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, 1999 to September 30, 1999        12.50     12.00       .10
      October 1, 1999 to December 31, 1999      13.75     11.63       .10
      January 1, 2000 to March 31, 2000         13.50     10.00       .10
      April 1, 2000 to June 30, 2000            11.00      9.00       .10
      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


     The number of  stockholders of record of common stock as of the record date
of August 31, 2001, was  approximately  455. This does not reflect the number of
persons or entities who held stock in nominee or "street"  name through  various
brokerage firms. At August 31, 2001, 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

<TABLE>
<CAPTION>
                                                                 For  the Years Ended
                                                                       June 30
                                                                 -------------------
                                                                  2001 %     2000 %
                                                                 ------------------
<S>                                                             <C>       <C>
         Return on average assets
              (net income divided by average total assets)            .62       .63
         Return on average equity
              (net income divided by average equity)                 6.16      6.01
         Average equity to average assets ratio
              (average equity divided by average assets)            10.06     10.53
         Equity to assets at period end                              9.76     10.37
         Net interest spread                                         2.95      3.25
         Dividend payout ratio                                      35.50     37.78
         Net yield on average interest-earning assets                3.46      3.71
         Non-performing loans to total assets                         .72       .34
         Non-performing loans to total loans                          .92       .41
         Allowance for loan losses to non-performing assets         49.60     74.06
</TABLE>

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

     On April 18, 2001, the Company entered into a definitive  merger  agreement
to acquire Ohio State Financial Services, Inc. of Bridgeport, Ohio ("OSFS"). The
merger is subject to regulatory approvals, OSFS's shareholder approval and other
conditions. The Company will acquire all of the outstanding common stock of OSFS
for $16.00 per share in cash, or approximately  $8.0 million.  It is anticipated
that the merger will close by the end of the  Company's  first quarter of fiscal
2002.

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.

     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.

7
<PAGE>

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, 2001.


    Changes in rates              NPV Ratio (1)              Change(2)
    ----------------              -------------              ---------
        +300 bp                       9.22 %                  (316) bp
        +200 bp                      10.59                    (179) bp
        +100 bp                      11.65                    ( 72) bp
           0 bp                      12.38
        -100 bp                      12.49                      11  bp
        -200 bp                      12.13                    ( 24) bp
        -300 bp                      11.54                    ( 84) 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,
                                              --------------------------------------------------------------- ----------------------
                                                          2001                            2000                        2001
                                              ------------------------------ -------------------------------- ----------------------
                                               Average             Average    Average               Average     Average   Average
                                               Balance  Interest  Yield/Cost  Balance   Interest   Yield/Cost   Balance  Yield/Cost
                                              --------- --------  ---------- --------   --------   ---------- ---------  -----------
<S>                                          <C>       <C>       <C>       <C>          <C>       <C>        <C>          <C>
Interest-earning assets:
  Loans receivable (1)                        $124,726  $10,611     8.51%    $116,825     $9,564      8.19%    $129,082      8.40%
  Investment securities (2)                     18,060    1,114     6.17%      13,627        879      6.45%      21,154      5.06%
  Mortgage-backed securities                     6,595      439     6.66%       3,936        256      6.49%       9,406      5.89%
                                              --------- --------  --------   ---------   --------   --------   ---------   --------
     Total interest-earning assets             149,381   12,164     8.15%     134,388     10,699      7.96%     159,642      7.81%
                                                        --------  --------               --------   --------               --------
Non-interest-earning assets                      7,094                          7,151                             7,181
                                              ---------                      ---------                         ---------
     Total assets                             $156,475                       $141,539                          $166,823
                                              =========                      =========                         =========
Interest-bearing liabilities:
  Interest-bearing demand deposits             $19,534      637     3.26%     $20,630       $691      3.35%     $20,195      2.56%
  Certificates of deposit                       81,172    4,874     6.00%      71,005      3,849      5.42%      85,072      5.74%
  Savings deposits                              17,499      488     2.79%      16,958        459      2.71%      18,316      2.68%
  FHLB borrowings                               16,563    1,003     6.06%      12,812        717      5.60%      20,000      5.73%
                                              --------- --------  --------   ---------   --------   --------   ---------   --------
     Total interest-bearing liabilities        134,768    7,002     5.20%     121,405      5,716      4.71%     143,583      4.90%
                                                        --------  --------               --------   --------               --------
Non-interest bearing liabilities                 5,960                          5,237                             6,888
                                              ---------                      ---------                         ---------
     Total liabilities                         140,728                        126,642                           150,471
Stockholders' equity                            15,747                         14,897                            16,352
                                              ---------                      ---------                         ---------
     Total liabilities and stockholders'
       equity                                 $156,475                       $141,539                          $166,823
                                              =========                      =========                         =========
Net interest income                                     $ 5,162                          $ 4,983
                                                        ========                         ========
Interest rate spread (3)                                            2.95%                             3.25%                  2.91%
                                                                  ========                          ========               ========
Net Yield on interest-earning assets (4)                            3.46%                             3.71%                  3.40%
                                                                  ========                          ========               ========
Ratio of average interest-earning assets to
  average interest-bearing liabilities                            110.84%                           110.69%                111.18%
                                                                  ========                          ========               ========
</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.


<TABLE>
<CAPTION>
                                                                        Year Ended June 30,
                                                                ----------------------------------
                                                                           2001 vs 2000
                                                                ----------------------------------
                                                                        Increase (Decrease)
                                                                             Due to
                                                                ----------------------------------
                                                                 Volume         Rate         Net
                                                                ----------------------------------
                                                                      (Dollars in Thousands)
<S>                                                             <C>          <C>        <C>
              Interest Income:
                Loans receivable                                   $683         $365       $1,048
                Investment securities                               274          (39)         235
                Mortgage-backed securities                          178            5          183
                                                                ----------------------------------
                   Total interest-earning assets                  1,135          331        1,466
                                                                ----------------------------------

              Interest Expense:
                Interest-bearing demand
                 deposits                                           (14)         (40)         (54)
                Certificates of Deposit                             612          413        1,025
                Savings Deposits                                     14           15           29
                FHLB borrowings                                     227           59          286
                                                                ----------------------------------
                   Total interest-bearing liabilities               839          447        1,286
                                                                ----------------------------------
              Net change in interest income                        $296       $ (116)      $  180
                                                                ==================================
</TABLE>

Comparison of Financial Condition

     The Company's total assets increased approximately $22,223,000,  or 15.30%,
to  $167,487,000  at June 30, 2001,  from  $145,264,000  at June 30,  2000.  The
Company's total Liabilities  increased  $20,948,000 or 16.09% to $151,144,000 at
June 30, 2001,  from  $130,196,000 at June 30, 2000. The increase in liabilities
is  primarily  comprised  of an increase in deposits  and Federal Home Loan Bank
("FHLB") advances of $11,568,000 and $9,500,000,  respectively.  These increases
were used to fund loan demand and to purchase investment securities.

