value ("NPV")and net interest income would
tend to increase  during periods of rising  interest  rates but decrease  during
periods of falling  interest rates.  Conversely,  if the Bank's assets mature or
reprice more slowly or to a lesser extent than its  liabilities,  the Bank's NPV
and net interest income would tend to decrease during periods of rising interest
rates but increase during periods of falling  interest rates.  The Bank's policy
has been to address the interest  rate risk inherent in the  historical  savings
institution  business  of  originating  long-term  loans  funded  by  short-term
deposits by  maintaining  sufficient  liquid  assets for material and  prolonged
changes  in  interest  rates and by  originating  loans  with  shorter  terms to
maturity such as construction,  commercial and consumer loans. In addition,  the
Bank has invested in adjustable-rate  mortgage- backed securities as an interest
risk management strategy.

         Quantitative  Analysis.  In order to encourage savings  associations to
reduce  their  interest  rate  risk,  the OTS  adopted a rule  incorporating  an
interest rate risk ("IRR") component into the risk- based capital rules. The IRR
component is a dollar  amount that will be deducted  from total  capital for the
purpose of calculating an institution's  risk-based  capital  requirement and is
measured in terms of the  sensitivity  of its NPV to changes in interest  rates.
NPV is the difference  between incoming and outgoing  discounted cash flows from
assets,  liabilities,  and off-balance sheet contracts.  An institution's IRR is
measured as the change to its NPV as a result of a hypothetical  200 basis point
("bp") change in market interest  rates. A resulting  change in NPV of more than
2% of the  estimated  present  value of total  assets  ("PV")  will  require the
institution  to deduct from its capital  50% of that  excess  change.  The rules
provide  that  the OTS  will  calculate  the IRR  component  quarterly  for each
institution. Based on the Bank's asset size and risk-based capital, the Bank has
been  informed  by the OTS that it is exempt from this rule.  Nevertheless,  the
following  table  presents the Bank's NPV at December 31, 2000, as calculated by
the OTS, based on quarterly information voluntarily provided to the OTS.


                                       Net Portfolio Value
   Changes          ----------------------------------------------------------
   In Market
Interest Rates      $ Amount     $ Change     % Change        NPV Ratio(1)
--------------      --------     --------     --------        ------------
(basis points)      (Dollars in Thousands)

      +300          $ 2,562      $ -3,896          -60   %          4.62 %
      +200            3,978        -2,480          -38              6.93
      +100            5,366        -1,092          -17              9.05
         0            6,458                                        10.61
      -100            7,046           587           +9             11.37
      -200            7,088           629          +10             11.32
      -300            7,256           797          +12             11.46

--------------
(1)  Calculated as the estimated NPV divided by present value of total assets.

         Computations  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates,  prepayments and deposit  run-offs and should not be relied upon
as indicative of actual results.

                                        8
<PAGE>

         The Bank's  Board of Directors  reviews the Bank's asset and  liability
policies on an annual basis.  The Board of Directors  meets  quarterly to review
interest  rate risk and trends,  as well as  liquidity  and  capital  ratios and
requirements.  Management  administers  the policies and  determinations  of the
Board of  Directors  with respect to the Bank's  asset and  liability  goals and
strategies.

PROVISION FOR LOAN LOSSES

         The  provision  for loan losses  reached  $7,000 in 2000  compared with
$2,000 in 1999. The  additional  provision was responsive to loan growth and net
charge-offs  taken in 2000.  While  charge- off levels  increased in 2000,  they
remained at a low percentage of average loans (0.07%).

NONINTEREST INCOME AND EXPENSES

         Noninterest  income  increased 22% in total in 2000 compared with 1999,
due to income earned on Bank-owned life insurance and to increased rental income
associated   with  expanded   leasing  of  unused   portions  of  the  corporate
headquarters. Most service fee categories remained stable with 1999 results.

         Noninterest  expenses  increased  $137,000 or 11% in total, with 88% of
the increase  occurring in salaries and benefits.  Salaries increased $31,000 or
8% due to merit increases and additional staff. Additionally, 2000 reflected the
first full year of expense associated with the Employee Stock Ownership Plan and
the Restricted Stock Plan.

INCOME TAX EXPENSE

         Income tax expense for 2000  resulted in an effective tax rate of 22.5%
compared  with  26.7%  in  1999.  The  reduction  in the  effective  tax rate is
attributable  to the investment in Bank-owned  life insurance and a higher level
of investment in tax-free state and municipal bonds.

LIQUIDITY AND CAPITAL RESOURCES

         The Bank is  required to maintain  minimum  levels of liquid  assets as
defined by OTS  regulations.  This  requirement,  which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of the Bank's deposits and short-term  borrowings.  The required ratio currently
is 4% and the Bank's regulatory  liquidity ratio was 27% and 37% at December 31,
2000 and 1999, respectively.

         The Corporation's  primary sources of funds are deposits,  repayment of
loans and mortgage-  backed  securities,  maturities  of investment  securities,
advances  from the  Federal  Home Loan Bank  ("FHLB")  and funds  provided  from
operations.  While scheduled repayments of loans and mortgage- backed securities
and  maturities  of  investment  securities  are  predictable  sources of funds,
deposit flows, and loan prepayments are greatly  influenced by the general level
of interest rates, economic conditions and competition. The Corporation uses its
liquidity  resources  principally to fund existing and future loan  commitments,
maturing  certificates of deposit and demand deposit  withdrawals,  to invest in
other  interest-earning  assets,  to  maintain  liquidity,  and  meet  operating
expenses.

                                        9
<PAGE>

         Due to customer preference for potentially higher stock market returns,
it is getting increasingly difficult for the Bank and other institutions to grow
deposits.  As a result,  the Bank  funded most of its 2000 loan growth with FHLB
borrowings.  At December 31, 2000,  the Bank could  borrow an  additional  $18.6
million from the FHLB based on qualifying collateral.

         Approximately  $14.5  million of the Bank's time deposits are scheduled
to mature within the next 12 months.  It has been the Bank's  experience  that a
substantial  portion of such maturing deposits remain with the Bank. At December
31, 2000, the Bank had minimal loan commitments outstanding.

                                       10
<PAGE>





                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Steelton Bancorp, Inc.
Steelton, Pennsylvania


              We have audited the  accompanying  consolidated  balance  sheet of
Steelton Bancorp, Inc. and its wholly-owned subsidiary (the "Corporation") as of
December  31,  2000,  and  the  related   consolidated   statements  of  income,
stockholders'  equity and cash flows for the year then  ended.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit. The consolidated  financial statements of Steelton Bancorp,  Inc. for
the year ended  December 31, 1999 were audited by other  auditors  whose report,
dated January 24, 2000, expressed an unqualified opinion on those statements.


              We  conducted  our audit 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
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.


              In our opinion, the consolidated  financial statements referred to
above  present  fairly,  in all material  respects,  the  financial  position of
Steelton Bancorp, Inc. and its wholly-owned  subsidiary as of December 31, 2000,
and the results of their operations and their cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.




