ADVANCE FINANCIAL BANCORP

Corporate Profile

     Advance  Financial  Bancorp  (the  "Company")  is  a  Delaware  corporation
organized in September 1996 at the direction of Advance  Financial  Savings Bank
(the  "Bank") to acquire  all of the  capital  stock that the Bank issued in its
conversion  from a mutual to a stock form of ownership  (the  "Conversion").  On
December 31, 1996,  the Bank  completed the Conversion and became a wholly owned
subsidiary  of the  Company.  The Company 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.  The  Company
conducts no significant business or operations of its own other than holding all
the outstanding stock of the Bank and investing the Company's portion of the net
proceeds obtained in the Conversion.

     The Bank chartered in 1935 under the name Advance  Federal Savings and Loan
Association  of West  Virginia,  is a federally  chartered  stock  savings  bank
headquartered  in Wellsburg,  West Virginia.  The Bank is subject to examination
and  comprehensive  regulation  by the  Office  of  Thrift  Supervision  and its
deposits are federally  insured by the Savings  Association  Insurance Fund. The
Bank is a member of and owns stock in the  Federal  Home Loan Bank  ("FHLB")  of
Pittsburgh, which is one of the 12 regional banks in the FHLB System.

     The Bank operates a traditional  savings bank business,  attracting deposit
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,  non-residential  real estate,  commercial  loans and
consumer  automobile  loans.  To a  lesser  extent,  the  Bank  also  originates
multi-family real estate loans and other consumer loans.

Stock Market Information

     The Company's  common stock has been traded on the NASDAQ  SmallCap  Market
under the trading  symbol of "AFBC" since it commenced  trading in January 1997.
The following table reflects high and low bid quotations as published by NASDAQ.
The quotations reflect inter-dealer prices,  without retail mark-up,  mark-down,
or commission, and may not represent actual transactions.

                                                                    Dividends
                                                                    ---------
         Date                           High ($)    Low ($)         Declared ($)
         ----                           --------    -------         ------------

July 1, 2000 to September 30, 2000        11.44      9.75              .10
October 1, 2000 to December 31, 2000      12.13      9.13              .10
January 1, 2001 to March 31, 2001         11.25     10.25              .10
April 1, 2001 to June 30, 2001            13.25     10.71              .10
July 1, 2001 to September 30, 2001        14.00     11.80              .10
October 1, 2001 to December 31, 2001      13.95     12.80              .12
January 1, 2002 to March 31, 2002         16.60     13.50              .12
April 1, 2002 to June 30, 2002            18.00     15.96              .12


     The number of  stockholders of record of common stock as of the record date
of September 3, 2002, was approximately 427. This does not reflect the number of
persons or entities who held stock in nominee or "street"  name through  various
brokerage  firms. At September 3, 2002,  there were 932,285 shares  outstanding.
The Company's  ability to pay dividends to  stockholders  is 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 capital requirements imposed by the OTS.

Selected Financial Ratios and Other Data

                                                       For  the Years Ended
                                                             June 30
                                                    --------------------------
                                                     2002 %            2001 %
                                                    --------------------------
Return on average assets
     (net income divided by average total assets)       .86               .62
Return on average equity
     (net income divided by average equity)            9.69              6.16
Average equity to average assets ratio
     (average equity divided by average assets)        8.85             10.06
Equity to assets at period end                         8.50              9.76
Net interest spread                                    3.07              2.95
Dividend payout ratio                                 21.68             35.50
Net yield on average interest-earning assets           3.45              3.46
Non-performing loans to total assets                    .94               .72
Non-performing loans to total loans                    1.17               .92
Allowance for loan losses to non-performing assets    36.23             49.60


6
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

     The Private  Securities  Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words  "believes",  "anticipates",  "contemplates",  "expects",  and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest  rates,  risks  associated with the ability to control costs
and expenses, and general economic conditions.

     The Company conducts no significant business or operations of its own other
than holding all of the outstanding  stock of the Advance Financial Savings Bank
(the "Bank"). As a result, references to the Company generally refer to the Bank
unless the context indicates otherwise.

OVERVIEW

Effective  March 8, 2002,  the Company was granted  permission to establish a de
novo  branch  at  125  Dunbar  Avenue  in  the  Hollywood   Shopping   Plaza  in
Steubenville, Ohio. The Company anticipates the completion of the de novo branch
in the first  quarter  of the 2003  fiscal  year.  The  anticipated  cost of the
facility  including  the  building,  equipment  and  furniture is expected to be
approximately  $800,000,  which will primarily be capitalized.  The Company will
use excess cash  liquidity to pay all costs  associated  with  constructing  and
equipping the new branch facility.

On September 7, 2001,  the Company's  growth was bolstered by the  completion of
the  acquisition of Ohio State Financial  Services,  Inc ("OSFS") and its wholly
owned subsidiary  Bridgeport  Savings and Loan Association.  The acquisition was
accounted for under the purchase method of accounting in a cash transaction.  As
a result of the completion of the acquisition,  the Company paid $7.8 million to
the  shareholders  of OSFS.  The  transaction  was  funded  with a $3.8  million
short-term  FHLB  advance and $4 million  dollars from the  Company's  overnight
funds.  The FHLB  advance  was repaid  with  proceeds  from  matured  and called
investment  securities  and redeemed FHLB stock after the date of the merger and
prior to September 30, 2001. With the completion of the acquisition, the Company
added two additional branches located in Bridgeport and Shadyside, Ohio bringing
the total  branch  locations of the Company to five.  The results of  operations
from September 8, 2001 include the operations of OSFS.

On July 30, 2002 the President  signed into law the  Sarbanes-Oxley  Act of 2002
(the  Act),  following  an  investigative  order  proposed  by the SEC on  chief
financial officers and chief executive officers of 947 large public companies on
June 27, 2002. Additional regulations are expected to be promulgated by the SEC.
As a result  of the  accounting  restatements  by large  public  companies,  the
passage  of the Act and  regulations  expected  to be  implemented  by the  SEC,
publicly-registered   companies,  such  as  the  Company,  will  be  subject  to
additional and more cumbersome reporting  regulations and disclosure.  These new
regulations, which are intended to curtail corporate fraud, will require certain
officers to personally certify certain SEC filings and financial  statements and
will require additional  measures to be taken by our outside auditors,  officers
and directors.  The new laws and  regulations  could  increase our  non-interest
expenses.


Asset and Liability Management

     The  Company's  net  interest  income is  sensitive  to changes in interest
rates, as the rates paid on interest-bearing liabilities generally change faster
than the rates  earned on  interest-earning  assets.  As a result,  net interest
income will frequently  decline in periods of rising interest rates and increase
in periods of decreasing interest rates.

     To mitigate the impact of changing  interest rates on net interest  income,
the Company  manages  interest rate  sensitivity  and  asset/liability  products
through an asset/liability management committee (the "Committee"). The Committee
meets as necessary to  determine  the rates of interest for loans and  deposits.
Rates on deposits are primarily  based on the Company's  need for funds and on a
review of rates offered by other financial  institutions in the Company's market
area.  Interest rates on loans are primarily based on the interest rates offered
by other financial  institutions  in the Company's  market area, as well as, the
Company's cost of funds.

     The Committee manages the imbalance between its interest-earning assets and
interest-bearing   liabilities  through  the  determination  and  adjustment  of
asset/liability  composition and pricing strategies. The Committee then monitors
the  impact  of the  interest  rate  risk  and  earnings  consequences  of  such
strategies  for  consistency  with the  Company's  liquidity  needs,  growth and
capital adequacy.  The Committee's  principal strategy is to reduce the interest
rate sensitivity of interest-earning  assets and attempt to match the maturities
of interest-earning assets with interest-bearing liabilities, while allowing for
a mismatch in an attempt to increase net interest income.

                                                                               7
<PAGE>

     In an effort to reduce  interest  rate  risk and  protect  itself  from the
negative  effects of rapid or prolonged  changes in interest rates,  the Company
has also instituted certain asset and liability management  measures,  including
underwriting  long-term  fixed  rate loans that are  saleable  in the  secondary
market,  offering  longer  term  deposit  products  and  diversifying  the  loan
portfolio into shorter term consumer and commercial business loans. In addition,
the  Company  originates  one year,  three-year  and five year  adjustable  rate
mortgage loans.

Net Portfolio Value

     The Company  computes  amounts by which the net present  value of cash flow
assets,  liabilities  and off balance  sheet items  ("NPV")  would change in the
event of a range of assumed changes in market interest rates.  The  computations
estimate the effect on the Company's NPV from  instantaneous and permanent 1% to
3% (100 to 300 basis points) increases or decreases in market interest rates.

Based upon the Office of Thrift  Supervision  assumptions,  the following  table
presents the Company's NPV at June 30, 2002.


   Changes in rates              NPV Ratio (1)              Change(2)
   ----------------              -------------              ---------
       +300 bp                       8.12 %                  (249) bp
       +200 bp                       9.37                    (125) bp
       +100 bp                      10.20                    ( 42) bp
          0 bp                      10.62
       -100 bp                      10.42                     (20) bp
       -200 bp                       9.82                    ( 80) bp
       -300 bp                       9.18                    (143) bp

(1)  Calculated as the estimated NPV divided by present value of total assets.
(2)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.

       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.  Certain  shortcomings  are inherent in
  such  computations.  Although  certain assets and liabilities may have similar
  maturity  or periods of  repricing  they may react at  different  times and in
  different  degrees to changes in market interest rates.  The interest rates on
  certain types of assets and liabilities may fluctuate in advance of changes in
  market  interest  rates,  while rates on other types of assets and liabilities
  may lag behind  changes in market  interest  rates.  Certain  assets,  such as
  adjustable rate mortgages,  generally have features, which restrict changes in
  interest  rates on a short-term  basis and over the life of the asset.  In the
  event of a change in interest rates,  prepayments and early withdrawal  levels
  could  deviate  significantly  from those assumed in making  calculations  set
  forth above. Additionally,  an increased credit risk may result as the ability
  of many  borrowers  to  service  their  debt may  decrease  in the event of an
  interest rate increase.

8
<PAGE>

Average Balance Sheet

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end  balances instead of daily
average  balances  has  caused  any  material  differences  in  the  information
presented.


<TABLE>
<CAPTION>
                                                               Year Ended June 30,                             Month Ended June 30,
                                     ---------------------------------------------------------------------   -----------------------
                                                   2002                               2001                            2002
                                     ----------------------------------  ---------------------------------   -----------------------
                                        Average               Average      Average               Average       Average     Average
                                        Balance  Interest    Yield/Cost    Balance  Interest    Yield/Cost     Balance    Yield/Cost
                                     ----------- --------   -----------  ---------- --------   -----------   ----------   ----------
Interest-earning assets:
<S>                                   <C>       <C>         <C>          <C>       <C>        <C>            <C>         <C>
  Loans receivable (1)                 $157,557  $12,209         7.75%    $124,726  $10,611         8.51%     $170,805         7.32%
  Investment securities (2)              20,165      832         4.12%      18,060    1,114         6.17%       24,384         3.41%
  Mortgage-backed securities              9,490      582         6.14%       6,595      439         6.66%        9,280         5.79%
                                     ----------- --------   -----------  ---------- --------   -----------   ----------   ----------
     Total interest-earning assets      187,212   13,623         7.28%     149,381   12,164         8.15%      204,469         6.79%
                                                 --------   -----------             --------   -----------                ----------
Non-interest-earning assets               7,789                              7,094                               8,256
                                     -----------                         ----------                          ----------
     Total assets                      $195,001                           $156,475                            $212,725
                                     ===========                         ==========                          ==========

Interest-bearing liabilities:
  Interest-bearing demand deposits      $25,010      608         2.43%     $19,534     $637         3.26%      $29,364         2.43%
  Certificates of deposit                95,157    4,577         4.81%      81,172    4,874         6.00%      100,600         4.03%
  Savings deposits                       29,966      812         2.71%      17,499      488         2.79%       36,098         2.73%
  FHLB borrowings                        20,000    1,164         5.82%      16,563    1,003         6.06%       20,000         5.73%
                                     ----------- --------   -----------  ---------- --------   -----------   ----------   ----------
     Total interest-bearing
       liabilities                      170,133    7,161         4.21%     134,768    7,002         5.20%      186,062         3.71%
                                                 --------   -----------             --------   -----------                ----------
Non-interest bearing liabilities          7,608                              5,960                               8,575
                                     -----------                         ----------                          ----------
     Total liabilities                  177,741                            140,728                             194,637
Stockholders' equity                     17,260                             15,747                              18,088
                                     -----------                         ----------                          ----------
     Total liabilities and
       stockholders' equity            $195,001                           $156,475                            $212,725
                                     ===========                         ==========                          ==========

Net interest income                              $ 6,462                            $ 5,162
                                                 ========                           ========
Interest rate spread (3)                                         3.07%                              2.95%                      3.08%
                                                            ===========
                                                                                               ===========                ==========
Net Yield on interest-
  earning assets (4)                                             3.45%                              3.46%                      3.42%
                                                            ===========                        ===========                ==========
Ratio of average interest-
  earning assets  to
  average interest-
  bearing liabilities                                          110.04%                            110.84%                    109.89%
                                                            ===========                        ===========                ==========

</TABLE>

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

9
<PAGE>

Rate/Volume Analysis

The table below sets forth  certain  information  regarding  changes in interest
income and interest expense of the Company 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 old rate) and (ii ) changes in rate
(changes in rate  multiplied  by old  average  volume).  Changes,  which are not
solely  attributable to rate or volume,  are allocated to changes in rate due to
rate sensitivity of interest-earning assets and interest-bearing liabilities.