     Total cash and cash  equivalents  increased by  $2,801,000 to $8,553,000 at
June 30,  2001 from  $5,752,000  at June 30,  2000.  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 loan demand.

     Investment  securities  available  for  sale  increased  by  $2,913,000  to
$11,148,000 at June 30, 2001 from  $8,235,000 at June 30, 2000. This increase is
the net result of the  purchase  of five long term  Municipal  Bond  obligations
totaling $5,755,000 which have a tax equivalent yield of approximately 7.66% and
three short term investment grade Corporate Bonds totaling $2,000,000 which have
a weighted average yield of approximately  6.00%. In offsetting these investment
purchases,  the Company chose not to replace  $5,500,000 in FHLB callable agency
securities  redeemed  during the year.  The weighted  average rate of the called
FHLB bonds was 7.15%. The funding for this net increase in investments came from
FHLB advances originated during the fiscal year.

10

<PAGE>

     Mortgage-backed  securities  available for sale  increased by $6,827,000 to
$8,383,000 at June 30, 2001 from  $1,556,000 at June 30, 2000.  This increase is
the result of the purchase of two GNMA  securities with an original par value of
$5,500,000 and a current book value of  $4,664,000,  as well as, the purchase of
three FNMA  securities  with an original par value of  $2,244,000  and a current
book value of $2,242,000.  The weighted  average yield on the five securities is
approximately  6.86%. The funding for the purchases of the investments came from
FHLB advances originated during the fiscal year.

     Net loans receivable  increased $9,875,000 to $129,596,000 at June 30, 2001
from  $119,721,000 at June 30, 2000. The net increase was spread over the entire
portfolio.  Loans  secured by 1-4 family  residences  increased  $2,532,000  due
primarily to the  Company's  decision in April 2001 to retain 15 year fixed rate
mortgages  that in prior periods were sold upon  closing.  This policy change to
retain 15 year fixed rate  mortgages  was temporary in nature and can be changed
by the Company's management upon evaluation of the interest rate environment and
the effects of holding these loans on the Company's interest rate risk measures.
Non-residential  real estate loans and commercial  loans increased by $3,413,000
and  $2,151,000,  respectively,  due to the  strong  demand  for  the  Company's
competitively priced ARM products and demand from existing customers. Automobile
loans  increased  $2,097,000 of which  $1,905,000 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  $11,568,000 to  $130,499,000  at June 30, 2001 from
$118,931,000  at June 30, 2000.  Within the deposit line item,  certificates  of
deposit increased by $9,330,000 to $85,342,000 at June 30, 2001 from $76,012,000
at June 30,  2000.  This  increase is  primarily  the result of  certificate  of
deposit specials  offered over the past fiscal year.  Although the same specials
are being offered  currently,  the annual  percentage rates have been reduced on
average  approximately 250 basis points from the beginning of the fiscal period.
For the year  ended  June 30,  2001,  the  weighted  average  cost of funds  for
certificates of deposit was 6.00%,  while the weighted average cost of funds for
certificates of deposits for the month of June 2001 was 5.74%.  This decrease is
a result of the current  interest  rate  environment  we have been  experiencing
since January 2001.

     Demand  deposits and savings  deposits  increased  $1,590,000 and $648,000,
respectively.  The  increase in core  deposits is a reversal of a trend  noticed
during  the last half of  fiscal  2000 and the first  half of fiscal  2001.  The
increase in core and the significant growth in certificates can be attributed to
customers altering their investment options.

     Advances from the FHLB increased $9,500,000 to $20,000,000 at June 30, 2001
from  $10,500,000 at June 30, 2000.  This increase is the net result of activity
over the current period. During the fiscal year ended June 30, 2001, the Company
has  taken out  three $5  million  convertible  select  advances.  The first was
obtained in November  2000 and has a maturity of November 2010 with a conversion
date of  November  2003,  it is priced at 6.05%.  The  second  was  obtained  in
December  2000 and has a maturity of  December  2010 with a  conversion  date of
December  2004,  it is priced at 5.54%.  The third advance was obtained in March
2001 and has a maturity  of March 2011 with a  conversion  date of March 2002 if
the three-month  Libor rate exceeds 6.99%,  this advance is priced at 4.96%. The
increase  in  advances  is offset by the  maturity  of a  $2,500,000  short term
advance and the payoff of a $3 million  dollar  advance that was priced at 5.52%
and was to be converted in October 2001. The additional $9,500,000 in funds were
used primarily to purchase investment and mortgage-backed securities.

     Stockholders  equity  increased  $1,275,000 to $16,343,000 at June 30, 2001
from  $15,068,000 at June 30, 2000. Net income of $970,000,  the  recognition of
shares in the Employee Stock  Ownership  Plan and the  Restricted  Stock Plan of
$286,000, and an increase in the net unrealized gain on securities available for
sale of $363,000 were offset by the payment of cash dividends of $344,000.

Comparison  of the Results of  Operations  for the Years Ended June 30, 2001 and
2000

     Net Interest Income. The Company's net interest income increased  $179,000,
or 3.61%, to $5,162,000 for the year ended June 30, 2001 from $4,983,000 for the
same period ended 2000. 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 decreased to
2.95% for the period  ended June 30, 2001 from 3.25% for the same  period  ended
2000. The average yield on interest  earning assets increased 18 basis points to
8.14% at June 30, 2001 from 7.96% for the  comparable  period  ended  2000.  The
average cost of funds increased 49 basis points to 5.20% for the year ended June
30, 2001 from 4.71% for the comparable period ended 2000.