                                       /s/Beard Miller Company LLP
                                       -------------------------------
                                       Beard Miller Company LLP



Harrisburg, Pennsylvania
January 26, 2001


                                      F-1
<PAGE>


<TABLE>
<CAPTION>

STEELTON BANCORP, INC.
CONSOLIDATED BALANCE SHEETS


----------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                2000                  1999
----------------------------------------------------------------------------------------------------------------------------

              ASSETS

<S>                                                                              <C>                   <C>
Cash and due from banks                                                               $      278,524        $    1,617,768
Interest bearing deposits in other banks                                                   1,140,038             1,670,023
                                                                                --------------------------------------------
              Cash and cash equivalents                                                    1,418,562             3,287,791
Investment securities available for sale                                                  10,007,980            10,252,585
Investment securities held to maturity (fair values 2000 $ 5,341,664;
     1999 $ 5,459,556)                                                                     5,380,735             5,756,786
Loans receivable, net of allowance for loan losses 2000 $ 149,603;
     1999 $ 168,200                                                                       39,769,076            32,027,255
Federal Home Loan Bank stock, at cost                                                      1,030,700               691,800
Bank premises and equipment, net                                                           1,449,585             1,212,927
Accrued interest receivable and other assets                                               1,688,395               666,227
                                                                                --------------------------------------------

              Total assets                                                            $   60,745,033        $   53,895,371
                                                                                ============================================

     LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
     Deposits                                                                         $   34,133,250        $   33,266,127
     Advances from Federal Home Loan Bank                                                 19,398,854            13,334,745
     Advances from borrowers for insurance and taxes                                         305,662               232,508
     Accrued interest payable and other liabilities                                          262,479               289,913
                                                                                --------------------------------------------

              Total liabilities                                                           54,100,245            47,123,293
                                                                                --------------------------------------------

STOCKHOLDERS' EQUITY
     Preferred stock, no par value; 2,000,000 shares authorized;
         none issued and outstanding                                                               -                     -
     Common stock, $ .10 par value; 8,000,000 shares authorized;
         issued 2000 404,250 shares; 1999 385,000 shares                                      40,425                38,500
     Surplus                                                                               3,665,547             3,457,015
     Retained earnings                                                                     3,889,722             3,863,701
     Unearned compensation                                                                  (422,598)             (308,000)
     Treasury stock, at cost, 2000 41,398 shares                                            (478,826)                    -
     Accumulated other comprehensive loss                                                    (49,482)             (279,138)
                                                                                --------------------------------------------

              Total stockholders' equity                                                   6,644,788             6,772,078
                                                                                --------------------------------------------

              Total liabilities and stockholders' equity                              $   60,745,033        $   53,895,371
                                                                                ============================================
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-2
<PAGE>

<TABLE>
<CAPTION>


STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME


----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                                  2000                 1999
----------------------------------------------------------------------------------------------------------------------------

<S>                                                                              <C>                   <C>
Interest and dividend income:
     Loans                                                                            $     2,977,575       $    2,266,609
     Securities:
         Taxable                                                                              923,647              745,119
         Tax exempt                                                                            90,674               77,805
     Dividends on FHLB stock                                                                   95,071               52,129
     Other                                                                                     58,018              100,459
                                                                                  ------------------------------------------

              Total interest and dividend income                                            4,144,985            3,242,121
                                                                                  ------------------------------------------

Interest expense:
     Deposits                                                                               1,544,340            1,351,594
     Advances from Federal Home Loan Bank                                                   1,080,298              589,316
                                                                                  ------------------------------------------

              Total interest expense                                                        2,624,638            1,940,910
                                                                                  ------------------------------------------

              Net interest income                                                           1,520,347            1,301,211

Provision for loan losses                                                                       7,000                2,000
                                                                                  ------------------------------------------

              Net interest income after provision for loan losses                           1,513,347            1,299,211
                                                                                  ------------------------------------------

Noninterest income:
     Fees and service charges                                                                 163,724              162,634
     Other                                                                                     94,952               49,842
                                                                                  ------------------------------------------

              Total noninterest income                                                        258,676              212,476
                                                                                  ------------------------------------------

Noninterest expense:
     Salaries and employee benefits                                                           746,071              625,736
     Occupancy                                                                                101,644               97,040
     Equipment                                                                                189,539              192,989
     Professional fees                                                                        138,134              123,848
     Advertising                                                                               51,879               42,422
     Other                                                                                    173,802              181,556
                                                                                  ------------------------------------------

              Total noninterest expense                                                     1,401,069            1,263,591
                                                                                  ------------------------------------------

              Income before income taxes                                                      370,954              248,096

Income taxes                                                                                   83,316               66,166
                                                                                  ------------------------------------------

              Net income                                                              $       287,638       $      181,930
                                                                                  ==========================================

Per share data:
     Net income, basic                                                                $          0.84       $         0.31
                                                                                  ==========================================

     Net income, diluted                                                              $          0.82       $         0.31
                                                                                  ==========================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-3

<PAGE>


STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000 and 1999
-----------------------------------------------------------------------------------------------------------------------------------


                                                                                                         Accumulated
                                                                                                            Other         Total
                                      Common                    Retained      Unearned      Treasury    Comprehensive Stockholders'
                                      Stock       Surplus       Earnings    Compensation     Stock          Loss          Equity
                                   -------------------------------------------------------------------------------------------------

<S>                              <C>         <C>           <C>           <C>            <C>          <C>            <C>
Balance, December 31, 1998         $        -  $          -  $  3,712,571  $          -   $         -  $    (14,082)  $  3,698,489
                                                                                                                      --------------
    Comprehensive income:
      Net income                            -             -       181,930             -             -             -        181,930
      Net change in unrealized
        losses on available for
        sale securities                     -             -             -             -             -      (265,056)      (265,056)
                                                                                                                      --------------

        Total comprehensive income                                                                                         (83,126)
                                                                                                                      --------------

    Stock issuance                     38,500     3,457,015             -      (308,000)            -             -      3,187,515
    Cash dividends declared
      ($ .08 per share)                     -             -       (30,800)            -             -             -        (30,800)
                                   -------------------------------------------------------------------------------------------------

Balance, December 31, 1999             38,500     3,457,015     3,863,701      (308,000)            -      (279,138)     6,772,078
                                                                                                                      --------------
    Comprehensive income:
      Net income                            -             -       287,638             -             -             -        287,638
      Net change in unrealized
        losses on available for
        sale securities                     -             -             -             -             -       229,656        229,656
                                                                                                                      --------------
        Total comprehensive income                                                                                         517,294
                                                                                                                      --------------
    Stock purchased for treasury
      and benefit plans                     -             -             -      (171,345)     (478,826)            -       (650,171)
    Earned compensation                     -         2,695             -        56,747             -             -         59,442
    Cash dividends declared
      ($ .16 per share)                     -             -       (53,855)            -             -             -        (53,855)
    Stock dividend declared             1,925       205,837      (207,762)            -             -             -              -
                                   -------------------------------------------------------------------------------------------------

Balance, December 31, 2000         $   40,425  $  3,665,547  $  3,889,722  $   (422,598)  $  (478,826) $    (49,482)  $  6,644,788
                                   =================================================================================================

</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>


STEELTON BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                                    2000               1999
----------------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                       $        287,638      $      181,930
     Adjustments to reconcile net income to net cash
         provided by operating activities:
         Provision for loan losses                                                               7,000               2,000
         Depreciation                                                                           66,237              84,077
         ESOP and restricted stock plan expense                                                 59,442              19,822
         Earnings on bank-owned life insurance                                                 (32,824)                  -
         Deferred income taxes                                                                  (8,185)            (37,852)
         Increase in accrued interest receivable                                               (78,770)            (94,507)
         Increase in accrued interest payable                                                    2,073              68,246
         Other                                                                                 (15,502)            114,240
                                                                                    -----------------------------------------

              Net cash provided by operating activities                                        287,109             337,956
                                                                                    -----------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Available for sale securities:
         Maturities                                                                          1,379,430           1,447,318
         Purchases                                                                            (780,624)         (8,143,062)
     Held to maturity securities:
         Maturities                                                                            365,324             916,652
         Purchases                                                                                   -          (1,478,574)
     Net increase in loans                                                                  (7,776,278)         (4,194,356)
     Purchase of bank-owned life insurance                                                  (1,000,000)                  -
     Purchase of bank premises and equipment                                                  (302,895)           (182,276)
     Purchase of Federal Home Loan Bank stock                                                 (338,900)           (127,200)
                                                                                    -----------------------------------------