                                                  Year Ended June 30,
                                        ----------------------------------------
                                                     2002 vs 2001
                                        ----------------------------------------
                                                  Increase (Decrease)
                                                        Due to
                                        ----------------------------------------
                                         Volume              Rate           Net
                                        ----------------------------------------
                                                (Dollars in Thousands)
Interest Income:
  Loans receivable                      $ 2,748           $(1,151)        $1,597
  Investment securities                     122              (404)         (282)
  Mortgage-backed securities                189               (46)           143
                                        ----------------------------------------
     Total interest-earning assets        3,059            (1,601)         1,458
                                        ----------------------------------------

Interest Expense:
  Interest-bearing demand
   deposits                                 176              (205)          (29)
  Certificates of Deposit                   839            (1,136)         (297)
  Savings Deposits                          349               (25)           324
  FHLB borrowings                           207               (46)           161
                                        ----------------------------------------
     Total interest-bearing liabilities   1,571            (1,412)           159
                                        ----------------------------------------

Net change in interest income            $1,488             $(189)        $1,299
                                        ========================================


Comparison of Financial Condition

     The Company's total assets increased approximately $46,818,000,  or 27.95%,
to $214,305,000  at June 30, 2002, from  $167,487,000 at June 30, 2001 primarily
as a result of the acquisition of OSFS which increased assets  $24,935,000.  The
Company's total liabilities increased approximately  $44,937,000,  or 29.73%, to
$196,082,000 at June 30, 2002, from  $151,144,000 at June 30, 2001. The increase
in liabilities is primarily comprised of an increase in deposits of $44,560,000.
The  increase in deposits is  primarily in core  accounts  which have  increased
$28,052,000 of which $12,630,000 was acquired in the OSFS merger.  The remaining
deposit  increase  of  $16,508,000  is  comprised  of  time  deposits  in  which
$11,630,000 was acquired in the OSFS merger

     Total cash and cash  equivalents  increased by $3,217,000 to $11,770,000 at
June 30, 2002 from $8,553,000 at June 30, 2001. This increase is due principally
to the called, matured and repaid investments that have not yet been reinvested.
This  additional  liquidity  enables  the  Company's  management  to help manage
interest  rate risk in the  current  interest  rate  environment  by being  less
dependent  on  outside  funding  to  meet  future  loan  demand  and  investment
opportunities.

     Investment  securities,  including  mortgage-backed  securities,  increased
$311,000 to $22,187,000 at June 30, 2002 from  $21,876,000 at June 30, 2001. The
acquisition of OSFS contributed  $3,265,000 to the investment  portfolio and the
change in market value of available for sale  securities  increased  $281,000 to
$375,000  at June  30,  2002  from  $94,000  at June 30,  2001.  Net of the OSFS
contribution  and the change in market value of available  for sale  securities,
investment  securities  decreased  $3,200,000.  This  decrease  is the result of
Company  choosing  not to  reinvest  proceeds  from  called,  matured and repaid
investment securities due to the current low-yielding interest rate environment.
The funds are currently in the Company's  overnight  deposit account invested at
the  current  federal  funds rate as part of the  Company's  interest  rate risk
management  strategy and as a hedge for more  profitable  investment in bonds or
loans as the future interest rate environment dictates.

10
<PAGE>

     Net loans receivable increased $42,550,000 to $172,146,000 at June 30, 2002
from  $129,596,000  at June  30,  2001.  The  acquisition  of  OSFS  contributed
$26,763,000 to loans receivable, net, consisting primarily of $24,025,000 in 1-4
family mortgages,  $1,275,000 in 1-4 family  construction  loans and $700,000 in
automobile loans. Net of the OSFS contribution,  the increase in net loans as of
June 30, 2002  totaled  $15,787,000.  Of such  increases,  loans  secured by 1-4
family residences increased $1,667,000 due primarily to the Company's additional
market area created as part of the merger and due to the  Company's  popular ARM
products.  Non-residential  real estate loans and commercial  loans increased by
$8,190,000  and  $2,173,000,  respectively,  due to the  strong  demand  for the
Company's competitively priced ARM products,  demand from existing customers and
demand from our  expanded  customer  base  developed as part of the OSFS merger.
Automobile  loans increased  $4,176,000 of which  $2,940,000 were "dealer loans"
written by automobile  dealership  customers of the Company. The funding for the
loan growth was provided primarily by an increase in deposits.

     Deposits  increased by  $44,560,000 to  $175,059,000  at June 30, 2002 from
$130,499,000 at June 30, 2001. The acquisition of OSFS contributed approximately
$24,349,000 to deposits, consisting primarily of $12,630,000 in core savings and
NOW  accounts  and  $11,719,000  in  certificates  of  deposit.  Net of the OSFS
contribution,  deposits increased $20,211,000 as a result of operations. Of such
increase,  core  savings,  demand  products,  and  certificates  of deposit have
increased $7,738,000, $7,684,000, and $4,788,000,  respectively. The increase in
core deposit products is reflective of customer  preferences  toward  short-term
liquid  insured  deposits due to the current low interest rate  environment  and
other significant  events over the past fiscal year ended June 30, 2002. For the
year ended June 30, 2002, the weighted  average cost of deposit funds  decreased
108  basis  points  to 3.99%  from  5.07%  for the  year  ended  June 30,  2001.
Management of the Company believes that the current trend of customer preference
for  short-term  liquid  deposits is  temporary  in nature and will shift as the
economy and  treasury  yield curve  improves for higher  returns on  alternative
investments.

     Stockholders  equity  increased  $1,881,000 to $18,224,000 at June 30, 2002
from  $16,343,000 at June 30, 2001. The increase was the result of net income of
$1,874,000  for the year ended,  of which $201,000  relates to an  extraordinary
gain as a result of the merger with OSFS, as well as, the  recognition of shares
in the Employee Stock Ownership Plan and the Restricted  Stock Plan of $228,000,
and an increase in the net unrealized  gain on securities  available for sale of
$185,000.  These  increases  were  offset by the  payment of cash  dividends  of
$406,000.

Comparison  of the Results of  Operations  for the Years Ended June 30, 2002 and
2001

      Net  Income.  For the  year  ended  June  30,  2002,  net  income  totaled
$1,874,000  compared to $970,000 for the same 2001  period.  The increase in net
income for the current  year is  primarily  the result of the OSFS  acquisition.
Additionally,  the increase in net income also reflects a $201,000 extraordinary
gain from the acquisition of OSFS. This  non-recurring  gain was due to the fact
that the  Company  purchased  the net assets of OSFS at a discount of their fair
market value. See "Note 3 - Extraordinary  item" in the  Consolidated  Financial
Statements.

     Net  Interest   Income.   The  Company's  net  interest  income   increased
$1,300,000,  or 25.18%,  to  $6,462,000  for the year  ended June 30,  2002 from
$5,162,000 for the same period ended 2001.  The increase in net interest  income
resulted  primarily  from an increase in the  average  volume of the  underlying
principle balances in interest earning assets and liabilities.  The net interest
spread  increased to 3.07% for the period ended June 30, 2002 from 2.95% for the
same period ended 2001. The average yield on interest  earning assets  decreased
87 basis points to 7.28% at June 30, 2002 from 8.15% for the  comparable  period
ended 2001. The average cost of funds decreased 99 basis points to 4.21% for the
year ended June 30, 2002 from 5.20% for the  comparable  period ended 2001.  See
Average Balance Sheet Table included herein for additional detail.

     Interest and Dividend Income.  Total interest and dividend income increased
$1,459,000,  or 11.99%,  to  $13,623,000  for the year ended June 30,  2002 from
$12,164,000 for the comparable 2001 period. The increase was primarily due to an
increase in earnings on loans of  $1,597,000  as the average  principle  balance
increased $32,831,000 to $157,557,000 at June 30, 2002 from $124,726,000 for the
comparable   2001  period.   Interest  and  dividend   income  on   investments,
mortgaged-backed  securities, and interest bearing deposits with other financial
institutions  decreased  approximately  $138,000  as a result of average  yields
decreasing  153 basis points.  However,  average  principle  balances  increased
$5,000,000 to $29,655,000 at June 30, 2002 from  $24,655,000  for the comparable
2001 period.  See Average  Balance Sheet Table  included  herein for  additional
detail.

     Interest  Expense.  Total interest expense  increased  $159,000 or 2.27% to
$7,161,000  for the year ended June 30, 2002 compared to $7,002,000 for the same
period ended 2001.  The increase  was  primarily  due to an increase in interest
paid on Advances  from the FHLB of $161,000  as the  average  principle  balance
increased  $3,437,000 to $20,000,000 at June 30, 2002 from  $16,563,000  for the
comparable 2001 period.  This increase was offset by a decrease in interest paid
on deposits of $2,000 as the average balance of deposits  increased  $31,927,000
to  $150,133,000  at June 30, 2002 from  $118,206,000  for the  comparable  2001
period. See Average Balance Sheet included herein for additional detail.

     Provision for Loan Losses.  For the year ended June 30, 2002, the provision
for loan losses was  $245,000 as compared to $191,000  for the  comparable  2001
period.  The increase in the  provision  for loan losses for the year ended June
30, 2002 was precipitated by higher net charge-offs.  In the year ended June 30,
2002, net charge-offs increased  approximately $131,000 to $225,000 from $94,000
for the comparable 2001 period.  Such net charge-offs were primarily  related to
consumer and commercial loans.

                                                                              11
<PAGE>

     In  determining  the adequacy of the allowance for loan losses,  management
reviews  and  evaluates  on a  quarterly  basis the  potential  risk in the loan
portfolio.  This evaluation  process is documented by management and approved by
the Company's Board of Directors.  The evaluation is performed by senior members
of management with years of lending and review experience.  Management evaluates
homogenous consumer-oriented loans, such as 1-4 family mortgage loans and retail
consumer  loans,  based  upon  all  or  a  combination  of  delinquencies,  loan
concentrations and charge-off  experience.  Management supplements this analysis
by reviewing the local economy,  political  trends  effecting local industry and
business  development  and other known  factors  which may impact  future credit
losses.  Nonhomogenous loans,  generally defined as commercial business and real
estate loans,  are selected by  management  to be reviewed on a quarterly  bases
upon the combination of  delinquencies,  concentrations  and other known factors
that  may  effect  the  local  economy  and  more  specifically  the  individual
businesses. During this evaluation, the individual loans are evaluated quarterly
by senior members of management for impairment as prescribed under SFAS No. 114,
"Accounting  by  Creditors  for  Impairment  of a loan".  Impairment  losses are
assumed when,  based upon current  information,  it is probable that the Company
will be unable to collect all amounts due according to the contractual  terms of
the loan agreement.  Impairment is measured by a loan's observable market value,
fair  value  of the  collateral  or the  present  value  of  future  cash  flows
discounted at the loan's  effective  interest  rate.  This data on impairment is
combined  with the  other  data  used for  homogenous  loans  and is used by the
classified asset committee in determining the adequacy of the allowance for loan
losses.

     The  allowance  for loan losses is  maintained  at a level that  represents
management's best estimates of losses in the loan portfolio at the balance sheet
date. However, there can be no assurance that the allowance for loan losses will
be  adequate  to cover  losses  which may be  realized  in the  future  and that
additional provision for loan losses will not be required.

     Noninterest Income.  Noninterest income increased  $433,000,  or 51.87%, to
$1,268,000  for the year ended June 30, 2002  compared to $835,000  for the same
period  ended 2001.  For the year ended June 30,  2002,  gains on sales of fixed
rate  mortgages and income from mortgage loan servicing  increased  $150,000 and
$193,000,  respectively  due to the current fixed rate mortgage loan environment
in comparison  to the period ended 2001.  The gains on the sale of loans and the
income  from  servicing  sold loans for the year ended  June 30,  2002,  are not
necessary  indicative of anticipated trends for future periods.  Fees on deposit
accounts,  Consumer Card income and ATM fee income increased by $52,000, $15,000
and  $21,000,  respectively  due to an  increase in core  customers  and related
consumer activity

     Noninterest Expense.  Noninterest expense increased $717,000, or 16.82%, to
$4,980,000 for the year ended June 30, 2002 from  $4,263,000 for the same period
ended 2001.  Compensation and benefits  increased  $293,000 for the period ended
June 30, 2002 primarily as the result of the hiring of thirteen (13)  additional
employees  to operate  the two  branches  created by the merger with OSFS and an
additional cost of living increase for other full time employees.  Occupancy and
equipment,  professional  fees,  marketing  and data  processing  expenses  have
increased  by $185,000  primarily  due to the  operation of the two new branches
created by the merger with OSFS. Other expenses have increased  $239,000 for the
year ended June 30, 2002 also as a result of the OSFS acquisition.


     Liquidity and Capital Resources. The Company's primary sources of funds are
deposits,  repayment  of loans and  mortgage-backed  securities,  maturities  of
investments and  interest-bearing  deposits,  funds provided from operations and
advances from the FHLB of  Pittsburgh.  The Company's  borrowing  limit with the
FHLB is approximately $100 million with $20 million currently outstanding. While
scheduled  repayments of loans and mortgage-backed  securities and maturities of
investment  securities are predicable  sources of funds,  deposit flows and loan
prepayments  are  greatly  influenced  by the general  level of interest  rates,
economic conditions,  and competition.  The Company uses its resources primarily
to fund existing and future loan commitments,  maturing  certificates of deposit
and demand  deposit  withdraws,  investments in other  interest-bearing  assets,
maintenance of necessary liquidity, and to meet operating expenses.