11
<PAGE>

     Interest and Dividend Income.  Total interest and dividend income increased
$1,465,000,  or 13.70%,  to  $12,164,000  for the year ended June 30,  2001 from
$10,699,000 for the comparable 2000 period. The increase was primarily due to an
increase in earnings on loans of  $1,048,000  as the average  principle  balance
increased  $7,901,000 to $124,726,000 at June 30, 2001 from $116,825,000 for the
comparable 2000 period. Interest and dividend income on investments and interest
bearing  deposits  with other  financial  institutions  increased  approximately
$417,000 as average principle  balances  increased  $7,092,000 to $24,655,000 at
June 30, 2001 from  $17,563,000  for the  comparable  2000  period.  See Average
Balance Sheet Table included herein for additional detail.

     Interest Expense.  Total interest expense increased $1,286,000 or 22.50% to
$7,002,000  for the year ended June 30, 2001 compared to $5,716,000 for the same
period ended 2000.  The increase was primarily due to an increase in interest on
certificates  of  deposit  of  $1,025,000  as  the  average  balance   increased
$10,167,000 to $81,172,000 for the year ended June 30, 2001 from $71,005,000 for
the comparable 2000 period.  Interest expense on advances  increased $286,000 as
the average balance increased  $3,751,000 to $16,563,000 for the year ended June
30, 2001 from  $12,812,000 for the comparable  2000 period.  See Average Balance
Sheet included herein for additional detail.

     Provision for Loan Losses.  For the year ended June 30, 2001, the provision
for loan losses was  $191,000 as compared to $175,000  for the  comparable  2000
period. Net charge-offs for the period ended June 30, 2001 were $94,000 compared
to $75,000 for the comparable 2000 period.  Management continually evaluates the
adequacy of the allowance for loan losses,  which  encompasses  the overall risk
characteristics of the various portfolio segments,  past experience with losses,
the impact of economic  conditions on  borrowers,  and other  relevant  factors.
While the loan mix has  changed  slightly  over the past two  years,  management
believes that the underlying  collateral supporting such loans provides adequate
coverage.  The Company  maintains a desirable  level in its loan loss provisions
based upon the  Company's  review of the  market,  loan  portfolio,  and overall
assessment  of  the  adequacy  of  the  valuation  allowance.  There  can  be no
assurance,  however,  that additional  provisions will not be required in future
periods.

     Noninterest Income.  Noninterest income increased  $130,000,  or 18.40%, to
$835,000  for the year ended June 30, 2001  compared  to  $705,000  for the same
period  ended 2000.  For the year ended June 30,  2001,  gains on sales of fixed
rate mortgages increased by $59,000. In addition, miscellaneous fees and fees on
deposit  accounts  increased  $50,000  and  Consumer  Card income  increased  by
$19,000.  The  increases in these service fees are due primarily to increases in
customer activity. Also, during the fiscal year ended June 30, 2001, the Company
sold two investments  with a net realized gain of $19,000.  Theses net increases
were offset by a write-down of Other Real Estate Owned of $20,000 and a realized
loss on the sale of another piece of Other Real Estate Owned of $11,000.

     Noninterest Expense.  Noninterest expense increased $223,000,  or 5.52%, to
$4,263,000 for the year ended June 30, 2001 from  $4,040,000 for the same period
ended 2000.  Compensation and benefits increased $108,000,  or 5.56%, due to the
hiring of additional employees for loan collection and data processing,  as well
as, additional costs of living increases for all full time employees.  Occupancy
and equipment  increased $89,000, or 13.10%. The increase is primarily due to an
increase in combined  equipment  depreciation  and  maintenance of $69,000.  The
increase is directly  related to the in-house item  processing  department  that
began during the latter part of 1999. Data processing  charges decreased $56,000
for the year ended June 30, 2001.  The decrease is due to the  completion of the
conversion  to in-house item  processing  in January 2000.  The decrease in data
processing  is offset by similar  increases in  "occupancy  and  equipment"  for
depreciation   and   maintenance   and  in  "other   expenses"   for   supplies,
communications and postage,  which increased $30,000 for the year ended June 30,
2001. Other expenses have increased $77,000 for the year ended June 30, 2001. In
addition  to the  increase in  supplies,  communications  and postage  discussed
above,  state franchise taxes have increased $15,000 and expenses related to the
company's merchant card program have increased $11,000.

     Income Taxes.  Income tax expense decreased $5,000 to $573,000 for the year
ended June 30, 2001  compared to $578,000  for the same period  ended 2000.  The
effective tax rate for income taxes as of the years ended June 30, 2001 and 2000
was 37% and 39%, respectively. The decrease in the effective tax rate is related
to the municipal bonds purchased during the fiscal period ended June 30, 2001.

12
<PAGE>

     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.  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  decreased  $864,000 to $825,000
for the year ended June 30,  2001  compared  to  $1,689,000  for the same period
ended 2000.  This decrease was primarily the result of an increase in fixed rate
mortgage loans  originated but not yet sold of $440,000 and a change in deferred
income taxes on available for sale investments of $187,000.

     Net cash used for  investing  activities  for the year ended June 30,  2001
increased $4,239,000 to $18,690,000 from $14,451,000 for the year ended June 30,
2000.  This  increase is  primarily  the result of a net  increase in  investing
activity of  $4,713,000  The net increase in investing  activity was funded by a
net increase in FHLB advances discussed below in financing activity.

     Net cash provided by financing  activities for the year ended June 30, 2001
increased  $6,513,000 to $20,667,000  from $14,154,000 for the same period ended
2000.  The  increase  was  primarily a result of a net  increase in FHLB advance
activity of $8,000,000.  The increase in net FHLB advance activity was offset by
a decrease in net deposit activity of $2,024,000.

     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.

13
<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,  2001  and  2000,  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, 2001 and 2000,  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/ S.R. Snodgrass, A.C.