              Net cash used in investing activities                                         (8,453,943)        (11,761,498)
                                                                                    -----------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits                                                                  867,123           4,993,696
     Net increase in advances from borrowers for insurance and taxes                            73,154              65,193
     Advances from Federal Home Loan Bank                                                   21,000,000          14,264,247
     Repayment of Federal Home Loan Bank advances                                          (14,935,891)        (10,186,910)
     Proceeds from issuance of stock, net                                                            -           3,187,515
     Stock purchased for treasury and benefit plans                                           (650,171)                  -
     Payment of dividends                                                                      (56,610)                  -
                                                                                    -----------------------------------------

              Net cash provided by financing activities                                      6,297,605          12,323,741
                                                                                    -----------------------------------------

              Increase (decrease) in cash and cash equivalents                              (1,869,229)            900,199

Cash and cash equivalents:
     Beginning                                                                               3,287,791           2,387,592
                                                                                    -----------------------------------------

     Ending                                                                           $      1,418,562      $    3,287,791
                                                                                    =========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash payments for:
         Interest                                                                     $      2,622,565      $    1,872,665
                                                                                    =========================================
         Income taxes                                                                 $        167,207      $            -
                                                                                    =========================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-5

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES

         Nature of operations:
              The Corporation's  business is conducted  principally  through its
              wholly-owned subsidiary,  Mechanics Savings Bank (the "Bank"). The
              Bank  provides a variety of retail  banking  services to customers
              through its two offices located in Dauphin  County,  Pennsylvania.
              The  Bank's  primary  deposit   products  are   non-interest   and
              interest-bearing   checking   accounts,   savings   accounts   and
              certificates  of  deposit.   Its  primary  lending   products  are
              single-family residential loans.

         Basis of consolidation:
              The  consolidated  financial  statements  include the  accounts of
              Steelton Bancorp,  Inc. (the  "Corporation")  and its wholly-owned
              subsidiary,  Mechanics  Savings  Bank.  All material  intercompany
              balances and transactions have been eliminated in consolidation.

         Use of estimates:
              The preparation of consolidated financial statements in conformity
              with generally accepted accounting  principles requires management
              to make estimates and assumptions that affect the reported amounts
              of assets and liabilities and disclosure of contingent  assets and
              liabilities  at the  date  of the  financial  statements  and  the
              reported  amounts of revenues  and expenses  during the  reporting
              period. Actual results could differ from those estimates.

         Investment securities:
              The   Corporation's   investment   securities  are  classified  as
              available  for sale and held to maturity and are  accounted for as
              follows:

              o   Securities  held to maturity - Government,  federal agency and
                  corporate  debt  securities  that  management has the positive
                  intent and ability to hold to maturity  are  reported at cost,
                  adjusted  for   amortization  of  premiums  and  accretion  of
                  discounts that are recognized in interest income using methods
                  approximating the interest method over the period to maturity.
                  Mortgage-backed  securities represent  participating interests
                  in pools of long-term  first  mortgage  loans  originated  and
                  serviced  by  issuers  of  the   securities.   Mortgage-backed
                  securities are carried at unpaid principal balances,  adjusted
                  for unamortized premiums and unearned discounts.  Premiums and
                  discounts  are  amortized  using the interest  method over the
                  terms of the securities.



                                      F-6

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Investment securities (continued):
              o   Securities  available for sale - Available for sale securities
                  consist of  investment  securities  not  classified as held to
                  maturity securities.  Unrealized holding gains and losses, net
                  of tax, on available for sale securities are included in other
                  comprehensive  income.  Realized gains and losses on available
                  for  sale   securities   are  included  in  income  and,  when
                  applicable, are reported as a reclassification adjustment, net
                  of tax, in other comprehensive income. Gains and losses on the
                  sale of available for sale securities are determined using the
                  specific  identification  method. The amortization of premiums
                  and the  accretion of  discounts  are  recognized  in interest
                  income  using  the  interest  method  over  the  terms  of the
                  securities.

         Loans receivable:
              Loans  receivable  that  management  has the intent and ability to
              hold for the  foreseeable  future or until  maturity or payoff are
              stated at their outstanding unpaid principal  balances,  net of an
              allowance for loan losses and any deferred fees.  Interest  income
              is accrued on the unpaid principal balance.  Loan origination fees
              are  deferred  and  recognized  as  an  adjustment  of  the  yield
              (interest  income) of the  related  loans.  The Bank is  generally
              amortizing these amounts over the contractual life of the loan.

              The  accrual  of  interest  is  generally  discontinued  when  the
              contractual  payment of  principal  or interest has become 90 days
              past  due  or   management   has  serious   doubts  about  further
              collectibility  of principal or interest,  even though the loan is
              currently performing. A loan may remain on accrual status if it is
              in the  process of  collection  and is either  guaranteed  or well
              secured.  When a loan  is  placed  on  nonaccrual  status,  unpaid
              interest  credited to income in the current  year is reversed  and
              unpaid  interest  accrued in prior  years is charged  against  the
              allowance for loan losses.  Interest  received on nonaccrual loans
              generally  is either  applied  against  principal  or  reported as
              interest  income,  according  to  management's  judgment as to the
              collectibility  of  principal.  Generally,  loans are  restored to
              accrual  status  when  the  obligation  is  brought  current,  has
              performed  in  accordance  with  the   contractual   terms  for  a
              reasonable  period of time and the ultimate  collectibility of the
              total contractual principal and interest is no longer in doubt.



                                      F-7


<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Allowance for loan losses:
              The allowance for loan losses is  established  through  provisions
              for  loan  losses  charged  against  income.  Loans  deemed  to be
              uncollectible  are charged  against the allowance for loan losses,
              and subsequent recoveries, if any, are credited to the allowance.

              The allowance for loan losses is maintained at a level  considered
              adequate to provide for losses that can be reasonably anticipated.
              Management's  periodic evaluation of the adequacy of the allowance
              is based on the  Bank's  past  loan  loss  experience,  known  and
              inherent  risks  in the  portfolio,  adverse  situations  that may
              affect the borrower's ability to repay, the estimated value of any
              underlying collateral,  composition of the loan portfolio, current
              economic conditions and other relevant factors. This evaluation is
              inherently  subjective as it requires material  estimates that may
              be susceptible to  significant  change,  including the amounts and
              timing of future  cash flows  expected  to be received on impaired
              loans.

              A loan is considered  impaired when, based on current  information
              and events, it is probable that the Bank will be unable to collect
              the scheduled payments of principal or interest when due according
              to the contractual terms of the loan agreement. Factors considered
              by management in determining  impairment  include  payment status,
              collateral  value  and the  probability  of  collecting  scheduled
              principal and interest  payments when due.  Loans that  experience
              insignificant  payment delays and payment shortfalls generally are
              not classified as impaired. Management determines the significance
              of payment delays and payment shortfalls on a case-by-case  basis,
              taking into consideration all of the circumstances surrounding the
              loan and the  borrower,  including  the length of the  delay,  the
              reasons for the delay, the borrower's prior payment record and the
              amount of the  shortfall in relation to the principal and interest
              owed.  Impairment  is  measured  on  a  loan  by  loan  basis  for
              commercial and  construction  loans by either the present value of
              expected  future  cash flows  discounted  at the loan's  effective
              interest  rate,  the loan's  obtainable  market  price or the fair
              value of the collateral if the loan is collateral dependent.

              Large groups of smaller balance homogeneous loans are collectively
              evaluated  for   impairment.   Accordingly,   the  Bank  does  not
              separately  identify individual consumer and residential loans for
              impairment disclosures.



                                      F-8


<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Bank premises and equipment:
              Bank premises and  equipment  are comprised of land, at cost,  and
              buildings,  building  improvements,  furnishings  and equipment at
              cost  less  accumulated  depreciation.  Depreciation  charges  are
              computed on the  straight-line  and declining balance methods over
              the estimated useful lives of the related assets.