     Net cash  provided by  operating  activities  increased  to  $1,688,000  to
$2,513,000  for the year ended June 30, 2002  compared to $825,000  for the same
period  ended 2001.  This  increase was  primarily  the result of an increase in
fixed rate mortgage loans sold of $494,000 and net income of $904,000.

     Net cash used for  investing  activities  for the year ended June 30,  2002
decreased $5,389,000 to $13,301,000 from $18,690,000 for the year ended June 30,
2001. This decrease is primarily the result of a net decease in loans originated
due to the volume of fixed rate loans originated and sold to FHLMC.

     Net cash provided by financing  activities for the year ended June 30, 2002
decreased  $6,662,000 to $14,005,000  from $20,667,000 for the same period ended
2001.  The  decrease  was  primarily a result of a net  decrease in FHLB advance
activity  of  $9,500,000,  and net funds used to  purchase  the stock of OSFS of
$6,041,000. These decreases in financing funds were offset by an increase in net
deposits of $8,732,000 for the year ended June 30, 2002

     Liquidity  may  be  adversely  affected  by  unexpected  deposit  outflows,
excessive interest rates paid by competitors,  adverse publicity relating to the
savings and loan industry and similar  matters.  Management  monitors  projected
liquidity  needs  and  determines  the  level  desirable  based  in  part on the
Company's  commitments to make loans and  management's  assessment of the Bank's
ability to generate funds.

12
<PAGE>
SNODGRASS
Certified Public Accountants and Consultants
[LOGO]


                         Report of Independent Auditors


Board of Directors and Stockholders
Advance Financial Bancorp

We have audited the accompanying consolidated balance sheet of Advance Financial
Bancorp  and  subsidiary  as  of  June  30,  2002  and  2001,  and  the  related
consolidated statements of income,  stockholders' equity, and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

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




S.R. Snodgrass, A.C.

Steubenville, Ohio
July 31, 2002


                                                                              13
<PAGE>

                            ADVANCE FINANCIAL BANCORP
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                    June 30,
                                                                               2002             2001
                                                                          -------------    -------------
<S>                                                                     <C>              <C>
ASSETS Cash and cash equivalents:
     Cash and amounts due from banks                                      $   1,775,051    $   1,177,728
     Interest-bearing deposits with other institutions                        9,995,389        7,375,450
                                                                          -------------    -------------
              Total cash and cash equivalents                                11,770,440        8,553,178
                                                                          -------------    -------------

Investment securities:
     Securities held to maturity (fair value of $0
      and $742,057)                                                                  --          749,934
     Securities available for sale                                           12,999,362       11,147,919
                                                                          -------------    -------------
              Total investment securities                                    12,999,362       11,897,853
                                                                          -------------    -------------

Mortgage-backed securities:
     Securities held to maturity (fair value of $1,449,641
      and $1,601,960)                                                         1,396,306        1,595,349
     Securities available for sale                                            7,791,566        8,383,075
                                                                          -------------    -------------
              Total mortgage-backed securities                                9,187,872        9,978,424
                                                                          -------------    -------------

Loans held for sale                                                             578,647          439,949
Loans receivable (net of allowance for loan losses of
 $969,088 and $779,170)                                                     172,145,867      129,595,542
Premises and equipment, net                                                   3,901,592        3,828,367
Federal Home Loan Bank stock, at cost                                         1,058,100        1,075,000
Accrued interest receivable                                                   1,160,312        1,017,024
Other assets                                                                  1,502,749        1,101,725
                                                                          -------------    -------------

              TOTAL ASSETS                                                $ 214,304,941    $ 167,487,062
                                                                          =============    =============

LIABILITIES
Deposits                                                                  $ 175,058,743    $ 130,499,131
Advances from Federal Home Loan Bank                                         20,000,000       20,000,000
Advance payments by borrowers for taxes and insurance                           404,220          146,095
Accrued interest payable and other liabilities                                  618,232          499,119
                                                                          -------------    -------------
              TOTAL LIABILITIES                                             196,081,195      151,144,345
                                                                          -------------    -------------

STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value; authorized 500,000 shares; none issued              --               --
Common stock, $.10 par value, 2,000,000 shares authorized;
 1,084,450 shares issued at June 30, 2002 and 2001                              108,445          108,445
Additional paid in capital                                                   10,380,430       10,339,790
Retained earnings - substantially restricted                                 10,274,004        8,806,639
Unallocated shares held by Employee Stock Ownership Plan (ESOP)                (337,394)        (424,154)
Unallocated shares held by Restricted Stock Plan (RSP)                         (215,775)        (316,480)
Treasury stock (152,165 shares at cost)                                      (2,233,265)      (2,233,265)
Accumulated other comprehensive income                                          247,301           61,742
                                                                          -------------    -------------
              TOTAL STOCKHOLDERS' EQUITY                                     18,223,746       16,342,717
                                                                          -------------    -------------

              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 214,304,941    $ 167,487,062
                                                                          =============    =============
</TABLE>

See accompanying notes to the consolidated financial statements.


14
<PAGE>
                            ADVANCE FINANCIAL BANCORP
                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                            Year Ended June 30,
                                                                            2002           2001
                                                                        ------------    ------------
<S>                                                                   <C>             <C>
INTEREST AND DIVIDEND INCOME
     Loans                                                              $ 12,208,847    $ 10,611,680
     Investment securities                                                   628,145         743,324
     Interest-bearing deposits with other institutions                       144,990         304,312
     Mortgage-backed securities                                              582,365         438,865
     Federal Home Loan Bank stock                                             58,432          66,073
                                                                        ------------    ------------
              Total interest and dividend income                          13,622,779      12,164,254
                                                                        ------------    ------------

INTEREST EXPENSE
     Deposits                                                              5,996,723       5,998,943
     Advances from Federal Home Loan Bank                                  1,163,855       1,002,988
                                                                        ------------    ------------
              Total interest expense                                       7,160,578       7,001,931
                                                                        ------------    ------------

NET INTEREST INCOME                                                        6,462,201       5,162,323

Provision for loan losses                                                    245,430         191,400
                                                                        ------------    ------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                        6,216,771       4,970,923
                                                                        ------------    ------------

NONINTEREST INCOME
     Service charges on deposit accounts                                     532,301         479,912
     Income from loan servicing activity                                     204,426          54,593
     Gain on sale of loans                                                   260,050          67,497
     Gain on sale of investments                                                  --          18,670
     Gain on sale of fixed assets                                              6,270              --
     Loss on sale of other real estate owned                                 (28,124)        (31,251)
     Other income                                                            292,957         245,439
                                                                        ------------    ------------
              Total noninterest income                                     1,267,880         834,860
                                                                        ------------    ------------

NONINTEREST EXPENSE
     Compensation and employee benefits                                    2,336,380       2,043,805
     Occupancy and equipment                                                 862,705         766,472
     Professional fees                                                       125,434         111,834
     Advertising                                                             126,299         110,320
     Data processing                                                         302,433         243,387
     Other operating expenses                                              1,226,093         986,741
                                                                        ------------    ------------
              Total noninterest expense                                    4,979,344       4,262,559
                                                                        ------------    ------------

Income before income taxes                                                 2,505,307       1,543,224
Income taxes                                                                 832,991         573,359
                                                                        ------------    ------------

Income before extraordinary item                                           1,672,316         969,865
Extraordinary item- Excess over cost on net assets acquired in merger        201,206              --
                                                                        ------------    ------------

NET INCOME                                                              $  1,873,522    $    969,865
                                                                        ============    ============

EARNINGS PER SHARE - INCOME BEFORE EXTRAORDINARY ITEM
     Basic                                                              $       1.89    $       1.11
     Diluted                                                            $       1.89    $       1.11

EARNINGS PER SHARE - NET INCOME
     Basic                                                              $       2.12    $       1.11
     Diluted                                                            $       2.12    $       1.11
</TABLE>

See accompanying notes to the consolidated financial statements.


                                                                              15
<PAGE>
                            ADVANCE FINANCIAL BANCORP
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        Retained                                          Accumulated    Total
                                          Additional    Earnings    Unallocated  Unallocated                Other        Stock-
                                Common     Pain In    Substantially Shares Held  Shares Held   Treasury  Comprehensive   holders'
                                Stock      Capital     Restricted     by ESOP       By RSP      Stock    Income (Loss)   Equity
                               --------  -----------  -----------    ---------    ---------  -----------   ---------   -----------

<S>                           <C>       <C>          <C>            <C>          <C>        <C>           <C>         <C>
Balance, June 30, 2000         $108,445  $10,329,885  $ 8,181,053    $(510,915)   $(505,849) $(2,233,265)  $(301,080)  $15,068,274
Comprehensive income:
   Net income                                             969,865                                                          969,865
   Net unrealized gain on
    securities, net of tax
    of $186,908                                                                                              362,822       362,822
                                                                                                                         ---------
Comprehensive income                                                                                                     1,332,687
Accrued compensation expense
  for RSP                                                                           207,079                                207,079
RSP forfeited shares                                                                (17,710)                               (17,710)
Release of earned ESOP shares                  9,905                    86,761                                              96,666
Cash dividends declared
   ($.40 per share)                                      (344,279)                                                        (344,279)
                               --------  -----------  -----------    ---------    ---------  -----------   ---------   -----------

Balance, June 30, 2001          108,445   10,339,790    8,806,639     (424,154)    (316,480)  (2,233,265)     61,742    16,342,717

Comprehensive income:
   Net income                                           1,873,522                                                        1,873,522
   Net unrealized gain on
    securities, net of tax
    of $95,592                                                                                               185,559       185,559
                                                                                                                       -----------
Comprehensive income                                                                                                     2,059,081
Accrued compensation expense
  for RSP                                                                           124,298                                124,298
RSP forfeited shares                                                                (23,593)                               (23,593)
Release of earned ESOP shares                 40,640                    86,760                                             127,400
Cash dividends declared
   ($.46 per share)                                      (406,157)                                                        (406,157)
                               --------  -----------  -----------    ---------    ---------  -----------   ---------   -----------
Balance, June 30, 2002         $108,445  $10,380,430  $10,274,004    $(337,394)   $(215,775) $(2,233,265)  $ 247,301   $18,223,746
                               ========  ===========  ===========    =========    =========  ===========   =========   ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

16
<PAGE>
                            ADVANCE FINANCIAL BANCORP
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            Year Ended June 30,
                                                                            2002           2001
                                                                       ------------    ------------
<S>                                                                  <C>             <C>
OPERATING ACTIVITIES
     Net income                                                        $  1,873,522    $    969,865
     Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation, amortization and accretion, net                      526,615         616,801
         Provision for loan losses                                          245,430         191,400
         Gain on sale of investments                                           --           (18,670)
         Loss on sale of other real estate owned                             28,124          31,251
         Gain on sale of fixed assets                                        (6,270)             --
         Extraordinary gain on net assets acquired in merger               (201,206)             --
         Gain on sale of loans                                             (260,050)        (67,497)
         Origination of loans held for sale                             (22,263,762)     (5,568,905)
         Proceeds from the sale of loans                                 22,385,116       5,196,453
         Increase in accrued interest receivable                           (143,288)       (146,069)
         Increase (decrease) in accrued interest payable                     11,093        (113,019)
         Other, net                                                         317,937        (266,683)
                                                                       ------------    ------------

              Net cash provided by operating activities                   2,513,261         824,927
                                                                       ------------    ------------

INVESTING ACTIVITIES
     Investment securities held to maturity:
         Purchases                                                               --              --
         Maturities and repayments                                          750,000         500,000
     Investment securities available for sale:
         Purchases                                                       (3,268,931)     (8,609,371)
         Maturities and repayments                                        4,507,061       6,000,322
         Proceeds from sale                                                      --         135,905
     Mortgage-backed securities held to maturity:
         Purchases                                                               --              --
         Maturities and repayments                                          525,399         491,414
     Mortgage-backed securities available for sale:
         Purchases                                                       (2,512,706)     (7,745,213)
         Maturities and repayments                                        3,216,138       1,042,705
     Purchases of Federal Home Loan Bank Stock                             (173,100)       (275,000)
     Sale of Federal Home Loan Bank Stock                                   635,900              --
     Net increase in loans                                              (16,481,398)    (10,065,634)
     Purchases of premises and equipment                                   (499,789)       (165,189)
                                                                       ------------    ------------

              Net cash used for investing activities                    (13,301,426)    (18,690,061)
                                                                       ------------    ------------

FINANCING ACTIVITIES
     Net increase in deposits                                            20,300,060      11,568,192
     Proceeds of advances from Federal Home Loan Bank                            --      15,000,000
     Repayment of advances from Federal Home Loan Bank                           --      (3,000,000)
     Net decrease in short term advances from Federal Home Loan Bank             --      (2,500,000)
     Net change in advances for taxes and insurance                         152,531         (57,225)
     Net cash purchase of OSFS stock                                     (6,041,007)             --
     Cash dividends paid                                                   (406,157)       (344,279)
                                                                       ------------    ------------

         Net cash provided by financing activities                       14,005,427      20,666,688
                                                                       ------------    ------------

         Increase in cash and cash equivalents                            3,217,262       2,801,554

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                            8,553,178       5,751,624
                                                                       ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                               $ 11,770,440    $  8,553,178
                                                                       ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements

                                                                              17
<PAGE>
                            ADVANCE FINANCIAL BANCORP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of significant  accounting and reporting  policies applied in the
     presentation of the accompanying financial statements follows:

     Nature of Operations and Basis of Presentation
     ----------------------------------------------

     Advance Financial Bancorp (the "Company") is the holding company of Advance
     Financial Savings Bank, (the "Bank"). The Bank and its wholly-owned service
     corporation  subsidiary,  Advance  Financial  Service  Corporation  of West
     Virginia are wholly-owned  subsidiaries of the Company. The Company and its
     subsidiaries  derive  substantially  all  their  income  from  banking  and
     bank-related  services which include interest  earnings on residential real
     estate,  commercial real estate,  and consumer loan  financing,  as well as
     interest earnings on investment securities,  interest-bearing deposits with
     other  financial  institutions,  and charges  for  deposit  services to its
     customers.  The Bank is a federally chartered stock savings bank located in
     Wellsburg,  WV. The  Company  and the Bank are  subject to  regulation  and
     supervision by the Office of Thrift Supervision.