Steubenville, Ohio
July 20, 2001



14
<PAGE>

                            ADVANCE FINANCIAL BANCORP
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                     June 30,
                                                                               2001             2000
                                                                          -------------    -------------
<S>                                                                     <C>              <C>
ASSETS Cash and cash equivalents:
     Cash and amounts due from banks                                      $   1,177,728    $   1,109,746
     Interest-bearing deposits with other institutions                        7,375,450        4,641,878
                                                                          -------------    -------------
              Total cash and cash equivalents                                 8,553,178        5,751,624
                                                                          -------------    -------------
Investment securities:
     Securities held to maturity (fair value of $742,057
      and $1,187,625)                                                           749,934        1,249,672
     Securities available for sale                                           11,147,919        8,234,637
                                                                          -------------    -------------
              Total investment securities                                    11,897,853        9,484,309
                                                                          -------------    -------------
Mortgage-backed securities:
     Securities held to maturity (fair value of $1,601,960
      and $2,027,016)                                                         1,595,349        2,089,010
     Securities available for sale                                            8,383,075        1,556,172
                                                                          -------------    -------------
              Total mortgage-backed securities                                9,978,424        3,645,182
                                                                          -------------    -------------

Loans held for sale                                                             439,949                -
Loans receivable (net of allowance for loan losses of
 $779,170 and $682,103)                                                     129,595,542      119,721,308
Premises and equipment, net                                                   3,828,367        4,070,295
Federal Home Loan Bank stock, at cost                                         1,075,000          800,000
Accrued interest receivable                                                   1,017,024          870,955
Other assets                                                                  1,101,725          920,767
                                                                          -------------    -------------

              TOTAL ASSETS                                                $ 167,487,062    $ 145,264,440
                                                                          =============    =============

LIABILITIES
Deposits                                                                  $ 130,499,131    $ 118,930,939
Advances from Federal Home Loan Bank                                         20,000,000       10,500,000
Advance payments by borrowers for taxes and insurance                           146,095          203,320
Accrued interest payable and other liabilities                                  499,119          561,907
                                                                          -------------    -------------
              TOTAL LIABILITIES                                             151,144,345      130,196,166
                                                                          -------------    -------------
COMMITMENTS AND CONTINGENCIES

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, 2001 and 2000                              108,445          108,445
Additional paid in capital                                                   10,339,790       10,329,885
Retained earnings - substantially restricted                                  8,806,639        8,181,053
Unallocated shares held by Employee Stock Ownership Plan (ESOP)                (424,154)        (510,915)
Unallocated shares held by Restricted Stock Plan (RSP)                         (316,480)        (505,849)
Treasury stock (152,165 shares at cost)                                      (2,233,265)      (2,233,265)
Accumulated other comprehensive income (loss)                                    61,742         (301,080)
                                                                          -------------    -------------
              TOTAL STOCKHOLDERS' EQUITY                                     16,342,717       15,068,274
                                                                          -------------    -------------

              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 167,487,062    $ 145,264,440
                                                                          =============    =============
</TABLE>
See accompanying notes to the consolidated financial statements.

15
<PAGE>

                            ADVANCE FINANCIAL BANCORP
                        CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>

                                                             Year Ended June 30,
                                                             2001            2000
                                                         ------------    ------------
<S>                                                   <C>             <C>
INTEREST AND DIVIDEND INCOME
     Loans                                               $ 10,611,680    $  9,563,641
     Investment securities                                    743,324         652,439
     Interest-bearing deposits with other institutions        304,312         175,184
     Mortgage-backed securities                               438,865         255,555
     Federal Home Loan Bank stock                              66,073          51,781
                                                         ------------    ------------
              Total interest and dividend income           12,164,254      10,698,600
                                                         ------------    ------------

INTEREST EXPENSE
     Deposits                                               5,998,943       4,998,754
     Advances from Federal Home Loan Bank                   1,002,988         717,212
                                                         ------------    ------------
              Total interest expense                        7,001,931       5,715,966
                                                         ------------    ------------

NET INTEREST INCOME                                         5,162,323       4,982,634

Provision for loan losses                                     191,400         174,600
                                                         ------------    ------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES         4,970,923       4,808,034
                                                         ------------    ------------
NONINTEREST INCOME
     Service charges on deposit accounts                      479,912         438,984
     Gain on sale of loans                                     67,497           8,957
     Gain on sale of investments                               18,670            --
     Loss on sale of other real estate owned                  (31,251)           --
     Other income                                             300,032         257,162
                                                         ------------    ------------
              Total noninterest income                        834,860         705,103
                                                         ------------    ------------

NONINTEREST EXPENSE
     Compensation and employee benefits                     2,043,805       1,936,149
     Occupancy and equipment                                  766,472         677,675
     Professional fees                                        111,834         108,979
     Advertising                                              110,320         107,770
     Data processing                                          243,387         299,306
     Other operating expenses                                 986,741         909,622
                                                         ------------    ------------
              Total noninterest expense                     4,262,559       4,039,501
                                                         ------------    ------------

Income before income taxes                                  1,543,224       1,473,636
Income taxes                                                  573,359         577,876
                                                         ------------    ------------

NET INCOME                                               $    969,865    $    895,760
                                                         ============    ============
EARNINGS PER SHARE:
     Basic                                               $       1.11    $       1.01
     Diluted                                             $       1.11    $       1.01

</TABLE>

See accompanying notes to the consolidated financial statements.


16
<PAGE>
                                     ADVANCE FINANCIAL BANCORP
                       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 Retained                                               Accumulated
                                   Additional    Earnings   Unallocated   Unallocated                      Other         Total
                         Common     Paid In   Substantially Shares Held   Shares Held     Treasury     Comprehensive  Stockholders'
                          Stock     Capital     Restricted   By ESOP        By RSP          Stock      (Loss) Income     Equity
                          -----     -------     ----------   ----------   -----------     --------     -------------     ------
<S>                    <C>       <C>           <C>           <C>          <C>          <C>              <C>           <C>
Balance, June 30, 1999  $108,445  $10,316,719   $7,623,733    $(597,767)   $(682,357)   $(1,626,890)     $(148,431)    $14,993,452
Comprehensive income:
   Net income                                      895,760                                                                 895,760
   Net unrealized
    loss on securities,
    net of tax benefit
    of $78,637                                                                                            (152,649)       (152,649)
                                                                                                                          ---------
Comprehensive income                                                                                                       743,111
Purchase of treasury
  stock                                                                                    (606,375)                      (606,375)
Accrued compensation
  expense for RSP                                                            197,591                                       197,591
RSP forfeited shares                                                         (21,083)                                      (21,083)
Release of earned
  ESOP shares                          13,166                    86,852                                                    100,018
Cash dividends declared
   ($.40 per share)                               (338,440)                                                               (338,440)
                        ---------------------  ------------ -----------  -----------  ------------- --------------    -------------

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

See accompanying notes to the consolidated financial statements.