         Stock based compensation:
              Stock options are accounted for under Accounting  Principles Board
              Opinion (APB) No. 25. Stock options are granted at exercise prices
              not less than the fair  value of the  common  stock on the date of
              grant.  Under APB No. 25, no  compensation  expense is  recognized
              related  to these  plans.  The pro forma  impact to net income and
              earnings  per share that would occur if  compensation  expense was
              recognized based on the estimated fair value of the options on the
              date of the grant is  disclosed  in the notes to the  consolidated
              financial statements.

         Pension plan:
              The  Corporation  has a pension plan  covering  substantially  all
              employees.  The  plan  is a fully  insured  defined  benefit  plan
              provided through a contract with a life insurance  company that is
              currently funded by the Corporation through annual premiums.

         Income taxes:
              Deferred  taxes  are  provided  on the  liability  method  whereby
              deferred  tax  assets  are  recognized  for  deductible  temporary
              differences  and  deferred  tax  liabilities  are  recognized  for
              taxable  temporary  differences.  Temporary  differences  are  the
              differences between the reported amounts of assets and liabilities
              in the  financial  statements  and their tax basis.  Deferred  tax
              assets are reduced by a valuation  allowance  when, in the opinion
              of management, it is more likely than not that some portion or all
              of the  deferred  tax assets will not be  realized.  Deferred  tax
              assets and  liabilities  are adjusted  through the  provision  for
              income  taxes for the  effects of changes in tax laws and rates on
              the date of enactment.

              The Corporation  and its  subsidiary  file a consolidated  federal
              income tax return.

         Advertising:
              Advertising costs are expensed as incurred.

         Off-balance sheet financial instruments:
              In the  ordinary  course of  business,  the Bank has entered  into
              off-balance sheet financial instruments  consisting of commitments
              to extend credit and letters of credit. Such financial instruments
              are recorded in the balance sheet when they are funded.



                                      F-9
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Comprehensive income:
              Comprehensive  income for the  Corporation  consists of net income
              and  unrealized  gains or losses on available for sale  securities
              and is presented in the  consolidated  statement of  stockholders'
              equity.  Unrealized securities gains or losses and the related tax
              impact included in comprehensive income are as follows:

                                                     Year Ended December 31,
                                                        2000       1999
                                                     --------------------------

                  Unrealized holding gain (loss)     $ 378,597   $   (432,234)
                  Tax effect                           148,941       (167,178)
                                                     --------------------------

                                Net of tax amount    $ 229,656   $   (265,056)
                                                     ==========================

         Earnings per share:
              Basic  earnings per share is  calculated by dividing net income by
              the weighted average number of shares of common stock  outstanding
              during  each  period.   Unallocated  shares  associated  with  the
              Corporation's ESOP are not considered  outstanding shares. Diluted
              earnings per share is calculated by increasing the denominator for
              the assumed conversion of all potentially dilutive securities. The
              Corporation's dilutive securities are limited to stock options and
              restricted stock awards.

              Basic  earnings per share for the year ended December 31, 1999 was
              calculated  by dividing net income for the period from the date of
              conversion  (see Note 8) to December  31, 1999 of $ 116,251 by the
              weighted average common shares outstanding for that same period of
              371,910.

              Historical  shares  outstanding  and  per  share  data  have  been
              restated to reflect a 5% stock dividend  declared in November 2000
              and issued in January 2001.

         Treasury stock:
              The  acquisition  of  treasury  stock is  recorded  under the cost
              method.  The subsequent  disposition or sale of the treasury stock
              is recorded using the average cost inventory method.

         Statements of cash flows:
              The  Corporation  considers  all  cash  and  due  from  banks  and
              interest-bearing  deposits in other  banks to be cash  equivalents
              for purposes of the statements of cash flows.


                                      F-10

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Reclassifications:
              Certain amounts in the 1999 consolidated financial statements have
              been  reclassified  to conform  with the 2000  presentation.  Such
              reclassifications had no impact on reported net income.

         Segment reporting:
              The  Corporation  operates in a single business segment consisting
              of traditional savings bank activities.

         New accounting standards:
              In June 1998,  the  Financial  Accounting  Standards  Board issued
              Statement  No. 133 (as  amended by  Statement  Nos.  137 and 138),
              "Accounting for Derivative  Instruments  and Hedging  Activities".
              This  statement  and  its  amendments   establish  accounting  and
              reporting   standards  for  derivative   instruments  and  hedging
              activities,  including certain derivative  instruments embedded in
              other  contracts,   and  require  that  an  entity  recognize  all
              derivatives  as assets or  liabilities  in the  balance  sheet and
              measure them at fair value. The statement requires that changes in
              the fair value of  derivatives  be recorded each period in current
              earnings or other  comprehensive  income,  depending  on whether a
              derivative is designated as part of a hedge transaction and, if it
              is, the type of hedge  transaction.  The  Corporation  adopted the
              statement on January 1, 2001.  The adoption of the  statement  did
              not  have a  significant  impact  on the  financial  condition  or
              results of operations of the Corporation.

              In September 2000, the Financial Accounting Standards Board issued
              Statement  No. 140,  "Accounting  for  Transfers  and Servicing of
              Financial  Assets  and   Extinguishments  of  Liabilities".   This
              statement  replaces  SFAS No. 125 of the same name. It revises the
              standards  of  securitizations  and other  transfers  of financial
              assets  and  collateral  and  requires  certain  disclosures,  but
              carries  over  most of the  provisions  of SFAS  No.  125  without
              reconsideration.  SFAS No.  140 is  effective  for  transfers  and
              servicing of financial assets and  extinguishments  of liabilities
              occurring  after March 31, 2001.  The  statement is effective  for
              recognition and reclassification of collateral and for disclosures
              relating to securitization  transactions and collateral for fiscal
              years ending after  December  15,  2000.  This  statement is to be
              applied  prospectively with certain  exceptions.  Other than these
              exceptions,  earlier or retroactive  application of its accounting
              provision is not  permitted.  The adoption of the statement is not
              expected to have a significant impact on the Corporation.



                                      F-11
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




2
--------------------------------------------------------------------------------
INVESTMENT SECURITIES

         The  amortized  cost and  estimated  fair  values of the  Corporation's
         investment  securities at December 31, 2000 and 1999 are  summarized as
         follows:
<TABLE>
<CAPTION>

                                                                                Gross           Gross
                                                                Amortized     Unrealized      Unrealized           Fair
                                                                  Cost          Gains           Losses             Value
                                                       ---------------------------------------------------------------------
<S>                                                  <C>                 <C>            <C>             <C>
              Securities available for sale:
                   December 31, 2000:
                       U.S. Government and
                            federal agencies            $       4,844,270  $     17,092   $      19,131   $      4,842,231
                       Mortgage-backed securities:
                            Government agency                   3,440,170        13,568          21,389          3,432,349
                            Corporate                             985,636             -          56,026            929,610
                       State and local governments                812,877         1,288          10,375            803,790
                                                       ---------------------------------------------------------------------

                                                        $      10,082,953  $     31,948   $     106,921   $     10,007,980
                                                       =====================================================================
                   December 31, 1999:
                       U.S. Government and
                            federal agencies            $       4,591,384  $      1,458   $     166,358   $      4,426,484
                       Mortgage-backed securities:
                            Government agency                   4,288,009         3,065          83,260          4,207,814
                            Corporate                           1,000,000             -         133,437            866,563
                       State and local governments                826,762             -          75,038            751,724
                                                       ---------------------------------------------------------------------

                                                        $      10,706,155  $      4,523   $     458,093   $     10,252,585
                                                       =====================================================================
              Securities held to maturity:
                   December 31, 2000:
                       Certificate of deposit           $         100,000  $          -   $           -   $        100,000
                       U.S. Government and
                            federal agencies                      620,000             -          25,805            594,195
                       Mortgage-backed securities:
                            Government agency                   3,053,162        22,110          27,272          3,048,000
                            Corporate                             311,031            48           9,189            301,890
                       State and local governments              1,296,542         2,545           1,508          1,297,579
                                                       ---------------------------------------------------------------------