     The consolidated  financial  statements include the accounts of the Company
     and its wholly-owned subsidiary, the Bank, and its wholly-owned subsidiary,
     Advance  Financial  Service  Corporation  of West  Virginia.  All  material
     intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation.  The Company's  fiscal year end for  financial  reporting is
     June 30. For  regulatory  and income tax  reporting  purposes,  the Company
     reports on a December 31 calendar year basis.

     The consolidated financial statements have been prepared in conformity with
     accounting  principles  generally accepted in the United States of America.
     In preparing the consolidated financial statements,  management is required
     to make  estimates  and  assumptions  that affect the  reported  amounts of
     assets and liabilities as of the date of the balance sheet and revenues and
     expenses for the period.  Actual  results could differ  significantly  from
     those estimates. The major accounting policies and practices are summarized
     below.

     Investment Securities Including Mortgage-Backed Securities
     ----------------------------------------------------------

     Debt and Equity  securities  consist of  mortgage-backed  securities,  U.S.
     Government and federal agency  obligations,  obligations of state and local
     governments,  money funds and common stock.  Securities are classified,  at
     the time of purchase  based upon  management's  intention  and ability,  as
     available  for  sale or held to  maturity.  The  company  does not hold any
     securities as trading. Securities classified as held to maturity are stated
     at cost and adjusted for amortization of premium and accretion of discount,
     which  are  computed  using a level  yield  method  and are  recognized  as
     adjustments of interest income. Securities classified as available for sale
     are  carried at  estimated  fair value with  unrealized  holding  gains and
     losses reflected as a separate component of shareholders' equity.  Realized
     gains and losses on the sale of debt and  equity  securities  are  computed
     using  the  specific  identification  method.  Interest  and  dividends  on
     investment securities are recognized as income when earned.

     Common  stock  of the  Federal  Home  Loan  Bank  (the  "FHLB")  represents
     ownership  in an  institution,  which is  wholly-owned  by other  financial
     institutions.  This equity  security is accounted  for at cost and reported
     separately on the accompanying balance sheet.

     Loans Held for Sale
     -------------------

     Mortgage  loans  originated  and held for sale in the secondary  market are
     carried at the lower of cost or market  value  determined  on an  aggregate
     basis.  Net  unrealized  losses are  recognized  in a  valuation  allowance
     through  charges to income.  Gains and losses on the sale of loans held for
     sale are determined using the specific  identification  method. The company
     had $578,647 and $439,949 in loans held for sale at June 30, 2002 and 2001,
     respectively.


18
<PAGE>

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Mortgage Servicing Rights
     -------------------------

     Mortgage  Servicing rights ("MSR") are the rights to service mortgage loans
     for others and are acquired  primarily through loan sales.  Capitalized MSR
     are reported in intangible assets.  After the serviced residential mortgage
     portfolio  is  stratified  by interest  rate,  the fair value of the MSR is
     determined  using the  present  value of the  estimated  future cash flows,
     assuming a market discount and certain  forecasted  prepayment  rates based
     upon industry experience.  MSR are amortized in proportion to, and over the
     period of, the estimated net servicing  income of the underlying  financial
     assets.  The  assessment  of the  impairment on MSR is based on the current
     fair  value of those  rights.  Such  impairment  is  recognized  through  a
     valuation  allowance  established  through a charge  against  gains on loan
     sales. Total income from servicing was $292,957 and $54,593 for the periods
     ended June 30, 2002 and 2001, respectively.

     Loans
     -----

     Loans are stated at unpaid principal balances,  less loans in process,  net
     deferred loan fees, and the allowance for loan losses. Interest on loans is
     credited  to income as earned on an accrual  basis.  Loan  origination  and
     commitment  fees and  certain  direct  loan  origination  costs  are  being
     deferred  and the net amount  amortized  as an  adjustment  of the  related
     loan's yield.  The Company is amortizing these amounts over the contractual
     life of the related loans using the interest method.

     A loan is  considered  impaired  when it is probable that the borrower will
     not repay the loan according to the original  contractual terms of the loan
     agreement.   Management  has  determined   that  first  mortgage  loans  on
     one-to-four family properties and all consumer loans represent large groups
     of   smaller-balance,   homogeneous  loans  that  are  to  be  collectively
     evaluated. Management considers an insignificant delay, which is defined as
     less than 90 days by the Company, will not cause a loan to be classified as
     impaired. A loan is not impaired during a period of delay in payment if the
     Company  expects to collect all amounts due including  interest  accrued at
     the  contractual  interest  rate  during  the  period of  delay.  All loans
     identified  as impaired are  evaluated  independently  by  management.  The
     Company  estimates  credit  losses on  impaired  loans based on the present
     value of expected cash flows or the fair value of the underlying collateral
     if the loan  repayment  is expected to come from the sale or  operation  of
     said collateral.  Impaired loans or portions thereof,  are charged-off when
     it is determined  that a realized  loss has  occurred.  Until such time, an
     allowance for loan losses is maintained for estimated losses. Cash receipts
     on impaired loans are applied first to accrued interest receivable,  unless
     otherwise required by the loan terms,  except when an impaired loan is also
     a nonaccrual  loan,  in which case the portion of the  receipts  related to
     interest is recognized as income.

     Loans considered to be nonperforming  include  nonaccrual  loans,  accruing
     loans  delinquent  more  than  90  days  and  restructured  loans.  A loan,
     including an impaired loan, is classified as nonaccrual when collectability
     is in doubt. When a loan is placed on nonaccrual status, unpaid interest is
     reversed and an allowance is established by a charge to income equal to all
     accrued interest. Income is subsequently recognized only to the extent that
     cash payments are received.  Loans are returned to accrual  status when, in
     management's  judgment,  the  borrower  has the  ability and intent to make
     periodic  principal and interest payments (this generally requires that the
     loan be brought current in accordance with its original terms).


     Allowance for Loan Losses
     -------------------------

     The Company  maintains  an  allowance  for loan  losses  adequate to absorb
     estimated probable losses inherent in the loan portfolio. The allowance for
     loan losses  consists  of  specific  reserves  for  individual  credits and
     general  reserves for types and  portfolios of loans based upon  historical
     loan loss experience,  adjusted for concentrations and the current economic
     environment.   All  outstanding  loans,   letters  of  credit  and  binding
     commitments to provide  financing are considered in evaluating the adequacy
     of the  allowance  for loan  losses.  Increases to the  allowance  for loan
     losses are made by charges to the provision  for loan losses.  Loans deemed
     to be  uncollectible  are charged  against the  allowance  for loan losses.
     Recoveries of previously  charged-off amounts are credited to the allowance
     for loan losses.


                                                                              19
<PAGE>

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Allowance for Loan Losses (Continued)
     -------------------------------------

     In  determining  the adequacy of the allowance for loan losses,  management
     reviews and evaluates on a quarterly  basis the potential  risk in the loan
     portfolio. This evaluation process is documented by management and approved
     by the Company's  Board of Directors.  It is performed by senior members of
     management  with  years  of  lending  and  review  experience.   Management
     evaluates homogenous  consumer-oriented  loans, such as 1-4 family mortgage
     loans  and  retail  consumer  loans,  based  upon all or a  combination  of
     delinquencies,  loan concentrations and charge-off  experience.  Management
     supplements this analysis by reviewing the local economy,  political trends
     effecting  local industry and business  development and other known factors
     which may impact  future  credit  losses.  Nonhomogenous  loans,  generally
     defined as  commercial  business  and real estate  loans,  are  selected by
     management  to be  reviewed on a quarterly  bases upon the  combination  of
     delinquencies,  concentrations  and other known factors that may effect the
     local economy and more specifically the individual businesses.  During this
     evaluation,  the individual loans are evaluated quarterly by senior members
     of management for impairment as prescribed under SFAS No. 114,  "Accounting
     by Creditors for Impairment of a Loan". Impairment losses are assumed when,
     based upon  current  information,  it is probable  that the Company will be
     unable to collect all amounts due according to the contractual terms of the
     loan agreement. Impairment is measured by a loan's observable market value,
     fair value of the  collateral  or the  present  value of future  cash flows
     discounted at the loan's effective interest rate.

     This data on impairment is combined with the other data used for homogenous
     loans and is used by the  classified  asset  committee in  determining  the
     adequacy of the allowance for loan losses.  Although management believes it
     uses the best  information  available  to  determine  the  adequacy  of the
     allowance  for loan losses,  future  adjustments  to the  allowance  may be
     necessary  and  the  results  of  operations  could  be  significantly  and
     adversely   affected  if  circumstances   differ   substantially  from  the
     assumptions used in making the determination.

     Real Estate Acquired in Settlement of Loans
     -------------------------------------------

     Real estate  acquired in  settlement  of loans are reported at the lower of
     cost or fair value at the acquisition  date, and  subsequently at the lower
     of its  new  cost  or fair  value  minus  estimated  selling  costs.  Costs
     represents the unpaid loan balance at the  acquisition  date plus expenses,
     when  appropriate,  incurred to bring the property to a salable  condition.
     REO assets are  reviewed  periodically  by  management  and any  subsequent
     decrease in the  estimated  market value of the asset is taken as a loss on
     the income  statement  in the current  period.  Operating  expenses of such
     properties,  net of related  income and  losses on their  disposition,  are
     expenses as incurred and included in the "other  expense"  line item on the
     income statement in the current period.

     Premises and Equipment
     ----------------------

     Land is carried at cost;  buildings and equipment are stated at cost,  less
     accumulated  depreciation.  The  provision  for  depreciation  is  computed
     primarily by the straight-line method based upon the estimated useful lives
     of the assets in the following ranges:

              Buildings                                          40 Years
              Building Improvements and Fixtures              10-20 Years
              Office Equipment and Furniture                   3-10 Years

     Expenditures  for  maintenance  and repairs are charged  against  income as
     incurred. Costs of major additions and improvements are capitalized.

     Income Taxes
     ------------

     Deferred tax assets and  liabilities  are  reflected  at currently  enacted
     income tax rates  applicable to the period in which the deferred tax assets
     or  liabilities  are expected to be realized or settled.  As changes in tax
     laws or rates are enacted, deferred tax assets and liabilities are adjusted
     through the  provision for income  taxes.  Deferred  income tax expenses or
     benefits  are based on the changes in the  deferred  tax asset or liability
     from period to period.  The Company and its subsidiary  file a consolidated
     income tax return.

20
<PAGE>

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Earnings per Share
     ------------------

     The Company  provides dual  presentation of basic and diluted  earnings per
     share.  Basic  earnings  per share is  calculated  by  dividing  net income
     available to common stockholders by the  weighted-average  number of common
     shares  outstanding  during  the  period.  Diluted  earnings  per  share is
     calculated  by  dividing  net  income  available  to  common  stockholders,
     adjusted   for   the   effects   of  any   dilutive   securities,   by  the
     weighted-average  number of common  shares  outstanding,  adjusted  for the
     effects of any dilutive securities.

     Comprehensive Income
     --------------------

     The Company is required  to present  comprehensive  income in a full set of
     general  purpose  financial  statements  for all periods  presented.  Other
     comprehensive income (loss) is comprised  exclusively of unrealized holding
     gains (losses) on the available for sale securities portfolio.  The Company
     has elected to report the effects of other  comprehensive  income (loss) as
     part of the Statement of Changes in Stockholders' Equity.

     Cash Flow Information
     ---------------------

     The Company has defined cash and cash equivalents as cash on hand,  amounts
     due from depository  institutions,  and overnight deposits with the Federal
     Home Loan Bank and the Federal Reserve Bank.

     Cash  payments  for  interest  for the fiscal years ended June 30, 2002 and
     2001 were $7,156,302 and $7,114,950, respectively. Cash payments for income
     taxes for the fiscal  years ended June 30, 2002 and 2001 were  $985,537 and
     $748,332, respectively.

     Stock Options
     -------------

     The Company maintains a stock option plan for the directors,  officers, and
     employees.  The stock options  typically have expiration terms of ten years
     subject  to  certain  extensions  and  early  terminations.  The per  share
     exercise price of a stock option shall be, at a minimum,  equal to the fair
     value of a share of common stock on the date the option is granted. Because
     the exercise  price of the Company's  stock options equals the market price
     of the underlying  stock on the date of the grant, no compensation  expense
     is recognized in the Company's financial  statements.  Pro forma net income
     and  earnings  per share are  presented  to reflect the impact of the stock
     option plan assuming  compensation  expense had been effected  based on the
     fair value of the stock options granted under this plan.