17
<PAGE>

                            ADVANCE FINANCIAL BANCORP
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                       Year Ended June 30,
                                                                                       2001            2000
                                                                                  ------------    ------------
<S>                                                                             <C>             <C>
OPERATING ACTIVITIES
     Net income                                                                   $    969,865    $    895,760
     Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation, amortization and accretion, net                                 616,801         560,757
         Provision for loan losses                                                     191,400         174,600
         Gain on sale of investments                                                   (18,670)              -
         Loss on sale of other real estate owned                                        31,251               -
         Gain on sale of loans                                                         (67,497)         (8,957)
         Origination of loans held for sale                                         (5,568,905)     (2,297,188)
         Proceeds from the sale of loans                                             5,196,453       2,306,145
         Increase in accrued interest receivable                                      (146,069)       (206,897)
         (Decrease) increase in accrued interest payable                              (113,019)        138,151
         Other, net                                                                   (266,683)        126,392
                                                                                  ------------    ------------

              Net cash provided by operating activities                                824,927       1,688,763
                                                                                  ------------    ------------
INVESTING ACTIVITIES
     Investment securities held to maturity:
         Purchases                                                                           -        (249,453)
         Maturities and repayments                                                     500,000               -
     Investment securities available for sale:
         Purchases                                                                  (8,609,371)     (4,467,656)
         Maturities and repayments                                                   6,000,322         506,330
         Proceeds from sale                                                            135,905               -
     Mortgage-backed securities held to maturity:
         Purchases                                                                           -               -
         Maturities and repayments                                                     491,414         381,374
     Mortgage-backed securities available for sale:
         Purchases                                                                  (7,745,213)              -
         Maturities and repayments                                                   1,042,705         253,257
     Purchases of Federal Home Loan Bank Stock                                        (275,000)       (170,500)
     Net increase in loans                                                         (10,065,634)    (10,353,855)
     Purchases of premises and equipment                                              (165,189)       (350,187)
                                                                                  ------------    ------------
              Net cash used for investing activities                               (18,690,061)    (14,450,690)
                                                                                  ------------    ------------
FINANCING ACTIVITIES
     Net increase in deposits                                                       11,568,192      13,592,169
     Proceeds of advances from Federal Home Loan Bank                               15,000,000      16,000,000
     Repayment of advances from Federal Home Loan Bank                              (3,000,000)    (17,000,000)
     Net (decrease) increase in short term advances from Federal Home Loan Bank     (2,500,000)      2,500,000
     Net change in advances for taxes and insurance                                    (57,225)          6,327
     Purchase of treasury stock                                                              -        (606,375)
     Cash dividends paid                                                              (344,279)       (338,440)
                                                                                  ------------    ------------
         Net cash provided by financing activities                                  20,666,688      14,153,681
                                                                                  ------------    ------------
         Increase in cash and cash equivalents                                       2,801,554       1,391,754

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                       5,751,624       4,359,870
                                                                                  ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                          $  8,553,178    $  5,751,624
                                                                                  ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements

18
<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,  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  $439,949  and $0 in loans  held for  sale at June 30,  2001 and  2000,
     respectively.

19
<PAGE>
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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  judgement,  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  allowance  for loan  losses  represents  the amount  which  management
     estimates  is  adequate  to  provide  for  potential  losses  in  its  loan
     portfolio.  The  allowance  method is used in  providing  for loan  losses.
     Accordingly,  all  loan  losses  are  charged  to  the  allowance  and  all
     recoveries are credited to it. The allowance for loan losses is established
     through a provision for loan losses  charged to  operations.  The provision
     for loan losses is based on management's  periodic evaluation of individual
     loans,  economic  factors,  past  loan  loss  experience,  changes  in  the
     composition and volume of the portfolio,  and other relevant  factors.  The
     estimates  used in  determining  the  adequacy  of the  allowance  for loan
     losses,  including the amounts and timing of future cash flows  expected on
     impaired loans, are particularly susceptible to changes in the near term.

     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.
     Any  subsequent   write-downs  are  charged  against  operating   expenses.
     Operating expenses of such properties,  net of related income and losses on
     their disposition are included in other expenses.

     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,  which  range from five to forty  years.  Expenditures  for
     maintenance  and repairs are charged  against income as incurred.  Costs of
     major additions and improvements are capitalized.

20
<PAGE>
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

     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, 2001 and
     2000 were $7,114,950 and $5,577,815, respectively. Cash payments for income
     taxes for the fiscal  years ended June 30, 2001 and 2000 were  $748,332 and
     $501,622, 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.  If applicable,  pro
     forma net income and  earnings  per share would be 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
     --------------------------------

     SFAS  No.  133   "Accounting   for  Derivative   Instruments   and  Hedging
     Activities",  was issued by the Financial Accounting Standards Board (FASB)
     in June 1998.  SFAS No. 133  standardizes  the  accounting  for  derivative
     instruments,  including certain  derivative  instruments  embedded in other
     contracts.  Under  the  standard,   entities  are  required  to  carry  all
     derivative  instruments  in the  statement of  financial  condition at fair
     value.  However,  SFAS No. 137  extended  the  adoption  of SFAS No. 133 to
     periods  beginning  after June 15, 2000. In June 2000, the FASB issued SFAS
     No 138, "Accounting for Certain Derivative  Instruments and Certain Hedging
     Activities",  an Amendment of FASB Statements No. 133 and 137, which amends
     the  accounting  and  reporting  standards  of SFAS No. 133 for  derivative
     instruments.  Upon adoption, the provisions of SFAS No. 133 must be applied
     prospectively. The adoption of SFAS No. 133 and SFAS 138 as of July 1, 2000
     did not have a material impact on the consolidated  financial statements of
     the Company.