                                                        $       5,380,735  $     24,703   $      63,774   $      5,341,664
                                                       =====================================================================
                   December 31, 1999:
                       Certificate of deposit           $         100,000  $          -   $           -   $        100,000
                       U.S. Government and
                            federal agencies                      621,312             -          48,807            572,505
                       Mortgage-backed securities:
                            Government agency                   3,425,238         7,301         161,409          3,271,130
                            Corporate                             314,493           145          39,750            274,888
                       State and local governments              1,295,743         6,775          61,485          1,241,033
                                                       ---------------------------------------------------------------------

                                                        $       5,756,786  $     14,221   $     311,451   $      5,459,556
                                                       =====================================================================

</TABLE>


                                      F-12
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




2
--------------------------------------------------------------------------------
INVESTMENT SECURITIES (CONTINUED)

         The following is a summary of the  maturities of investment  securities
at December 31, 2000:
<TABLE>
<CAPTION>

                                                              Available For Sale                  Held To Maturity
                                                     ------------------------------------------------------------------------
                                                           Amortized            Fair          Amortized          Fair
                                                             Cost              Value            Cost            Value
                                                     -----------------------------------------------------------------------
<S>                                               <C>                <C>              <C>             <C>
              Amounts maturing:
                    After one but within five years  $        799,852   $       791,136  $      749,894  $      730,321
                    After five but within ten years         1,628,192         1,637,549         534,641         532,334
                    After ten years                         7,654,909         7,579,295       4,096,200       4,079,009
                                                     --------------------------------------------------------------------

                                                     $     10,082,953   $    10,007,980  $    5,380,735  $    5,341,664
                                                     ====================================================================
</TABLE>

         The amortized  cost and fair value of  mortgage-backed  securities  are
         presented by  contractual  maturity in the  preceding  table.  Expected
         maturities will differ from contractual  maturities  because  borrowers
         may  have the  right  to call or  prepay  obligations  without  call or
         prepayment penalties.


3
--------------------------------------------------------------------------------
LOANS RECEIVABLE

         Loans  receivable  at  December  31,  2000  and  1999  consist  of  the
following:

                                                       2000             1999
                                                 -------------------------------

              Loans secured by real estate:
                   Residential                   $   38,597,448  $   31,878,923
                   Commercial                         1,023,815         830,132
              Consumer financings, direct loans         565,909         629,058
              Commercial                                 72,818          75,485
                                                 -------------------------------
                                                     40,259,990      33,413,598
              Loans in process                          (50,155)       (946,638)
              Net deferred loan origination fees       (291,156)       (271,505)
              Allowance for loan losses                (149,603)       (168,200)
                                                 -------------------------------

                                                 $   39,769,076  $   32,027,255
                                                 ===============================


                                      F-13

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




3
--------------------------------------------------------------------------------
LOANS RECEIVABLE (CONTINUED)

         The  majority of the Bank's loan  portfolio  consists of  single-family
         residential  loans in the area of  Dauphin  County,  Pennsylvania.  The
         ultimate  collectibility of a substantial  portion of the Corporation's
         loan portfolio is susceptible to changes in local market conditions.

         An analysis of the  allowance for  loan losses at December 31, 2000 and
         1999 is as follows:

                                                       2000          1999
                                                -----------------------------

              Balance, beginning of year        $     168,200   $   166,200
                   Provision for loan losses            7,000         2,000
                   Charge-offs                        (25,597)            -
                                                -----------------------------

              Balance, end of year              $     149,603   $   168,200
                                                =============================

         Nonaccrual  loans  totaled $ 212,000 and $ 527,000 at December 31, 2000
         and 1999,  respectively.  Nonaccrual  loans  are those on which  income
         under the accrual method has been discontinued with subsequent interest
         payments  credited to interest income when received or, if the ultimate
         collectibility   of  principal  is  in  doubt,   applied  as  principal
         reductions.  The  impact of  nonaccrual  loans  was to reduce  interest
         income by $ 11,498 and $ 27,382 for the years ended  December  31, 2000
         and 1999, respectively.

         There were no impaired loans as of December 31, 2000 and 1999.


                                      F-14

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




4
--------------------------------------------------------------------------------
BANK PREMISES AND EQUIPMENT

         A summary of bank  premises and equipment at December 31, 2000 and 1999
follows:
<TABLE>
<CAPTION>

                                                             2000               1999
                                                 ----------------------------------------

<S>                                            <C>                 <C>
              Land                                $         373,178   $         193,930
              Buildings and improvements                    879,598             863,066
              Furnishings and equipment                     622,911             614,354
              Construction in progress                      277,806             179,248
                                                 ----------------------------------------
                                                          2,153,493           1,850,598
              Less accumulated depreciation                 703,908             637,671
                                                 ----------------------------------------

                                                  $       1,449,585   $       1,212,927
                                                 ========================================
</TABLE>


5
--------------------------------------------------------------------------------
DEPOSITS

         Deposits at December 31, 2000 and 1999 consist of the following:
<TABLE>
<CAPTION>

                                                            2000                 1999
                                                 ------------------------------------------

<S>                                             <C>                  <C>
              Noninterest-bearing deposits        $        2,306,774   $        1,648,224
              Interest-bearing deposits:
                   NOW                                     1,654,653            1,330,492
                   Savings                                 5,134,016            5,457,016
                   Money market                            1,038,614            2,111,086
                   Certificates of deposit                23,999,193           22,719,309
                                                 ------------------------------------------

                            Total deposits        $       34,133,250   $       33,266,127
                                                 ==========================================
</TABLE>

         The aggregate  amount of certificates of deposit  including  individual
         retirement  accounts  with a minimum  denomination  of $ 100,000  was $
         4,021,925 and $ 3,759,212 at December 31, 2000 and 1999, respectively.

         Maturities  of  certificates  of deposit at  December  31,  2000 are as
follows:

              2001                                $         14,534,886
              2002                                           4,239,927
              2003                                           2,942,568
              2004                                           1,762,687
              2005 and thereafter                              519,125
                                                 -----------------------

                                                  $         23,999,193
                                                 =======================

                                      F-15
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




6
--------------------------------------------------------------------------------
ADVANCES FROM FEDERAL HOME LOAN BANK

         The Bank is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh
         and, as such,  can take advantage of the FHLB program for overnight and
         term  advances at published  daily rates.  Under the terms of a blanket
         collateral  agreement,  advances  from the FHLB are  collateralized  by
         first  mortgage  loans and  securities  which  totaled $ 45,481,000  at
         December 31, 2000.  Advances available under this agreement are limited
         by available  and  qualifying  collateral  and the amount of FHLB stock
         held by the  borrower.  At December 31, 2000,  the Bank could borrow an
         additional $ 18,628,000  based on  qualifying  collateral.  Outstanding
         borrowings from the Federal Home Loan Bank are summarized as follows at
         December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                      2000                              1999
                                                       ---------------------------------------------------------------------
                                                                             Weighted                          Weighted
                                                                              Average                           Average
                                                                             Interest                          Interest
                                                               Amount          Rate                Amount        Rate
                                                       ---------------------------------------------------------------------

<S>                                                 <C>                     <C>       <C>                     <C>
             Maturity:
                   Within one year                      $       5,500,000       6.34  %   $       6,084,745       5.78  %
                   Within two years                             1,000,000       6.63              2,000,000       5.76
                   Within three years                           3,500,000       6.42              1,000,000       6.08
                   Within four years                                    -         -               1,000,000       5.35
                   Five years and thereafter                    9,398,854       6.28              3,250,000       5.76
                                                       --------------------              --------------------

                                                        $      19,398,854                 $      13,334,745

                                                       ====================              ====================
</TABLE>

7
--------------------------------------------------------------------------------
INCOME TAXES

         The Corporation  and subsidiary file a consolidated  federal income tax
         return. The consolidated provision for income taxes for the years ended
         December 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>