     Recent Accounting Pronouncements
     --------------------------------

     In July 2001, the FASB issued Statement of Financial  Accounting  Standards
     No. 141, "Business  Combinations,  effective for all business  combinations
     initiated  after  June  30,  2001,  as  well as all  business  combinations
     accounted  for by the  purchase  method that are  completed  after June 30,
     2001. The new statement  requires that the purchase method of accounting be
     used  for  all  business   combinations   and  prohibits  the  use  of  the
     pooling-of-interest  method.  The adoption of Statement  No. 141 did have a
     material  effect  on  the  Company's   financial  position  or  results  of
     operations.

     In July 2001, the FASB issued Statement of Financial  Accounting  Standards
     No. 142, "Goodwill and Other Intangible Assets", effective for any goodwill
     arising as a result of business combinations initiated after June 30, 2001.
     The new statement  changes the accounting for goodwill from an amortization
     method to an  impairment-only  approach.  Thus,  amortization  of goodwill,
     including goodwill recorded in past business combinations,  will cease upon
     adoption of this  Statement.  The adoption of Statement  No. 142 did have a
     material  effect on the Company's  results of operations for the year ended
     June 30, 2002, please refer to Note 2 - "Business Combination".

     In October 2001, the FASB decided to undertake a  limited-scope  project to
     reconsider  part of the  guidance  in SFAS 72,  "  Accounting  for  Certain
     Acquisitions of Banking and Thrift Institutions." In particular,  the board
     decided to  reconsider  whether the  acquisition  of a branch is a business
     combination   and  if  goodwill   recorded  in  connection  with  a  branch
     acquisition  should  continue  to be  amortized.  Currently,  Statement  72
     Goodwill is excluded  from the scope of SFAS 142.  The results of this FASB
     project  is not  expected  to have a  material  effect on the  Consolidated
     Financial Statements of the Company.


                                                                              21
<PAGE>

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Recent Accounting Pronouncements (continued)
     --------------------------------------------

     In  August  2001,  the  FASB  issued  FAS No.  143,  Accounting  for  Asset
     Retirement  Obligations,  which requires that the fair value of a liability
     be recognized  when incurred for the  retirement of a long-lived  asset and
     the value of the asset be  increased  by that amount.  The  statement  also
     requires  that  the  liability  be  maintained  at its  present  value  for
     subsequent  periods and outlines certain  disclosures for such obligations.
     The adoption of this statement,  which is effective January 1, 2003, is not
     expected to have a material effect on the Company's financial statements.

     In October 2001, the FASB issued FAS No. 144, Accounting for the Impairment
     or Disposal of Long-Lived  Assets.  FAS No. 144  supercedes FAS No. 121 and
     applies to all long-lived  assets (including  discontinued  operations) and
     consequently  amends APB Opinion No. 30, Reporting  Results of Operations -
     Reporting  the effects of Disposal of a Segment of a Business.  FAS No. 144
     requires  that  long-lived  assets  that are to be  disposed  of by sale be
     measured  at the lower of book value or fair value less costs to sell.  FAS
     No. 144 is effective for financial  statements  issued for the fiscal years
     beginning  after December 15, 2001 and , generally its provisions are to be
     applied  prospectively.  The adoption of this  statement is not expected to
     have a material effect on the Company's financial statements.

     Reclassification of Comparative Amounts
     ---------------------------------------

     Certain  comparative  account  balances  for the  prior  period  have  been
     reclassified  to  conform  to  the  current  period  classifications.  Such
     reclassifications did not affect net income.

2.   BUSINESS COMBINATIONS

     As of the close of business  September 7, 2001, the Company acquired all of
     the outstanding  stock of Ohio State Financial  Services "OSFS".  The total
     cost of the acquisition by the Company was $7,861,147.  The acquisition was
     a cash  purchase of all  outstanding  stock of OSFS and was  accounted  for
     under the purchase  method of  accounting.  The  Consolidated  Statement of
     Income for the year ended June 30, 2002, includes the results of operations
     of the acquired institution from September 8, 2001.

     OSFS was a bank holding company for the Bridgeport  Savings and Loan, which
     had branch  offices  in  Bridgeport  and  Shadyside,  Ohio.  The merger was
     entered  into to enhance  the  Company's  return on equity by  geographical
     diversification,  more  profitable  deployment of excess capital and market
     area expansion.

     The following  Condensed Balance Sheet reflects the amounts assigned to the
     major asset and liability captions at the acquisition date:

      ASSETS
      ------
      Cash on hand and in banks                                     $  1,681,646
      Investment securities                                            2,602,442
      Mortgage-backed securities                                         355,526
      Federal Home Loan Bank stock                                       445,900
      Loans receivable, net of allowance for losses of $170,759       26,763,108
      Other                                                              695,754
                                                                    ------------
           Total Assets                                              $32,544,376
                                                                     ===========

      LIABILITIES
      -----------
      Deposits                                                       $24,348,551
      Other                                                              334,678
                                                                    ------------
           Total Liabilities                                          24,683,229

      SHAREHOLDERS' EQUITY                                             7,861,147
      --------------------                                          ------------

           Total Liabilities and Shareholders' equity               $ 32,544,376
                                                                    ============


22
<PAGE>

2.   BUSINESS COMBINATIONS (CONTINUED)

     The  following  are proforma  Statements of Income for the years ended June
     30,  2002 and 2001.  The  proforma  Statements  of Income are  intended  to
     present the  business  combination's  effect on earnings  per share for the
     comparable  periods had both  entities  been  combined at the start of each
     period.

<TABLE>
<CAPTION>
                                                              2002          2001
                                                           -----------   -----------
<S>                                                      <C>           <C>
Total interest income                                      $14,042,261   $14,503,791
Total interest expense                                       7,340,062     7,998,252
                                                           -----------   -----------
  Net interest income                                        6,702,199     6,505,539
Provision for loan losses                                      276,345       191,400
                                                           -----------   -----------
     Net interest income after provision for loan losses     6,425,854     6,314,139
Noninterest income                                           1,273,640       868,244
Noninterest expense                                          5,179,951     5,425,931
                                                           -----------   -----------
     Income before income taxes                              2,519,543     1,756,452
Income taxes                                                   833,381       646,434
                                                           -----------   -----------
     Net Income                                            $ 1,686,162   $ 1,110,018
                                                           ===========   ===========


Earnings per share:
Basic                                                      $      1.91   $      1.27
Diluted                                                    $      1.91   $      1.27
</TABLE>

3.       EXTRAORDINARY ITEM

     As a result of the  merger  with  OSFS,  the fair  market  value of the net
     assets  acquired  by the  Company  from OSFS  exceeded  the amount  paid by
     approximately  $2,697,000. In accordance with SFAS 141, all non-current and
     non-financial  asset  balances were reduced until the excess fair value was
     eliminated.  The total  non-current and  non-financial  assets created as a
     result of the merger was $2,496,000,  therefore,  since this total was less
     than the total  excess  fair value  acquired,  these  asset  balances  were
     reduced  to zero in  accordance  with SFAS  141.  After  eliminating  these
     balances,  approximately  $201,000  ($2,697,000  less $2,496,000) in excess
     fair value  remained  that could not be  reduced.  In  accordance  with APB
     Opinion No. 30, any excess that remains after  reducing to zero the amounts
     that  otherwise  would have been  assigned to those  assets,  the remaining
     excess shall be recognized as an extraordinary gain. The extraordinary gain
     shall be  recognized  in the period in which the  business  combination  is
     completed. The remaining portion of the excess, $201,206, was recognized as
     an extraordinary gain for the period ended June 30, 2002.

4.   EARNINGS PER SHARE

     There were no convertible  securities,  which would affect the numerator in
     calculating basic and diluted earnings per share; therefore,  net income as
     presented  on the  Consolidated  Statement  of  Income  will be used as the
     numerator.   The  following   table  sets  forth  the  composition  of  the
     weighted-average  common shares (denominator) used in the basic and diluted
     earnings per share computation.

<TABLE>
<CAPTION>
                                                                  2002          2001
                                                               ----------    ----------

<S>                                                           <C>           <C>
Weighted-average common shares outstanding                      1,084,450     1,084,450
Average treasury stock shares                                    (152,165)     (152,165)
Average unearned ESOP and RSP shares                              (47,873)      (55,118)
                                                               ----------    ----------

Weighted-average common shares and
    common stock equivalents used to calculate basic EPS          884,412       877,167

Additional common stock equivalents (65,061 options granted,
  none exercised) used to calculate diluted EPS                        --            --
                                                               ----------    ----------
Weighted-average common shares and
    common stock equivalents used to calculate
     diluted EPS                                                  884,412       877,167
                                                               ==========    ==========
</TABLE>

                                                                              23
<PAGE>

5.   INVESTMENT SECURITIES

     The  amortized  cost  and  estimated  market  value of  investments  are as
follows:

<TABLE>
<CAPTION>
                                                                     2002
                                             -----------------------------------------------------
                                                              Gross        Gross
                                              Amortized     Unrealized   Unrealized       Fair
                                                 Cost          Gains       Losses         Value
                                             -----------    -----------  -----------  ------------
<S>                                        <C>           <C>           <C>            <C>
Held-to-maturity
    U.S. Government and Agency Obligations   $        --   $        --   $        --    $        --
                                             -----------   -----------   -----------    -----------
Available-for-sale
    U.S. Government and Agency Obligations     4,800,000        67,954            --      4,867,954
    Municipal Bond Obligations                 5,757,115       167,267            --      5,924,382
    Corporate Bond Obligations                 1,989,035        25,981       (55,326)     1,959,690
    Time Deposits                                230,141            --            --        230,141
    Money Fund Securities                         17,595            --          (400)        17,195
                                             -----------   -----------   -----------    -----------
         Total available for sale             12,793,886       261,202       (55,726)    12,999,362
                                             -----------   -----------   -----------    -----------

         Total Investment Securities         $12,793,886   $   261,202   $   (55,726)   $12,999,362
                                             ===========   ===========   ===========    ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                     2001
                                             ------------------------------------------------------
                                                              Gross         Gross
                                              Amortized     Unrealized    Unrealized       Fair
                                                 Cost          Gains        Losses         Value
                                             -----------   -----------   -----------    -----------
<S>                                        <C>           <C>           <C>            <C>
Held-to-maturity
    U.S. Government and Agency Obligations   $   749,934   $     1,287   $    (9,164)   $   742,057
                                             -----------   -----------   -----------    -----------
Available-for-sale
    U.S. Government and Agency Obligations     2,970,000         2,397       (39,685)     2,932,712
    Municipal Bond Obligations                 5,755,422        72,751        (8,882)     5,819,291
    Corporate Bond Obligations                 1,983,634        19,254            --      2,002,888
    Common stocks                                373,200            --            --        373,200
    Money Fund Securities                         20,141            --          (313)        19,828
                                             -----------   -----------   -----------    -----------
         Total available for sale             11,102,397        94,402       (48,880)    11,147,919
                                             -----------   -----------   -----------    -----------

         Total Investment Securities         $11,852,331   $    95,689   $   (58,044)   $11,889,976
                                             ===========   ===========   ===========    ===========
</TABLE>

     The weighted average  interest rate on investment  securities was 5.36% and
     5.82% at June 30, 2002 and 2001, respectively.

     The amortized cost and estimated fair value of debt  securities at June 30,
     2002, by contractual  maturity,  are shown below.  Expected maturities will
     differ from contractual  maturities because borrowers may have the right to
     call or repay obligations with or without call or repayment penalties.

                                                    Amortized         Fair
                                                       Cost           Value
                                                    -----------    -----------

         One year or less                           $   730,141    $   730,465
         After one through five years                 4,506,630      4,512,545
         After five through ten years                   500,000        515,335
         After ten years                              7,057,115      7,241,017
                                                    -----------    -----------
              Total                                 $12,793,886    $12,999,362
                                                    ===========    ===========

     Proceeds  received  on  securities  as a result of sales and calls prior to
     maturity were  $4,507,061  and $6,136,227 for the years ended June 30, 2002
     and 2001,  respectively.  Gains on sales were $0 and  $20,375 for the years
     ended  June 30,  2002 and 2001,  respectively.  Losses on sales were $0 and
     $1,705 for the years ended June 30, 2002 and 2001, respectively.

     The  Company  has pledged $0 and  $750,000  of U.S.  Government  and Agency
     Obligations  to  secure  public  deposits  as of June 30,  2002  and  2001,
     respectively.