21
<PAGE>
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Recent Accounting Pronouncements (Continued)
     -------------------------------------------

     In September  2000, the FASB issued SFAS No. 140  "Accounting for transfers
     and Servicing of Financial  Assets and  Extinguishments  of  Liabilities (A
     Replacement of FASB  Statement  125)." SFAS No. 140 supercedes and replaces
     the  guidance  in SFAS  125  and,  accordingly,  provides  guidance  on the
     following topics:  securitization  transactions involving financial assets;
     sales  of  financial  assets  and  liabilities;   collateralized  borrowing
     arrangements;  securities lending transactions; repurchase agreements; loan
     participations  and  extinguishments  of  liabilities.   SFAS  No.  140  is
     effective for transactions  entered into after March 31, 2001. The adoption
     of SFAS 140 did not have a material  impact on the  consolidated  financial
     statements of the Company.

     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 is not
     expected to 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 the fiscal
     years  beginning  after  December 15, 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 is not expected to have a material  effect on
     the Company's financial position or results of operations.

     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 Combination
     --------------------

     On April 18, 2001, the Company entered into a definitive  merger  agreement
     to  acquire  Ohio  State  Financial  Services,  Inc.  of  Bridgeport,  Ohio
     ("OSFS").  The merger is subject to regulatory approvals,  OSFS shareholder
     approval,  and  other  conditions.  The  company  will  acquire  all of the
     outstanding  common  stock  of OSFS  for  $16.00  per  share  in  cash,  or
     approximately $8.0 million. It is anticipated that the merger will close by
     the end of the Company's first quarter of fiscal 2002.

3.   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>
                                                               2001          2000
                                                           ----------    ----------

<S>                                                       <C>           <C>
Weighted-average common shares outstanding                  1,084,450     1,084,450
Average treasury stock shares                                (152,165)     (132,011)
Average unearned ESOP and RSP shares                          (55,118)      (62,054)
                                                           ----------    ----------
Weighted -average common shares and
    common stock equivalents used to calculate basic EPS      877,167       890,385

Additional common stock equivalents (stock options)
    used to calculate diluted EPS                                   -             -
                                                           ----------    ----------
Weighted-average common shares and
    Common stock equivalents used to calculate
    Diluted EPS                                               877,167       890,385
                                                           ==========    ==========
</TABLE>
22
<PAGE>
4.   INVESTMENT SECURITIES

     The  amortized  cost  and  estimated  market  value of  investments  are as
follows:
<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>
<TABLE>
<CAPTION>
                                                                                    2000
                                                          ------------------------------------------------------
                                                                            Gross       Gross
                                                           Amortized      Unrealized   Unrealized      Fair
                                                              Cost          Gains       Losses         Value
                                                          ------------    -----------  -----------  ------------
<S>                                                      <C>          <C>              <C>         <C>
     Held-to-maturity
     ----------------
         U.S. Government and Agency Obligations            $ 1,249,672  $         -      $(62,047)   $ 1,187,625
                                                           -----------  -----------      --------    -----------
     Available-for-sale
     ------------------
         U.S. Government and Agency Obligations              8,469,628            -      (341,201)     8,128,427
         Common stocks                                         105,625            -       (25,625)        80,000
         Money Fund Securities                                  34,026            -        (7,816)        26,210
                                                          ------------  -----------    -----------    ----------
              Total available for sale                       8,609,279            -      (374,642)     8,234,637
                                                           -----------  -----------     ----------    ----------

              Total Investment Securities                   $9,858,951  $         -     $(436,689)    $9,422,262
                                                            ==========  ===========     ==========    ==========
</TABLE>
     The weighted average  interest rate on investment  securities was 5.82% and
     6.95% at June 30, 2001 and 2000, respectively.

     The amortized cost and estimated fair value of debt  securities at June 30,
     2001, 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                          $         -    $         -
         After one through five years                2,703,568      2,726,506
         After five through ten years                1,500,000      1,493,298
         After ten years                             7,255,422      7,277,144
                                                    ----------     ----------
              Total                                $11,458,990    $11,496,948
                                                   ===========    ===========

     Proceeds  received  on  securities  as a result of sales and calls prior to
     maturity were $6,136,227 and $500,000 for the years ended June 30, 2001 and
     2000, respectively.  Gains on sales were $20,375 and $0 for the years ended
     June 30,  2001 and 2000,  respectively.  Losses on sales were $1,705 and $0
     for the years ended June 30, 2001 and 2000, respectively.

As of June 30, 2001,  the Company has pledged  $750,000 of U.S.  Government  and
Agency Obligations to secure public deposits.

23
<PAGE>
5.   MORTGAGE-BACKED SECURITIES

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

<TABLE>
<CAPTION>
                                                                                    2000
                                                          ------------------------------------------------------
                                                                           Gross         Gross
                                                          Amortized      Unrealized    Unrealized         Fair
                                                              Cost          Gains        Losses           Value
                                                          -----------    ----------    ----------    -----------
<S>                                                     <C>             <C>         <C>            <C>
     Held-to-maturity
     ----------------
         Government National Mortgage Association         $   579,864     $   3,017   $   (5,320)    $   577,561
         Federal Home Loan Mortgage Corporation               131,343         7,922            -         139,265
         Federal National Mortgage Association              1,377,803             -      (67,613)      1,310,190
                                                           ----------    ----------    ----------     ----------
              Total held to maturity                        2,089,010        10,939      (72,933)      2,027,016
                                                           ----------    ----------    ----------     ----------
     Available-for-sale

         Government National Mortgage Association           1,223,787             -      (61,487)      1,162,300
         Federal National Mortgage Association                413,923             -      (20,051)        393,872
                                                           ----------    ----------    ----------     ----------
              Total available for sale                      1,637,710             -      (81,538)      1,556,172
                                                           ----------    ----------    ----------     ----------

              Total Mortgage backed securities             $3,726,720       $10,939    $(154,471)     $3,583,188
                                                           ==========       =======    ==========     ==========
</TABLE>

     Mortgage-backed securities provide for periodic, generally monthly payments
     of principal and interest and have contractual  maturities ranging from ten
     to thirty years at June 30, 2001. 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, 2001,  mortgage-backed securities with a book value
     of $762,998  and a fair value of  $768,206  are one year  adjustable  types
     currently paying a weighted  average 5.91%.  The remaining  instruments are
     all fixed rate types  ranging from 5.5% to 10%.  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, 2001 or 2000.