                                                                       2000                1999
                                                          -----------------------------------------
 <S>                                                    <C>                  <C>
             Tax currently payable:
                   Federal                                 $           72,533   $          90,564
                   State                                               18,968              13,454
              Deferred taxes (benefit)                                 (8,185)            (37,852)
                                                          -----------------------------------------

                            Total income tax expense       $           83,316   $          66,166
                                                          =========================================

</TABLE>


                                      F-16
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7
--------------------------------------------------------------------------------
INCOME TAXES (CONTINUED)

         The  difference  between the statutory  federal income tax rate and the
         income tax expense included in the consolidated statements of income is
         as follows:
<TABLE>
<CAPTION>

                                                                                  2000           1999
                                                                        ---------------------------------

<S>                                                                   <C>               <C>
              Expected tax provision at 34% rate                        $        126,124  $      84,353
              Tax-exempt interest income                                         (35,319)       (29,998)
              Increase in cash surrender value of
                   bank-owned life insurance                                     (11,160)             -
              State tax effect                                                    12,519          9,540
              Other                                                               (8,848)         2,271
                                                                        ---------------------------------

                                                                        $         83,316  $      66,166

                                                                        =================================
</TABLE>


         Temporary  differences  between the amounts  reported in the  financial
         statements  and the tax  bases of  assets  and  liabilities  result  in
         deferred taxes. Deferred tax assets and liabilities for the years ended
         December 31, 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>

                                                                                   2000             1999
                                                                        ------------------------------------

<S>                                                                   <C>                <C>
              Deferred tax assets:
                   Deferred loan fees                                    $         99,333   $       92,312
                   Unrealized securities losses                                    25,491          174,431
                   Allowance for loan losses                                       36,418           34,475
                   Other                                                           12,731            9,138
                                                                        ------------------------------------

                            Total deferred tax assets                             173,973          310,356

              Deferred tax liability, bank premises and equipment                 (11,928)          (7,556)
                                                                        ------------------------------------

                            Net deferred tax asset                       $        162,045   $      302,800
                                                                        ====================================
</TABLE>


                                      F-17

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




7
--------------------------------------------------------------------------------
INCOME TAXES (CONTINUED)

         The  Corporation  is permitted a special bad debt deduction for federal
         income tax purposes which is limited  generally to an amount calculated
         under the  experience  method as defined in the  Internal  Revenue Code
         (Code).  With the passage of the Small Business Jobs  Protection Act of
         1996 (Act),  thrift  institutions  are no longer  permitted  to use the
         percentage of taxable income method of computing additions to their bad
         debt reserves as provided for in the Code.  In addition,  the excess of
         the thrift's bad debt reserves over those  permitted,  as defined under
         the  provisions of the Act, are required to be  recaptured  into income
         for federal income tax purposes over a six-year period. Excess reserves
         are  those  reserves  in excess  of the base  year  reserves  generally
         defined  as the  balance  of  reserves  as of  December  31,  1987.  In
         accordance  with SFAS 109,  "Accounting  for Income  Taxes," a deferred
         liability  has not  been  established  for the tax bad debt  base  year
         reserve of the Corporation.  Therefore,  retained  earnings at December
         31, 2000 and 1999 includes  approximately $ 703,000  representing  such
         bad debt deductions for which no deferred taxes have been provided.

         Management  has  determined  that it is not  required  to  establish  a
         valuation  reserve for the  deferred  tax asset since it is more likely
         than  not  that  the  deferred  tax  asset  will  be  realized  through
         carryback,  future reversals of existing taxable temporary differences,
         future taxable income and tax planning strategies.


8
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY

         On July 8, 1999, the Bank completed a mutual to stock  conversion  (the
         "Conversion").  In connection with the Conversion, the Corporation sold
         404,250 shares  (adjusted for stock dividends) of its common stock in a
         subscription   offering  at  $  9.52  per  share  (adjusted  for  stock
         dividends). Upon completion of these transactions,  the Bank became the
         wholly-owned  subsidiary of the  Corporation  and changed its name from
         Mechanics Savings and Loan, FSA to Mechanics Savings Bank.

         At  the  time  of  Conversion,   the  Bank  segregated  and  restricted
         approximately  $ 3.7  million of  retained  earnings  in a  liquidation
         account  for the benefit of eligible  account  holders who  continue to
         maintain their deposit  accounts in the Bank after  conversion.  In the
         event of a complete liquidation of the Bank, and only in such an event,
         eligible depositors who continue to maintain accounts shall be entitled
         to receive a  distribution  from the  liquidation  account in an amount
         proportionate  to the  current  adjusted  balances  of  all  qualifying
         deposits then held. The liquidation account will be reduced annually to
         the extent that eligible  account holders have reduced their qualifying
         deposits.


                                      F-18

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




8
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (CONTINUED)

         Subsequent  to the  Conversion,  the  Corporation  or the  Bank may not
         declare or pay a cash  dividend on any of its shares of common stock if
         the effect  would reduce  stockholders'  equity below either the amount
         required for the liquidation  account discussed above or the applicable
         regulatory  capital  requirements,  or if such  declaration and payment
         would otherwise violate regulatory requirements.


9
--------------------------------------------------------------------------------
STOCK-BASED COMPENSATION

         The Corporation has an Employee Stock Ownership Plan (the "ESOP") which
         provides for annual contributions at the discretion of the Corporation.
         Employees are eligible to participate after one year of service and are
         vested after five years of service.  In 1999, the ESOP purchased 32,340
         (adjusted for stock dividends) of the  Corporation's  common stock at a
         total cost of $ 308,000  through a loan  financed  by the  Corporation.
         Dividends  are paid on allocated  shares and credited to  participants'
         accounts.  Compensation  expense  associated with the fair value of the
         shares is being recognized ratably over a ten year period. Such expense
         totaled  $ 33,496  for 2000 and $ 19,822  for 1999.  The fair  value of
         29,106  unearned  ESOP shares  approximated  $ 375,000 at December  31,
         2000.

         In 2000, the  Corporation  established  the Restricted  Stock Plan (the
         "Plan")  under  which  shares  were  awarded to  directors  and certain
         employees.  Under the terms of the plan, each non-employee director was
         awarded 808 shares for a total of 4,040  shares and  certain  employees
         were  awarded  a  total  of  12,127  shares  as  determined  by a Board
         appointed  committee.  (The  number of shares were  adjusted  for stock
         dividends.)  Granted shares are earned and  non-forfeitable at the rate
         of 20% on the  one-year  anniversary  of the date of the  grant and 20%
         annually  for the  next  four  years  if  service  continues.  Unearned
         compensation,  representing  the fair market value of the shares at the
         issuance date, will be charged to expense over the vesting period.  The
         Corporation  recognized  expense of $ 25,946 for the  portion of shares
         vesting in 2000.

         In 2000, the  Corporation  also  established the 2000 Stock Option Plan
         (the  "Option  Plan"),  which  provides  for the granting of options to
         Directors  and certain  employees.  Under the terms of the Option Plan,
         each  non-employee  director was awarded  2,021  options for a total of
         10,105  options and certain  employees  were  awarded a total of 30,319
         options as  determined  by a Board  appointed  committee.  The exercise
         price of the options is $ 8.75,  which represents the fair market value
         of the  related  shares on the grant  date.  (The number of options and
         exercise  price were  adjusted  for stock  dividends.)  The options are
         exercisable at the rate of 20% on the one-year  anniversary of the date
         of the  grant  and 20%  annually  for the next  four  years if  service
         continues.  The options expire after a ten-year period. No options were
         exercisable at December 31, 2000.