24
<PAGE>

6.   MORTGAGE-BACKED SECURITIES

     The amortized cost and estimated market value of mortgage-backed securities
     are as follows:

<TABLE>
<CAPTION>
                                                                                   2002
                                                          ------------------------------------------------------
                                                                           Gross         Gross
                                                          Amortized      Unrealized    Unrealized         Fair
                                                              Cost          Gains        Losses           Value
                                                          -----------    ----------    ----------    -----------
<S>                                                     <C>            <C>         <C>             <C>
     Held-to-maturity
         Government National Mortgage Association         $   299,120    $   16,564  $         -     $   315,684
         Federal Home Loan Mortgage Corporation               160,369        12,707            -         173,076
         Federal National Mortgage Association                936,817        24,064            -         960,881
                                                           ----------   -----------   ----------      ----------
              Total held to maturity                        1,396,306        53,335            -       1,449,641
                                                           ----------     ---------   ----------      ----------

     Available-for-sale
         Government National Mortgage Association           5,634,980       136,007            -       5,770,987
         Federal Home Loan Mortgage Corporation               654,598        20,815            -         675,413
         Federal National Mortgage Association              1,332,119        13,047            -       1,345,166
                                                          -----------   -----------   ----------      ----------
              Total available for sale                      7,621,697       169,869            -       7,791,566
                                                           ----------   -----------  -----------      ----------

              Total mortgage backed securities             $9,018,003      $223,204   $        -      $9,241,207
                                                           ==========      ========   ==========      ==========
</TABLE>


<TABLE>
<CAPTION>
                                                                                   2001
                                                          ------------------------------------------------------
                                                                           Gross         Gross
                                                          Amortized      Unrealized    Unrealized         Fair
                                                              Cost          Gains        Losses           Value
                                                           ----------      --------    ---------      ----------
<S>                                                     <C>            <C>         <C>             <C>
     Held-to-maturity
         Government National Mortgage Association         $   326,273    $    9,628  $         -     $   335,901
         Federal Home Loan Mortgage Corporation                59,192         4,735            -          63,927
         Federal National Mortgage Association              1,209,884         1,554       (9,306)      1,202,132
                                                           ----------      --------    ---------      ----------
              Total held to maturity                        1,595,349        15,917       (9,306)      1,601,960
                                                           ----------      --------    ---------      ----------

     Available-for-sale
         Government National Mortgage Association           5,738,895        82,969      (13,131)      5,808,733
         Federal Home Loan Mortgage Corporation               748,125           938            -         749,063
         Federal National Mortgage Association              1,848,028             -      (22,749)      1,825,279
                                                           ----------      --------    ---------      ----------
              Total available for sale                      8,335,048        83,907      (35,880)      8,383,075
                                                           ----------      --------    ---------      ----------

              Total mortgage backed securities             $9,930,397      $ 99,824    $ (45,186)     $9,985,035
                                                           ==========      ========    ==========     ==========
</TABLE>

     Mortgage-backed   securities  provide  for  periodic,   generally  monthly,
     payments of principal and interest and have contractual  maturities ranging
     from  four to  thirty  years at June 30,  2002.  However,  due to  expected
     repayment terms being  significantly less than the underlying mortgage loan
     pool contractual maturities, the estimated lives
     of these securities could be  significantly  shorter.  As of June 30, 2002,
     mortgage-backed securities with a book value of $3,011,266 and a fair value
     of $3,036,060 are one year  adjustable  types  currently  paying a weighted
     average 4.736%.  The remaining  instruments are all fixed rate types with a
     weighted average yield of 6.79%.  Certain  instruments have been classified
     as available for sale based upon management's evaluation of liquidity needs
     while optimizing return at the time of purchase.

     There were no sales of  mortgage-backed  securities for either period ended
     June 30, 2002 or 2001.

                                                                              25

<PAGE>

7.   LOANS RECEIVABLE

     Loans receivable are comprised of the following at June 30:

                                              2002           2001
                                         ------------   ------------

        Mortgage loans:
             1 - 4 family                $ 91,663,132   $ 64,696,315
             Multi-family                   6,864,328      6,002,553
             Non-residential               36,146,829     27,956,885
             Construction                   4,338,936      2,455,751
                                         ------------   ------------
                  Total mortgage loans    139,013,225    101,111,504
                                         ------------   ------------

        Consumer loans:
             Home improvement                 943,384      1,208,279
             Automobile                    17,176,464     13,000,468
             Share loans                    1,589,842      1,594,755
             Other                          2,613,243      2,778,630
                                         ------------   ------------
                  Total consumer loans     22,322,933     18,582,132
                                         ------------   ------------

        Commercial loans                   14,824,483     12,651,451
                                         ------------   ------------

        Less:
             Loans in process               2,966,039      1,861,360
             Net deferred loan fees            79,647        109,015
             Allowance for loan losses        969,088        779,170
                                         ------------   ------------
                                            4,014,774      2,749,545
                                         ------------   ------------

                 Total loans             $172,145,867   $129,595,542
                                         ============   ============

     Single  family  mortgage  loans  serviced  for Freddie  Mac,  which are not
     included  in  the  Consolidated  Balance  Sheet,  totaled  $35,009,670  and
     $20,594,042 at June 30, 2002 and 2001, respectively.

     The Company is a party to financial instruments with off-balance-sheet risk
     in the  normal  course  of  business  to meet  the  financing  needs of its
     customers.  These  financial  instruments  include  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
     condition.  The contract amounts of these instruments reflect the extent of
     involvement the Company has in particular classes of financial instruments.

     The Company's exposure to credit loss in the event of nonperformance by the
     other party to the financial instrument for commitments to extend credit is
     represented by the  contractual  amount of those  instruments.  The Company
     uses the  same  credit  policies  in  making  commitments  and  conditional
     obligations  as it does for  on-balance-sheet  instruments.  No losses  are
     anticipated by management as a result of these commitments.

     The following  represents  financial  instruments  whose  contract  amounts
     represent credit risk at June 30:

                                             2002          2001
                                          -----------   -----------

         Commitments to originate loans
              Fixed rate                  $ 1,149,575   $ 1,606,710
              Variable rate               $   943,700   $ 1,180,076
         Loans in process                 $ 2,966,039   $ 1,861,360
         Unused lines of credit           $10,506,511   $ 6,970,392
         Letters of credit                $    94,305   $    95,802


     The range of  interest  rates on fixed rate loan  commitments  was 6.25% to
     8.125% at June 30, 2002.

26
<PAGE>

7.   LOANS RECEIVABLE (Continued)

     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  expire  within  30 days or have  other  termination
     clauses and may require payment of a fee. Since many of the commitments are
     expected to expire without being drawn upon, the total  commitment  amounts
     do  not  necessarily  represent  future  cash  requirements.   The  Company
     evaluates each customer's  creditworthiness  on a case-by-case  basis.  The
     amount of  collateral  obtained,  if deemed  necessary  by the Company upon
     extension of credit,  is based on  management's  credit  evaluation  of the
     counter  party.   Collateral  held  consists   primarily  of  single-family
     residences and income-producing commercial properties.

     In the  normal  course  of  business,  loans  are  extended  to  directors,
     executive  officers and their  associates.  A summary of loan  activity for
     those  directors,  executive  officers,  and  their  associates  with  loan
     balances  in excess  of  $60,000  for the year  ended  June 30,  2002 is as
     follows:

           Balance                              Amount          Balance
             2001           Additions          Collected          2002
           ----------       ----------         ---------      ----------

           $1,482,774        $411,674           $321,244      $1,573,204

     The Company's  primary business  activity is with customers  located within
     its local trade  area.  Residential,  consumer,  and  commercial  loans are
     granted. The Company also selectively funds loans originated outside of its
     trade area provided such loans meet its credit policy guidelines.  Although
     the Company has a diversified  loan  portfolio,  at June 30, 2001 and 2000,
     loans  outstanding  to  individuals  and  businesses are dependent upon the
     local economic conditions in its immediate trade area.

8.   ALLOWANCE FOR LOAN LOSSES

     Activity  in the  allowance  for loan losses for the years ended June 30 is
     summarized as follows:

                                                      2002         2001
                                                  ----------   ----------

     Balance, beginning of period                 $  779,170   $  682,103
     Add:
          Provisions charged to operations           245,430      191,400
          Acquired through business combination      170,759           --
          Loan recoveries                             15,529        3,339
                                                  ----------   ----------
              Total                                1,210,888      876,842
     Less: loans charged off                         241,800       97,672
                                                  ----------   ----------

     Balance, end of period                       $  969,088   $  779,170
                                                  ==========   ==========

Nonperforming  loans totaled $2,012,560 and $1,203,011 at June 30, 2002 and 2001
respectively.  Impaired loans totaled $890,178 and $0 at June 30, 2002 and 2001,
respectively.  Such amounts have been  subject to specific  allowances  for loan
losses of $48,202  and $0 at June 30, 2002 and 2001,  respectively.  The average
investment in impaired loans for the year ended June 30, 2002 was $911,821.  The
interest  income  potential  based upon the original  terms of the  contracts of
these  impaired  loans was $86,688 for the year ended June 30, 2002.  The entire
interest income potential has been recognized for the year ended June 30, 2002.

                                                                              27

<PAGE>

9.   PREMISES AND EQUIPMENT, NET

     Premises and equipment are summarized by major classification as follows:

                                               2002         2001
                                            ----------   ----------

       Land                                 $  303,857   $  303,857
       Buildings and improvements            3,656,304    3,421,642
       Furniture, fixtures, and equipment    2,601,056    2,349,384
                                            ----------   ----------
            Total                            6,561,217    6,074,883
       Less accumulated depreciation         2,659,625    2,246,516
                                            ----------   ----------

            Premises and equipment, net     $3,901,592   $3,828,367
                                            ==========   ==========

     Depreciation  charged to  operations  amounted to $426,492 and $407,117 for
     the years ended June 30, 2002 and 2001, respectively.

10.  FEDERAL HOME LOAN BANK STOCK

     The Bank is a member of the Federal Home Loan Bank System. As a member, the
     Bank  maintains an investment in the capital stock of the Federal Home Loan
     Bank of  Pittsburgh,  at cost, in an amount not less than the greater of 1%
     of its outstanding  home loans or 5% of its  outstanding  borrowings to the
     Federal Home Loan Bank of  Pittsburgh  as calculated at December 31 of each
     year.

11.  ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable consists of the following:

                                            2002         2001
                                        ----------   ----------

           Investment securities        $  144,336   $  167,585
           Mortgage-backed securities       45,885       53,736
           Loans receivable                970,091      795,703
                                        ----------   ----------
                Total                   $1,160,312   $1,017,024
                                        ==========   ==========

12.  DEPOSITS

     Deposit accounts are summarized as follows:

<TABLE>
<CAPTION>
                                                                 2002                             2001
                                                   ------------------------------    ----------------------------
                                                                       Percent of                      Percent of
                                                       Amount          Portfolio         Amount        Portfolio
                                                    --------------    ----------     --------------    ----------

<S>                                               <C>                  <C>         <C>                 <C>
         Non-interest-bearing                       $    7,299,438         4.2%      $    6,591,651        5.1%
                                                      ------------       -----         ------------      -----

         Savings accounts                               36,030,981        20.6           18,299,257       14.0
         NOW accounts                                   10,829,261         6.2            8,361,345        6.4
         Money market accounts                          19,049,726        10.9           11,904,733        9.1
                                                      ------------       -----         ------------      -----
                                                        65,909,968        37.7           38,565,335       29.5
                                                      ------------       -----         ------------      -----

         Time certificates of deposit:
              2.00 -  4.00%                             59,590,853        34.0            3,175,532        2.4
              4.01 -  6.00%                             31,149,561        17.8           39,263,156       30.1
              6.01 -  8.00%                             11,108,923         6.3           42,903,457       32.9
                                                      ------------       -----         ------------      -----
                                                       101,849,337        58.1           85,342,145       65.4
                                                      ------------       -----         ------------      -----

                  Total                               $175,058,743       100.0%        $130,499,131      100.0%
                                                      ============       =====         ============      =====
</TABLE>
28

<PAGE>

12.  DEPOSITS (CONTINUED)

     The scheduled  maturities of time  certificates of deposit at June 30, 2002
are as follows:

                                                               Amount
                                                            ------------

         Within one year                                    $ 69,063,291
         Beyond one year but within two years                 18,562,745
         Beyond two years but within three years               4,170,352
         Beyond three years but within five years              4,733,082
         Beyond five years                                     5,319,867
                                                            ------------

              Total                                         $101,849,337
                                                            ============

     The Company had time certificates  with a minimum  denomination of $100,000
     in the amount of approximately $15,475,283 and $12,711,277 at June 30, 2002
     and 2001,  respectively.  Deposits in excess of $100,000 are not  federally
     insured. The Company does not have any brokered deposits.

     Interest  expense by  deposit  category  for the years  ended June 30 is as
follows:

                                                          2002           2001
                                                       ----------    -----------

         Passbooks                                     $  811,947     $  467,965
         NOW and Money Market Deposit accounts            625,139        636,793
         Time certificates                              4,559,637      4,894,185
                                                       ----------     ----------
                                                       $5,996,723     $5,998,943
                                                       ==========     ==========

13.  ADVANCES FROM FEDERAL HOME LOAN BANK

     Advances from the Federal Home Loan Bank consists of the following:

<TABLE>
<CAPTION>
                                Principal       Interest       Interest
                                    Due           Due            Rate                2002                 2001
                               -----------      --------       --------         ------------       -------------

<S>                          <C>             <C>               <C>            <C>                 <C>
         Advance               06-30-2005       Monthly          6.36%          $  5,000,000        $  5,000,000
         Advance               11-03-2010       Monthly          6.05%             5,000,000           5,000,000
         Advance               12-20-2010       Monthly          5.54%             5,000,000           5,000,000
         Advance               02-28-2011       Monthly          4.96%             5,000,000           5,000,000
                                                                                 -----------        ------------
                                                                                 $20,000,000         $20,000,000
                                                                                 ===========         ===========
</TABLE>

     These  borrowings  are subject to the terms and conditions of the Advances,
     Collateral Pledge and Security Agreement between the Federal Home Loan Bank
     of  Pittsburgh  and the Bank.  All advances,  at June 30, 2002,  have fixed
     rates with putable options. The putable options are as follows:

<TABLE>
<CAPTION>
                                Principal       Putable        Interest
                                    Due            Date          Rate                Renewable Terms
                                 ------        ----------      --------             --------------------

<S>                          <C>             <C>             <C>                 <C>
         Advance               06-30-2005       9-30-2002       6.36%               3 month Libor +.15
         Advance               11-03-2010      11-03-2003       6.05%               3 month Libor +.20
         Advance               12-20-2010      12-20-2004       5.54%               3 month Libor +.20
         Advance               02-28-2011       8-27-2002       4.96%               3 month Libor +.20
</TABLE>

     In addition, the Bank entered into a "RepoPlus" Advance credit arrangement,
     which is renewable  annually and incurs no service charges.  As of June 30,
     2002, the Bank has a borrowing limit of  approximately  $100 million with a
     variable  rate of  interest,  based  upon the  FHLB's  cost of  funds.  All
     borrowings  from  the FHLB  are  secured  by a  blanket  lien on  qualified
     collateral, defined principally as investment securities and mortgage loans
     which are owned by the Bank free and clear of any liens or encumbrances.