24
<PAGE>

6.   LOANS RECEIVABLE


     Loans receivable are comprised of the following at June 30:

                                                       2001            2000
                                                  ------------    ------------
         Mortgage loans:
              1 - 4 family                        $ 64,696,315    $ 62,163,992
              Multi-family                           6,002,553       5,469,906
              Non-residential                       27,956,885      24,543,795
              Construction                           2,455,751       3,241,801
                                                  ------------    ------------
                   Total mortgage loans            101,111,504      95,419,494
                                                  ------------    ------------
         Consumer loans:
              Home improvement                       1,208,279       1,439,387
              Automobile                            13,000,468      10,903,416
              Share loans                            1,594,755       1,406,328
              Other                                  2,778,630       2,675,498
                                                  ------------    ------------
                   Total consumer loans             18,582,132      16,424,629
                                                  ------------    ------------

         Commercial loans                           12,651,451      10,500,256
                                                  ------------    ------------
         Less:
              Loans in process                       1,861,360       1,812,877
              Net deferred loan fees                   109,015         128,091
              Allowance for loan losses                779,170         682,103
                                                  ------------    ------------
                                                     2,749,545       2,623,071
                                                  ------------    ------------

                  Total loans                     $129,595,542    $119,721,308
                                                  ============    ============

     Single  family  mortgage  loans  serviced  for Freddie  Mac,  which are not
     included  in  the  Consolidated  Balance  Sheet,  totaled  $20,594,042  and
     $19,682,946 at June 30, 2001 and 2000, 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:

                                                    2001                2000
                                                 ------------      -------------

         Commitments to originate loans
              Fixed rate                          $ 1,606,710        $   119,000
              Variable rate                       $ 1,180,076        $   163,962
         Loans in process                         $ 1,861,360        $ 1,812,877
         Unused lines of credit                   $ 6,970,392        $ 6,734,552
         Letters of credit                        $    95,802        $    55,000

     The range of interest  rates on fixed rate loan  commitments  was 6.625% to
     9.125% at June 30, 2001.

25
<PAGE>

6.   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,  2001 is as
     follows:

         Balance                              Amount          Balance
          2000               Additions       Collected         2001
        -----------          -----------     ---------      -----------

         $1,495,288           $156,255         $168,769      $1,482,774

     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.


7.   ALLOWANCE FOR LOAN LOSSES

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

                                                        2001           2000
                                                    ------------   ------------

         Balance, beginning of period               $    682,103   $    582,280
         Add:
              Provisions charged to operations           191,400        174,600
              Loan recoveries                              3,339          4,273
                                                    ------------     ----------
                  Total                                  876,842        761,153
         Less: loans charged off                          97,672         79,050
                                                    ------------     ----------

         Balance, end of period                     $    779,170   $    682,103
                                                    ============   ============

     Nonperforming  loans totaled  $1,203,011  and $493,195 at June 30, 2001 and
     2000 respectively. At June 30, 2001 and 2000, the company had no loans that
     met the definition of impaired.

26
<PAGE>
8.   PREMISES AND EQUIPMENT, NET

     Premises and equipment are summarized by major classification as follows:

<TABLE>
<CAPTION>
                                                                                     2001               2000
                                                                                 ------------       ------------
<S>                                                                            <C>               <C>
         Land                                                                    $    303,857       $    303,857
         Buildings and improvements                                                 3,421,642          3,421,642
         Furniture, fixtures, and equipment                                         2,349,384          2,210,790
                                                                                 ------------       ------------
              Total                                                                 6,074,883          5,936,289
         Less accumulated depreciation                                              2,246,516          1,865,994
                                                                                 ------------       ------------

              Premises and equipment, net                                        $  3,828,367       $  4,070,295
                                                                                 ============       ============
</TABLE>

     Depreciation  charged to  operations  amounted to $407,117 and $364,686 for
     the years ended June 30, 2001 and 2000, respectively.

9.   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.

10.  ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable consists of the following:
<TABLE>
<CAPTION>
                                                                                       2001              2000
                                                                                 ------------       ------------
<S>                                                                            <C>                <C>
         Investment securities                                                   $    167,585       $    160,874
         Mortgage-backed securities                                                    53,736             18,991
         Loans receivable                                                             795,703            691,090
                                                                                 ------------        -----------
              Total                                                                 1,017,024       $    870,955
                                                                                  ===========       ============
</TABLE>

11.  DEPOSITS

     Deposit accounts are summarized as follows:

<TABLE>
<CAPTION>
                                                                 2001                             2000
                                                   ------------------------------     ---------------------------
                                                                       Percent of                      Percent of
                                                        Amount         Portfolio            Amount     Portfolio
                                                   ---------------    -----------     --------------   ----------
<S>                                              <C>                   <C>        <C>                  <C>
         Non-interest-bearing                      $     6,591,651         5.1%       $    5,054,410       4.3%
                                                   ---------------    --------        --------------   -------

         Savings accounts                               18,299,257        14.0           17,651,027       14.8
         NOW accounts                                    8,361,345         6.4            7,807,308        6.6
         Money market accounts                          11,904,733         9.1           12,406,664       10.4
                                                    --------------     -------        -------------     ------
                                                        38,565,335        29.5           37,864,999       31.8
                                                    --------------     -------        -------------     ------
         Time certificates of deposit:
              2.00 -  4.00%                              3,175,532         2.4            2,101,639        1.8
              4.01 -  6.00%                             39,263,156        30.1           42,621,436       35.8
              6.01 -  8.00%                             42,903,457        32.9           31,288,455       26.3
                                                    --------------     -------        -------------     ------
                                                        85,342,145        65.4           76,011,530       63.9
                                                    --------------     --------       -------------     ------

                  Total                               $130,499,131      100.0%         $118,930,939      100.0%
                                                      ============      =====          ============      =====

</TABLE>

27
<PAGE>
11.  DEPOSITS (CONTINUED)

     The scheduled  maturities of time  certificates of deposit at June 30, 2001
are as follows:

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

         Within one year                                             $63,479,946
         Beyond one year but within two years                         16,797,453
         Beyond two years but within three years                       2,220,333
         Beyond three years but within five years                      1,776,001
         Beyond five years                                             1,068,412
                                                                     -----------

              Total                                                  $85,342,145
                                                                     ===========

     The Company had time certificates  with a minimum  denomination of $100,000
     in the amount of approximately  $12,711,277 and $6,685,503 at June 30, 2001
     and 2000,  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:

                                                        2001         2000
                                                      ----------   ----------