                                      F-19
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




9
--------------------------------------------------------------------------------
STOCK-BASED COMPENSATION (CONTINUED)

         The pro forma impact as though compensation expense associated with the
         Option Plan had been  determined  under the  recognition  provisions of
         FASB Statement No. 123, is as follows for 2000:

<TABLE>
<CAPTION>
                                                                                           Reported           Pro Forma
                                                                                     ----------------------------------------

<S>                                                                                <C>                     <C>
              Net income                                                              $       287,638        $       270,847
                                                                                     =======================================

              Basic earnings per share                                                $          0.84        $          0.79
                                                                                     =======================================

              Diluted earnings per share                                              $          0.82        $          0.77
                                                                                     =======================================
</TABLE>

         The pro forma  impact is based on a grant date fair value of $ 2.50 per
         option  computed  using  the  Black-Scholes  model  and  the  following
         assumptions:  dividend  yield of  1.72%,  expected  volatility  of 15%,
         interest rate of 6.63% and an expected life of 7 years.


10
--------------------------------------------------------------------------------
EARNINGS PER SHARE

         The following is a reconciliation of the numerators and denominators of
         the basic and diluted  earnings per share  computations  (in thousands,
         except per share data):

<TABLE>
<CAPTION>
                                                                                              2000             1999
                                                                                       ------------------------------------

<S>                                                                                  <C>               <C>
              Numerator, net income                                                     $       287,638   $       116,251
                                                                                       ====================================

              Denominators:
                   Average basic shares outstanding                                             341,413           371,910
                   Average dilutive option effect                                                 5,997                 -
                   Average restricted stock effect                                                2,810                 -
                                                                                       ------------------------------------

                            Average dilutive shares outstanding                                 350,220           371,910
                                                                                       ====================================

              Earnings per share:
                   Basic                                                                $         0.84    $         0.31
                                                                                       ====================================

                   Diluted                                                              $         0.82    $         0.31
                                                                                       ====================================

</TABLE>


                                      F-20
<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




11
--------------------------------------------------------------------------------
REGULATORY MATTERS

         The  Bank  is  subject  to  various  regulatory  capital   requirements
         administered  by its primary  federal  regulator,  the Office of Thrift
         Supervision  (OTS).  Failure  to meet the  minimum  regulatory  capital
         requirements can initiate certain  mandatory,  and possible  additional
         discretionary,  actions by regulators that, if undertaken, could have a
         direct  material  effect  on  the  Corporation  and  the   consolidated
         financial statements.  Under the regulatory capital adequacy guidelines
         and the regulatory  framework for prompt  corrective  action,  the Bank
         must meet specific capital guidelines involving  quantitative  measures
         of  assets,   liabilities  and  certain   off-balance  sheet  items  as
         calculated under regulatory  accounting  practices.  The Bank's capital
         amounts and classification  are also subject to qualitative  judgements
         by the regulators about components, risk-weightings and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
         adequacy  require the Corporation to maintain minimum amounts of ratios
         of  Total  and  Tier 1  capital  (as  defined  in the  regulations)  to
         risk-weighted  assets  (as  defined),  and Tier 1 capital to assets (as
         defined).

         The  following  table  provides a comparison  of the Bank's  risk-based
capital position to regulatory capital requirements:
<TABLE>
<CAPTION>

                                                                                                          To Be Well
                                                                                   For Capital        Capitalized Under
                                                                                    Adequacy          Prompt Corrective
                                                              Actual                Purposes          Action Provisions
                                                      ----------------------------------------------------------------------
                                                         Amount    Ratio       Amount      Ratio      Amount     Ratio
                                                      ----------------------------------------------------------------------
                                                                             (Dollars In Thousands)

<S>                                                  <C>          <C>       <C>          <C>      <C>          <C>
         December 31, 2000:
              Total capital (to risk-weighted assets)  $    5,688   19.03 %   $    2,391    8.00 %  $    2,989    10.00 %
              Tier 1 capital (to risk-weighted assets)      5,540   18.54            N/A     N/A         1,793     6.00
              Core (Tier 1) capital (to adjusted
                  total assets)                             5,540    9.27          2,391    4.00         2,988     5.00
              Tangible equity (to adjusted total
                  assets)                                   5,540    9.27            897    1.50           N/A      N/A

         December 31, 1999:
              Total capital (to risk-weighted assets)  $    5,798   23.59 %   $    1,966    8.00 %  $    2,457    10.00 %
              Tier 1 capital (to risk-weighted assets)      5,630   22.91            N/A     N/A         1,474     6.00
              Core (Tier 1) capital (to adjusted
                  total assets)                             5,630   10.59          2,127    4.00         2,658     5.00
              Tangible equity (to adjusted total
                  assets)                                   5,630   10.59            797    1.50           N/A     N/A
</TABLE>

         As of December 31, 2000, the Bank was  categorized as well  capitalized
         under the regulatory  framework for prompt  corrective  action based on
         the most recent  examination  by the OTS.  There are no  conditions  or
         events which have occurred since notification that management  believes
         have changed the institution's category.

                                      F-21

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




12
--------------------------------------------------------------------------------
PENSION AND RETIREMENT SAVINGS PLANS

         The Corporation has a qualified, noncontributory, fully insured defined
         benefit  pension plan which covers  substantially  all  employees.  The
         benefits are primarily based on years of service and earnings. The plan
         is fully insured through a contract with a life insurance  company and,
         as  such,  the  benefits  of the  plan  are  covered  by the  insurance
         contract.   As  a  result,   disclosure  of  the  accumulated   benefit
         obligations,  plan assets and the components of annual pension  expense
         required  by  Statement  of  Financial  Accounting  Standards  No.  87,
         "Employers' Accounting for Pensions," is not applicable.

         The  Corporation  makes  annual  premium  payments  for plan years that
         coincide with the  Corporation's  fiscal year. The  Corporation  has no
         obligation  for benefits  covered by the plan other than the payment of
         premiums to the insurance company.  Pension expense of the Corporation,
         net of  experienced-rated  dividends,  for the years ended December 31,
         2000 and 1999 was $ 51,204 and $ 62,931, respectively.

         The Corporation is a participant in the Financial  Institution's Thrift
         Plan.   The  plan  covers   substantially   all  employees  and  is  in
         participation with other  institutions.  The Plan is a qualified 401(k)
         salary deduction plan that permits participants to contribute up to 15%
         of their salary to the plan.  Additionally,  the  Corporation  provides
         matching contributions up to 6% of the participants'  salaries. For the
         years ended December 31, 2000 and 1999, the Corporation's contributions
         totaled $ 19,642 and $ 18,487, respectively.

         The Bank has entered into the Director  Supplemental  Retirement Plan -
         Defined  Contribution.  This  plan is  designed  to  provide  an annual
         retirement  benefit,  to be paid to each director upon  retirement from
         the  Board,  and  a  death  benefit,  to  be  paid  to  the  director's
         beneficiary  upon his or her  death.  To fund the  benefits  under this
         plan, the Bank is the owner and beneficiary of life insurance  policies
         on the directors.  The policies are actuarially  designed to offset the
         annual  expenses  associated with the plan and will,  given  reasonable
         actuarial  assumptions,  offset all of the plan's costs during the life
         of the participant and provide a complete recovery of all plan costs at
         his or her death.  The aggregate cash surrender  value  associated with
         all policies was $ 1,033,000 at December 31, 2000.


13
--------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

         The   Corporation   is  a   party   to   financial   instruments   with
         off-balance-sheet  risk in the normal  course of  business  to meet the
         financial needs of its customers.  These financial  instruments consist
         of commitments to extend credit.  These instruments involve, to varying
         degrees,  elements of credit risk in excess of the amount recognized in
         the statement of financial  position.  The contract or notional amounts
         of those instruments  reflect the extent of involvement the Corporation
         has in particular classes of financial instruments.

                                      F-22

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





13
--------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)

         The   Corporation's   exposure   to   credit   loss  in  the  event  of
         non-performance  by the other  party to the  financial  instrument  for
         commitments to extend credit is represented by the contractual notional
         amount  of those  instruments.  The  Corporation  uses the same  credit
         policies  in  making  commitments  as  it  does  for   on-balance-sheet
         instruments.