                                                                              29
<PAGE>

14.  INCOME TAXES

     The  components  of income  tax  expense  for the years  ended  June 30 are
     summarized as follows:

                                                    2002                 2001
                                                 ----------           --------
         Currently payable:
              Federal                            $  853,590           $508,338
              State                                 192,909            113,760
                                                 ----------           --------
                                                  1,046,499            622,098
              Deferred                             (213,507)           (48,739)
                                                 -----------         ----------

                  Total                          $  832,992           $573,359
                                                 ==========           ========

     The  following  temporary  differences  gave rise to deferred tax asset and
liabilities:

                                                    2002               2001
                                                 ----------         ----------
         Deferred tax assets
              Allowance for loan losses          $  329,490         $  264,918
              Loan origination fees, net              7,256             11,237
              Other, net                              7,692              9,701
                                                 ----------        -----------
                  Deferred tax assets               344,438            285,856
                                                 ----------        -----------

         Deferred tax liabilities
              Premise and equipment depreciation    111,102            248,622
              Tax reserve for loan losses            36,610             45,901
              Net unrealized gain on securities     127,398             31,806
              Other, net                            102,217             55,716
                                                 ----------        ------------
                  Deferred tax liabilities          377,327            382,045
                                                 ----------        -----------
                  Net deferred tax liability     $  (32,889)       $   (96,189)
                                                 ===========       ===========

     On August 20, 1996,  the Small  Business Job Protection Act (the "Act") was
     signed into law. The Act  eliminated  the  percentage of taxable income bad
     debt  deduction  for  thrift  institutions  for tax years  beginning  after
     December 31,  1995.  The Act provides  that bad debt  reserves  accumulated
     prior to 1988 be exempt from recapture. Bad debt reserves accumulated after
     1987 are subject to recapture.  The recapture tax will be paid in six equal
     installments  beginning  with the 1998 tax year. At December 31, 1995,  the
     Bank had $386,250 in bad debt reserves in excess of the base year (includes
     $62,244  from the merger  with  Bridgeport  Savings  and Loan).  Subject to
     prevailing  corporate  tax rates,  the Bank owes $36,610 in federal  income
     taxes, which is reflected as a deferred tax liability.

     The  reconciliation  between the actual  provision for income taxes and the
     amount of income taxes which would have been  provided at  statutory  rates
     for the years ended June 30 is as follows:

<TABLE>
<CAPTION>
                                                              2002                     2001
                                                     ---------------------   ----------------------
                                                        Amount    Percent       Amount    Percent
                                                        ------    -------       ------    -------

<S>                                                  <C>          <C>        <C>          <C>
         Provision at statutory rate                   $851,804     34.0%      $524,696     34.0%
         State income tax expense, net of federal
          tax benefit                                   127,320      5.0         76,784      5.0
         Tax exempt interest                           (103,017)    (3.1)       (66,234)    (4.3)
         Other, net                                     (43,115)    (1.7)        38,113      2.5
                                                       --------    ------     ---------    -----
              Actual expense and effective rate        $832,992     34.2%      $573,359     37.2%
                                                       ========     ====       ========     ====
</TABLE>

15.  RETIREMENT PLAN

     The Company has a  profit-sharing  plan with a 401(k)  feature.  The 401(k)
     allows  employees  to make  contributions  to the  plan up to 10% of  their
     annual compensation. The Company will match 50% of the employees' voluntary
     contributions up to 3% of the employee's compensation.  Additional employer
     contributions  are made at the  discretion of the Board of  Directors.  The
     plan covers  substantially all employees with more than one year's service.
     The Company's  contributions for the benefit of covered employees  amounted
     to  $42,711  and  $38,243  for the  years  ended  June 30,  2002 and  2001,
     respectively.

30
<PAGE>

16.  RESTRICTED STOCK PLAN (RSP)

     In 1998,  the  Board of  Directors  adopted  a RSP for  directors,  certain
     officers and  employees,  which was approved by  stockholders  at a special
     meeting held on January 20, 1998.  The  objective of this Plan is to enable
     the Company and the Bank to retain its corporate  officers,  key employees,
     and directors who have the experience and ability necessary to manage these
     entities.  Directors,  officers,  and key  employees  who are  selected  by
     members of a Board  appointed  committee  are eligible to receive  benefits
     under the RSP. The non-employee directors of the Company and the Bank serve
     as trustees for the RSP, which has the  responsibility  to invest all funds
     contributed by the Bank to the Trust created for the RSP.

     On February 23, 1998,  the Trust  purchased  with funds  contributed by the
     Bank,  43,378 shares of the common stock of the Company.  At June 30, 2002,
     15,180  shares have been issued to  non-employee  directors,  26,244 shares
     have  been  issued  to  officers,   and  1,954  shares  remained  unissued.
     Directors, officers, and key employees who terminate their association with
     the Company  shall  forfeit the right to any shares  which were awarded but
     not  earned.  Shares are vested  over a  four-year  period from their grant
     date.  A total of 40,824  shares  were  vested as of June 30,  2002.  Total
     operating  expense  attributed to the RSP amounted to $124,298 and $207,079
     for the years ended June 30, 2002 and 2001.

17.  EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

     In conjunction  with the Bank's  conversion from mutual to stock,  the Bank
     adopted an ESOP for the  benefit of  officers  and  employees  who have met
     certain eligibility  requirements  related to age and length of service. An
     ESOP trust was created,  and acquired  86,756 shares of common stock in the
     Company's  initial public offering,  using proceeds of a loan obtained from
     the Company,  which bears  interest at the Wall Street  Journal prime rate,
     adjusted  quarterly.  The loan,  which is  secured  by the  shares of stock
     purchased,  calls for quarterly  interest over a ten year period and annual
     principal payments of $86,756.

     The Bank makes quarterly  contributions  to the trust to allow the trust to
     make the required  loan  payments to the Company.  Shares are released from
     collateral based upon the proportion of annual  principal  payments made on
     the loan each year and  allocated  to  qualified  employees.  As shares are
     released from collateral,  the Bank reports compensation expense based upon
     the amounts  contributed or committed to be  contributed  each year and the
     shares become  outstanding for earnings per share  computations.  Dividends
     paid on  allocated  ESOP shares are  recorded  as a  reduction  in retained
     earnings.  Dividends  paid on  unallocated  shares  were used to reduce the
     company's  contribution  to the ESOP plan for the years ended June 30, 2002
     and 2001.  Compensation  expense for the ESOP was  $127,402 and $96,665 for
     the years ended June 30, 2002 and 2001, respectively.

     The following table represents the components of the ESOP shares:

                                                         2002          2001
                                                       --------      --------

         Allocated shares                                47,604        38,928

              Shares released for allocation              4,338         4,338

         Shares distributed                              (1,056)       (1,056)

         Unreleased shares                               34,814         43,490
                                                       --------       --------

         Total ESOP share                                85,700         85,700
                                                       ========       ========

         Fair value of unreleased shares               $616,208       $576,242
                                                       ========       ========
                                                                              31


<PAGE>

18.  STOCK OPTION PLAN

     In December  1997,  the Board of Directors  adopted a Stock Option Plan for
     the directors,  officers, and employees, which was approved by stockholders
     at a special  meeting  held on January 20,  1998.  An  aggregate of 108,445
     shares of authorized but unissued common stock of the Company were reserved
     for  future  issuance  under the plan.  The stock  options  typically  have
     expiration  terms of ten years  subject  to  certain  extensions  and early
     terminations. The per share exercise price of a stock option shall be, at a
     minimum, equal to the fair value of a share of common stock on the date the
     option is granted.  Proceeds  from the  exercise  of the stock  options are
     credited  to common  stock for the  aggregate  par value and the  excess is
     credited to additional paid-in capital.

     On January 20, 1998,  qualified stock options were granted for the purchase
     of 65,061 shares  exercisable  at the market price of $18.75 per share at a
     rate of one fourth per year beginning  January 20, 1998. All options expire
     ten years  from the date of grant.  At June 30,  2002,  the  initial  stock
     options granted remain outstanding with none being exercised.

     The Company  accounts  for its stock  option plan under  provisions  of APB
     Opinion No. 25, " Accounting  for Stock Issued to  Employees,"  and related
     interpretations.  Under this  opinion,  no  compensation  expense  has been
     recognized  with  respect to the plan  because  the  exercise  price of the
     Company's  employee stock options equals the market price of the underlying
     stock on the grant date.

     Had  compensation  expense  for the stock  option plan been  recognized  in
     accordance  with the fair  value  accounting  provisions  of  Statement  of
     Financial  Accounting  Standards  No.  123, "  Accounting  for  Stock-based
     Compensation,"  net income  applicable to common stock,  basic and dilutive
     net income per common share, for the years ended June 30 would have been as
     follows:

                                                     2002                2001
                                                  ------------      ------------

         Net Income:
              As reported                          $1,873,522         $  969,865
                                                   ==========         ==========

              Pro forma                            $1,857,257         $  964,661
                                                   ==========         ==========

         Basic Earnings Per Share:
              As reported                          $    2.12          $     1.11
                                                   =========          ==========
              Pro forma                            $    2.12          $     1.11
                                                   =========          ==========

         Diluted Earnings Per Share:
              As reported                          $    2.12          $     1.11
                                                   =========          ==========
              Pro forma                            $    2.11          $     1.10
                                                   =========          ==========

     The following table presents share data related to the stock option plans:

                                                              2002      2001
                                                             -------   -------

         Outstanding, beginning                               65,061    65,061

              Granted                                              -         -
              Exercised                                            -         -
              Forfeited                                            -         -
                                                             -------   -------

         Outstanding, ending (at $18.75 per share)            65,061    65,061
                                                             =======   =======

32

<PAGE>

18.  STOCK OPTION PLAN (CONTINUED)

     The fair value of the option grant was  estimated  using the  Black-Scholes
     option-pricing model with the following  weighted-average  assumptions used
     for the grant in 2002 and 2001,  respectively:  expected  dividend yield of
     2.71% and 3.02%;  expected volatility of 6.0% and 8.0%;  risk-free interest
     rate of 1.68% and 3.91%; and expected lives of 5 and 6 years.

     Dividend  Equivalent  Rights  may be granted  concurrently  with any option
     granted.  These  rights  provide that upon the payment of a dividend on the
     Common  Stock,  the  holder  of  such  Options  shall  receive  payment  of
     compensation  in an amount  equivalent  to the dividend  payable as if such
     Options had been  exercised  and such Common  Stock held as of the dividend
     date. Dividend Equivalent Rights were granted  concurrently with respect to
     the stock options granted in 1998.

     Compensation  expense resulting from Dividend Equivalent Rights was $29,928
     and $26,024 for the years ended June 30, 2002 and 2001.

19.  PREFERRED SHARE PURCHASE RIGHTS PLAN

     In July 1997,  the Board of Directors  adopted a Preferred  Share  Purchase
     Rights Plan and  correspondingly  issued one Preferred Share Purchase Right
     ("a  Right")  for each  share of common  stock of the  Company.  Each Right
     entitles  the   registered   holder  to  purchase   from  the  Company  one
     one-hundredth  of a share of the Company's junior  Participating  Preferred
     Stock,   Series  A  ("Preferred   Shares"),   at  a  price  of  $37.00  per
     one-hundredth  of a Preferred  Share. The Rights will not be exercisable or
     separable  from the common shares until ten business days after a person or
     group  acquire  15% or more  or  tenders  for 50% or more of the  Company's
     outstanding  common  shares.  The Plan also  provides that if any person or
     group  becomes  an  "Acquiring  Person,"  each  Right,  other  than  Rights
     beneficially owned by the Acquiring Person (which will thereafter be void),
     will  entitle  its holder to receive  upon  exercise  that number of common
     shares having a market value of two times the exercise  price of the Right.
     In the  event  the  Company  is  acquired  in a merger  or  other  business
     combination transaction, each Right will entitle its holder to receive upon
     exercise of the Right,  at the Right's then current  exercise  price,  that
     number of the  acquiring  company's  common shares having a market value of
     two times the  exercise  price of the Right.  The  company is  entitled  to
     redeem  the  Rights at a price of one cent per  Right at any time  prior to
     them becoming exercisable, and the Rights expire on July 17, 2007. The Plan
     was designed to protect the interest of the Company's  shareholders against
     certain coercive tactics sometimes employed in takeover attempts.

20.  COMMITMENTS AND CONTINGENT LIABILITIES

     Lease Commitments
     -----------------

     The future  lease  commitments  as of June 30, 2002 for all  noncancellable
     equipment and land leases follows:

                      Fiscal Year
                     Ending June 30,                          Amount
                     ---------------                          ------

                          2002                            $    105,600
                          2003                                 108,600
                          2004                                 108,600
                          2005                                 112,560
                          2006                                 101,560
                   2007 and thereafter                       2,272,010
                                                           -----------

                                                           $ 2,808,930
                                                           ===========

     Litigation
     ----------

     The  Company is  involved  in  litigation  arising in the normal  course of
     business.  Management believes that liabilities, if any, arising from these
     proceedings  will not have a material  adverse  effect on the  consolidated
     financial position, operating results, or liquidity.

                                                                              33

<PAGE>

20.  COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

     Branch Expansion
     ----------------

     Effective March 8, 2002, the Company was granted  permission to establish a
     de novo branch at 125 Dunbar  Avenue in the  Hollywood  Shopping  Center in
     Steubenville,  Ohio. The Company  anticipates the completion of the de novo
     branch in the first quarter of the 2003 fiscal year. The  anticipated  cost
     of the facility  including  the  building,  equipment  and  furnishings  is
     expected to be approximately $800,000, which will primarily be capitalized.
     The Company will use excess cash liquidity to pay all costs associated with
     the constructing and equipping of the new branch facility.

21.  OTHER COMPREHENSIVE INCOME

     Other comprehensive  income in the Consolidated  Statement of Stockholders'
     Equity consists solely of unrealized gains and losses on available for sale
     securities.  The  change  in  net  unrealized  (loss)  gain  on  securities
     available for sale  securities  includes  reclassification  adjustments  to
     reclassify losses, net of tax for sales of the related securities of $0 and
     $18,400 for the years ended June 30, 2002 and 2001.

22.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

     The estimated carrying amounts and fair values are as follows:

<TABLE>
<CAPTION>
                                                              2002                             2001
                                                --------------------------------    ----------------------------
                                                                   Estimated                        Estimated
                                                    Carrying         Fair           Carrying          Fair
                                                    Amount           Value          Amount            Value
                                                --------------   ---------------   -------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial assets:
              Cash and cash equivalents          $  11,770,440     $  11,770,440     $  8,553,178  $   8,553,178
              Investment securities
                    Held to maturity                         -                 -          749,934        742,057
                    Available for sale               9,187,872         9,187,872       11,147,919     11,147,919
              Mortgage-backed securities:
                   Held to maturity                  1,396,306         1,449,641        1,595,349      1,601,960
                   Available for sale                7,791,566         7,791,566        8,383,075      8,383,075
              Loans receivable                     172,145,867       176,106,943      130,035,491    131,710,542
              Federal Home Loan Bank Stock           1,058,100         1,058,100        1,075,000      1,075,000
              Accrued interest receivable            1,160,312         1,160,312        1,017,024      1,017,024
                                                 -------------     -------------     ------------   ------------
                  Total                          $ 204,510,463     $ 208,524,874     $162,556,970   $164,230,755
                                                 =============     =============     ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                             2002                               2001
                                                --------------------------------    ----------------------------
                                                                  Estimated                         Estimated
                                                    Carrying         Fair           Carrying          Fair
                                                    Amount           Value          Amount            Value
                                                --------------   ---------------   -------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial liabilities:
              Deposits                           $ 175,058,743     $ 176,154,743     $130,499,131  $ 131,393,000
              Advances from Federal
               Home Loan Bank                       20,000,000        21,539,000       20,000,000     20,565,000
              Advance payment by borrowers
               for taxes and insurance                 404,220           404,220          146,095        146,095
              Accrued interest payable                  86,583            86,583           75,488         75,488
                                                 -------------     -------------     ------------   ------------
                  Total                          $ 195,549,546     $ 198,184,546     $150,720,714   $152,179,583
                                                 =============     =============     ============   ============
</TABLE>

34

<PAGE>

22.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)

     Financial  instruments are defined as cash,  evidence of ownership interest
     in an entity, or a contract which creates an obligation or right to receive
     or deliver cash or another financial  instrument from/to a second entity on
     potentially favorable or unfavorable terms.

     Fair value is defined as the amount at which a financial  instrument  could
     be exchanged in a current transaction between willing parties other than in
     a forced or  liquidation  sale. If a quoted market price is available for a
     financial  instrument,  the estimated fair value would be calculated  based
     upon the market price per trading unit of the instrument.

     If no  readily  available  market  exists,  the fair  value  estimates  for
     financial  instruments should be based upon management's judgment regarding
     current  economic  conditions,  interest  rate risk,  expected  cash flows,
     future estimated  losses,  and other factors as determined  through various
     option  pricing  formulas  or  simulation   modeling.   As  many  of  these
     assumptions  result from judgments made by management  based upon estimates
     which are inherently uncertain, the resulting estimated fair values may not
     be  indicative  of the  amount  realizable  in  the  sale  of a  particular
     financial  instrument.  In addition,  changes in  assumptions  on which the
     estimated  fair  values  are  based  may have a  significant  impact on the
     resulting estimated fair values.

     As certain  assets such as deferred tax assets and  premises and  equipment
     are not  considered  financial  instruments,  the  estimated  fair value of
     financial instruments would not represent the full value of the Company.

     The Company employed  simulation modeling in determining the estimated fair
     value of  financial  instruments  for which quoted  market  prices were not
     available based upon the following assumptions:

     Cash and Cash Equivalents,  Federal Home Loan Bank Stock,  Accrued Interest
     ---------------------------------------------------------------------------
     Receivable,  Accrued Interest Payable, and Advance Payment by Borrowers for
     ---------------------------------------------------------------------------
     Taxes and Insurance
     -------------------

     The fair value is equal to the current carrying value.

     Investment Securities, Mortgage-backed Securities, and Loans Held for Sale
     --------------------------------------------------------------------------

     The fair value of investment  securities,  mortgage-backed  securities  and
     loans held for sale is equal to the available  quoted  market price.  If no
     quoted market price is available,  fair value is estimated using the quoted
     market price for similar securities.

     Loans, Deposits, and Advances from Federal Home Loan Bank
     ---------------------------------------------------------

     The fair value of loans is estimated by  discounting  the future cash flows
     using a  simulation  model  which  estimates  future cash flows and employs
     discount  rates  that  consider   reinvestment   opportunities,   operating
     expenses, non-interest income, credit quality, and prepayment risk. Demand,
     savings, and money market deposit accounts are valued at the amount payable
     on demand as of year-end.  Fair values for time  deposits and advances from
     Federal  Home  Loan  Bank  are  estimated  using  a  discounted  cash  flow
     calculation  and applies  contractual  costs currently being offered in the
     existing  portfolio to current  market rates being offered for deposits and
     notes of similar remaining maturities.

     Commitments to Extend Credit
     ----------------------------

     These financial instruments are generally not subject to sale and estimated
     fair values are not readily available.  The carrying value,  represented by
     the net deferred fee arising from the unrecognized commitment, and the fair
     value,  determined by discounting  the remaining  contractual  fee over the
     term of the commitment  using fees currently  charged to enter into similar
     agreements  with  similar  credit  risk,  are not  considered  material for
     disclosure.  The contractual amounts of unfunded  commitments are presented
     in Note 7.

                                                                              35
<PAGE>

23.  CAPITAL REQUIREMENTS

     The Company,  on a  consolidated  basis and the Bank are subject to various
     regulatory  capital  requirements  administered  by the federal  regulatory
     agencies. Failure to meet minimum capital requirements can initiate certain
     mandatory and possibly additional  discretionary  actions by the regulators
     that, if undertaken,  could have a direct  material  effect on the entity's
     financial statements.  Under capital adequacy guidelines and the regulatory
     framework for prompt corrective  action, the Company and the Bank must meet
     specific  capital  guidelines  that  involve  quantitative  measures of the
     entities'  assets,  liabilities,  and  certain  off-balance  sheet items as
     calculated under  regulatory  accounting  practices.  The Company's and the
     Bank's capital amounts and  classification  are also subject to qualitative
     judgments by the regulators  about  components,  risk weighting,  and other
     factors.

     Quantitative  measures  established  by the  regulation  to ensure  capital
     adequacy  require the Company and the Bank to maintain  minimum amounts and
     ratios of Total and Tier I  capital  (as  defined  in the  regulations)  to
     risk-weighted  assets,  and of tangible and core capital (as defined in the
     regulations) to adjusted assets (as defined).  Management  believes that as
     of June  30,  2002 the  Company  and the Bank  meet  all  capital  adequacy
     requirements to which they are subject.

     As of June 30, 2002,  the most recent  notification  from the Company's and
     Bank's primary  regulatory  authorities have categorized the entity as well
     capitalized under the regulatory framework for prompt corrective action. To
     be  categorized  as well  capitalized,  the Company must  maintain  minimum
     tangible,  core,  and risk-based  ratios.  There have been no conditions or
     events since that  notification  that management  believes have changed the
     Company's or the Bank's category.

     The following  table  reconciles  the  Company's  and Bank's  capital under
     generally accepted accounting principles to regulatory capital:

<TABLE>
<CAPTION>
                                                          Company                                 Bank
                                            -------------------------------      -------------------------------
                                                        June 30,                             June 30,
                                                 2002              2001                 2002             2001
                                            --------------    -------------        ------------     ------------

<S>                                          <C>              <C>                 <C>              <C>
         Total equity                          $18,223,746      $16,342,717         $16,642,895      $15,587,143
         Intangibles                               445,160                -             445,160                -
         Unrealized gain (loss) - securities       247,301           61,742             247,301           61,742
                                               -----------      -----------         -----------      -----------

         Tier I, core, and tangible capital     17,531,285       16,280,975          15,950,434       15,525,401

         Allowance for loan losses                 969,088          779,170             969,088          779,170
                                               -----------      -----------         -----------      -----------

         Risk-based capital                    $18,500,373      $17,060,145         $16,919,522      $16,304,571
                                               ===========      ===========         ===========      ===========
</TABLE>

36

<PAGE>

23.  CAPITAL REQUIREMENTS (CONTINUED)

     The actual capital amounts and ratios were as follows:

<TABLE>
<CAPTION>
                                                                              Company at June 30,
                                                        --------------------------------------------------------
                                                                      2002                            2001
                                                        -----------------------------   ------------------------
                                                           Amount            Ratio         Amount         Ratio
                                                        ---------------     --------    -------------    -------
<S>                                                     <C>               <C>           <C>             <C>
     Total Capital to Risk-Weighted Assets
     -------------------------------------

         Actual                                           $  18,500,373     13.04%        $17,060,145     15.34%
         For Capital Adequacy Purposes                       11,346,550      8.00           8,898,599      8.00
         To be "Well Capitalized"                            14,183,188     10.00          11,123,249     10.00

     Tier I Capital to Risk-Weighted Assets
     --------------------------------------

         Actual                                           $  17,531,285     12.36%        $16,280,975     14.64%
         For Capital Adequacy Purposes                        5,673,275      4.00           4,449,300      4.00
         To be "Well Capitalized"                             8,509,913      6.00           6,673,950      6.00

     Core Capital to Adjusted Assets
     -------------------------------

         Actual                                           $  17,531,285      8.21%        $16,280,975      9.72%
         For Capital Adequacy Purposes                        8,539,403      4.00           6,697,013      4.00
         To be "Well Capitalized"                            10,674,254      5.00           8,371,266      5.00

     Tangible Capital to Adjusted Assets
     -----------------------------------

         Actual                                           $  17,531,285      8.21%        $16,280,975      9.72%
         For Capital Adequacy Purposes                        3,202,276      1.50           2,511,380      1.50
         To be "Well Capitalized"                             N/A              N/A            N/A           N/A

</TABLE>

<TABLE>
<CAPTION>
                                                                                   Bank at June 30,
                                                        --------------------------------------------------------
                                                                      2002                            2001
                                                        -----------------------------   ------------------------
                                                           Amount            Ratio         Amount         Ratio
                                                        ---------------     --------    -------------    -------
<S>                                                     <C>               <C>        <C>                <C>
     Total Capital to Risk-Weighted Assets
     -------------------------------------

         Actual                                           $  16,919,522     11.94%     $  16,304,571      14.71%
         For Capital Adequacy Purposes                       11,340,560      8.00          8,868,743       8.00
         To be "Well Capitalized"                            14,175,700     10.00         11,085,929      10.00

     Tier I Capital to Risk-Weighted Assets
     --------------------------------------

         Actual                                           $  15,950,434     11.25%     $  15,525,401      14.00%
         For Capital Adequacy Purposes                        5,670,280      4.00          4,434,372       4.00
         To be "Well Capitalized"                             8,505,420      6.00          6,651,558       6.00

     Core Capital to Adjusted Assets
     -------------------------------

         Actual                                           $  15,950,434      7.48%     $  15,525,401       9.20%
         For Capital Adequacy Purposes                        8,524,507      4.00          6,746,730       4.00
         To be "Well Capitalized"                            10,655,634      5.00          8,433,412       5.00

     Tangible Capital to Adjusted Assets
     -----------------------------------

         Actual                                           $  15,950,434      7.48%     $  15,525,401       9.20%
         For Capital Adequacy Purposes                        3,196,690      1.50          2,530,024       1.50
         To be "Well Capitalized"                                   N/A       N/A                N/A        N/A

</TABLE>

                                                                              37