         Commitments  to extend  credit are  agreements to lend to a customer as
         long as there  is no  violation  of any  condition  established  in the
         contract.  Commitments  generally have fixed  expiration dates or other
         termination   clauses.   The  Corporation   evaluates  each  customer's
         credit-worthiness  on a  case-by-case  basis.  The amount of collateral
         obtained  upon  extension  of  credit is based on  management's  credit
         evaluation of the counter party.

         The Corporation has outstanding loan commitments that are not reflected
         in the accompanying consolidated financial statements at December 31 as
         follows:

                                                 2000              1999
                                          -------------------------------------

              Unfunded loan commitments    $       477,000   $      1,817,000
              Unfunded lines of credit             344,000            298,000
                                          -------------------------------------

                                           $       821,000   $      2,115,000
                                          =====================================


14
--------------------------------------------------------------------------------
FAIR VALUES OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, "Disclosures About
         Fair Value of Financial Instruments," requires disclosure of fair value
         information about financial  instruments,  whether or not recognized in
         the  balance  sheet.  In  cases  where  quoted  market  prices  are not
         available,  fair values are based on estimates  using  present value or
         other valuation techniques. Those techniques are significantly affected
         by the assumptions  used,  including the discount rate and estimates of
         future cash flows.  In that regard,  the derived  fair value  estimates
         cannot be  substantiated  by comparison to independent  markets and, in
         many  cases,  could not be  realized  in  immediate  settlement  of the
         instruments.  Statement No. 107 excludes certain financial  instruments
         and all  non-financial  instruments  from its disclosure  requirements.
         Accordingly,   the  aggregate  fair  value  amounts  presented  do  not
         represent the underlying value of the Corporation.



                                      F-23

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




14
--------------------------------------------------------------------------------
FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

         The following  methods and assumptions  were used by the Corporation in
         estimating its fair value disclosures for financial instruments:

              Cash and cash equivalents:
                  The carrying  amounts  reported in the balance sheets for cash
                  and cash equivalents approximate their fair value.

              Investment securities (including mortgage-backed securities):
                  Fair  values  for  investment  securities  are based on quoted
                  market prices,  where  available.  If quoted market prices are
                  not  available,  fair values are based on quoted market prices
                  of comparable instruments.

              Loans:
                  For  variable-rate  loans that  reprice  frequently  and which
                  entail no significant  changes in credit risk, fair values are
                  based on carrying  values.  The fair values of other loans are
                  estimated  using  discounted  cash  flow  analysis,  based  on
                  interest rates  currently being offered for loans with similar
                  terms to borrowers of similar credit quality.

              Federal Home Loan Bank stock:
                  No ready  market  exists  for this  stock  that is held by the
                  Corporation  as required by law.  However,  redemption of this
                  stock has  historically  been at par value.  Accordingly,  the
                  carrying amount is deemed to be a reasonable  estimate of fair
                  value.

              Accrued interest receivable:
                  The carrying  amount of  accrued  interest  approximates   its
                  fair value.

              Deposits:
                  Fair values for demand deposits,  savings accounts and certain
                  money market deposits are, by definition,  equal to the amount
                  payable on demand at the reporting date (i.e.,  their carrying
                  amounts).  Fair values of fixed-rate  certificates  of deposit
                  are estimated  using a discounted cash flow  calculation  that
                  applies interest rates currently being offered on certificates
                  to a schedule  of  aggregated  expected  monthly  maturity  of
                  deposits.  The carrying amounts for variable rate certificates
                  of deposit approximate their fair values.

              Advances from Federal Home Loan Bank:
                  The  carrying  amounts of advances  from the Federal Home Loan
                  Bank are estimated using discounted cash flow analysis,  based
                  on  interest  rates  currently  being  offered  for loans with
                  similar terms.

              Accrued interest payable:
                  The  carrying  amount of  accrued  interest  approximates  its
                  fair value.

                                      F-24

<PAGE>



STEELTON BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




14
--------------------------------------------------------------------------------
FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

              Unfunded lending commitments:
                  Fair values for unfunded lending commitments are based on fees
                  currently  charged to enter into  similar  agreements,  taking
                  into account the  remaining  terms of the  agreements  and the
                  counterparties' credit standings.

         The carrying  amounts and  estimated  fair values of the  Corporation's
         financial instruments at December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                   2000                                 1999
                                                  --------------------------------------------------------------------------
                                                          Carrying            Fair             Carrying            Fair
                                                           Amount             Value             Amount             Value
                                                  --------------------------------------------------------------------------

<S>                                             <C>                <C>               <C>                <C>
              Financial assets:
                   Cash and due from banks         $        278,524  $        278,524  $       1,617,768  $      1,617,768
                   Interest bearing deposits              1,140,038         1,140,038          1,670,023         1,670,023
                   Investments:
                       Available for sale                10,007,980        10,007,980         10,252,585        10,252,585
                       Held to maturity                   5,380,735         5,341,664          5,756,786         5,459,556
                   Loans receivable, net                 39,769,076        39,084,421         32,027,255        31,485,994
                   Federal Home Loan Bank
                       stock                              1,030,700         1,030,700            691,800           691,800
                   Accrued interest receivable              400,989           400,989            322,219           322,219

              Financial liabilities:
                   Deposits                              34,133,250        34,593,348         33,266,127        32,999,998
                   Advances from Federal
                       Home Loan Bank                    19,398,854        19,358,251         13,334,745        13,176,062
                   Accrued interest payable                 142,546           142,546            140,473           140,473

              Off balance sheet financial
                   instruments, unfunded
                   lending commitments                            -                 -                  -                 -

</TABLE>

                                      F-25
<PAGE>


CORPORATE INFORMATION

                             STEELTON BANCORP, INC.
                              51 South Front Street
                          Steelton, Pennsylvania 17113
                                 (717) 939-1966
<TABLE>
<CAPTION>
<S>                                       <C>
                             MECHANICS SAVINGS BANK


               Main Office                             Middletown Office
          51 South Front Street                    1100 Spring Garden Drive
      Steelton, Pennsylvania, 17113             Middletown, Pennsylvania, 17057


                               Board of Directors

                                 Marino Falcone
                             Chairman of the Board
                    Retired - Steelton Coal and Oil Company

         Harold E. Stremmel                       Richard E. Farina
President and Chief Executive Officer   Retired - Pennsylvania Insurance Company

           James F. Stone                         Joseph A. Wiedeman
    Retired - Stone Funeral Home             CPA - Wiedeman & Douty, P.C.

          James S. Nelson                          Victor J. Segina
       Executive Vice President                   Retired - Architect

                               Executive Officers

                               Harold E. Stremmel
                      President and Chief Executive Officer

Victor J Segina, Secretary                    Joseph A. Wiedeman, Treasurer

James S. Nelson, Executive Vice President     Shannon Aylesworth, Chief Financial Officer



Local Counsel                                 Independent Auditor
Skarlatos and Zonarich                        Beard Miller Company LLP
204 State Street                              320 East Market Street
Harrisburg, Pennsylvania 17101                Harrisburg, Pennsylvania 17108

Special Counsel                               Transfer Agent and Registrar
Malizia Spidi & Fisch, PC                     Illinois Stock Transfer Company
1100 New York Avenue, N.W.                    209 West Jackson Blvd., Suite 903
Suite 340 West                                Chicago, Illinois 60607
Washington, D.C. 20005
</TABLE>

         The  Corporation's  Annual  Report on Form  10-KSB for the fiscal  year
ended December 31 , 2000 is available without charge upon written request. For a
copy of the Form 10-KSB,  please  write or call Mr.  James S. Nelson,  Executive
Vice President at the Corporation's  Office.  The Annual Meeting of Stockholders
will be held on April 18, 2001 at 10:00 a.m. at Mechanics Savings Bank, 51 South
Front Street, Steelton, Pennsylvania 17113.