         Passbooks                                    $  467,965   $  458,723
         NOW and Money Market Deposit accounts           636,793      690,941
         Time certificates                             4,894,185    3,849,090
                                                      ----------    ---------
                                                      $5,998,943   $4,998,754
                                                      ==========   ==========

12.  ADVANCES FROM FEDERAL HOME LOAN BANK

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

                Principal       Interest       Interest
                    Due           Due            Rate        2001        2000
               -----------      --------       -------- -----------  -----------
     Advance   08-03-2000       Annually         5.94%  %         -  $ 2,500,000
     Advance   06-30-2005       Monthly          6.36%    5,000,000    5,000,000
     Advance   10-22-2009       Monthly          5.52%            -    3,000,000
     Advance   11-03-2010       Monthly          6.05%    5,000,000            -
     Advance   12-20-2010       Monthly          5.54%    5,000,000            -
     Advance   02-28-2011       Monthly          4.96%    5,000,000            -
                                                        -----------  -----------
                                                        $20,000,000  $10,500,000
                                                        ===========  ===========

     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, 2001,  have fixed
     rates with putable options. The putable options are as follows:

                Principal       Putable        Interest
                   Due            Date          Rate       Renewable Terms
                 ------        ----------      -------  ---------------------
     Advance   06-30-2005       9-30-2001       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       2-20-2002       4.96%    3 month Libor +.20

     In addition, the Bank entered into a "RepoPlus" Advance credit arrangement,
     which is renewable  annually and incurs no service charges.  As of June 30,
     2001, the Bank has a borrowing  limit of  approximately  $76 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.

28
<PAGE>
13.  INCOME TAXES

     The  components  of income  tax  expense  for the years  ended  June 30 are
summarized as follows:
                                             2001                2000
                                          ----------          ---------
         Currently payable:
              Federal                       $508,338           $531,869
              State                          113,760             85,531
                                            --------           --------
                                             622,098            617,400
              Deferred                       (48,739)           (39,524)
                                           ----------          ---------

                  Total                     $573,359           $577,876
                                            ========           ========

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

                                                         2001           2000
                                                      ---------     ----------
         Deferred tax assets
              Allowance for loan losses               $ 264,918     $  231,915
              Loan origination fees, net                 11,237         16,773
              Net unrealized loss on securities               -        155,101
              Other, net                                  9,701         10,241
                                                      ---------     ----------
                  Deferred tax assets                   285,856        414,030
                                                      ---------     ----------

         Deferred tax liabilities
              Premise and equipment depreciation        248,622        253,176
              Tax reserve for loan losses                45,901         64,261
              Net unrealized gain on securities          31,806              -
              Other, net                                 55,716         54,613
                                                      ---------     ----------
                  Deferred tax liabilities              382,045        372,050
                                                      ---------     ----------
                  Net deferred tax asset (liability)  $ (96,189)    $   41,980
                                                      ----------    ----------

     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 $324,005 in bad debt reserves in excess of the base year.  Subject
     to prevailing  corporate tax rates, the Bank owes $45,901 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>
                                                              2001                   2000
                                                      --------------------   ----------------------
                                                        Amount    Percent     Amount        Percent
                                                        ------    -------     ------        -------

<S>                                                  <C>          <C>        <C>            <C>
         Provision at statutory rate                   $524,696     34.0%      $501,036       34.0%
         State income tax expense, net of federal
          tax benefit                                    76,784      5.0         56,450        3.8
         Tax exempt interest                            (66,234)    (4.3)       (12,693)       (.9)
         Other, net                                      38,113      2.5         33,083        2.3
                                                       --------    -----       --------       ----
              Actual expense and effective rate        $573,359     39.2%      $577,876       39.2%
                                                       ========    =====       ========       ====
</TABLE>
14.  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  $38,243  and  $32,988  for the  years  ended  June 30,  2001 and  2000,
     respectively.

29
<PAGE>

15.  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, 2001,
     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 32,144  shares  were  vested as of June 30,  2001.  Total
     operating  expense  attributed to the RSP amounted to $207,079 and $197,591
     for the years ended June 30, 2001 and 2000.


16.  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  principle  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, 2001
     and 2000.  Compensation  expense for the ESOP was $96,665 and  $100,018 for
     the years ended June 30, 2001 and 2000, respectively.

     The following table represents the components of the ESOP shares:

                                                          2001           2000
                                                         -------        -------

         Allocated shares                                 38,928         30,252

         Shares released for allocation                    4,338         4,338

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

         Unreleased shares                                43,490         52,166
                                                        --------       --------

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

         Fair value of unreleased shares                $576,242       $554,264
                                                        ========       ========

30

<PAGE>

17.  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,  2001,  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:

                                                       2001            2000
                                                    ----------     ------------
         Net Income:
              As reported                           $  969,865     $    895,760
                                                    ==========     ============

              Pro forma                             $  964,661     $    895,357
                                                    ==========     ============
         Basic Earnings Per Share:
              As reported                                1.11      $       1.01
                                                    =========      ============
              Pro forma                                  1.11      $       1.01
                                                    =========      ============
         Diluted Earnings Per Share:
              As reported                                1.11      $       1.01
                                                    =========      ============
              Pro forma                                  1.10      $       1.01
                                                    =========      ============


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

                                                       2001            2000
                                                     --------        ---------

         Outstanding, beginning                        65,061           65,061

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

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


31
<PAGE>
17.  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 2001 and 2000,  respectively:  expected  dividend yield of
     3.02% and 4.0%;  expected  volatility of 8.0% and 6.7%;  risk-free interest
     rate of 3.91% and 6.13%; and expected lives of 6 and 7 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 $26,024
     and $26,024 for the years ended June 30, 2001 and 2000.

18.  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.

19.  COMMITMENTS AND CONTINGENT LIABILITIES

     Lease Commitments
     -----------------
     The future  lease  commitments  as of June 30, 2001 for all  noncancellable
     equipment and land leases follows:

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

                             2002              $     70,600
                             2003                    72,600
                             2004                    72,600
                             2005                    72,600
                             2006                    76,560
                      2007 and thereafter         1,658,770
                                                -----------

                                                $ 2,023,730
                                                ===========

     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.

32
<PAGE>
20.  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
     $18,400 and $0 for the years ended June 30, 2001 and 2000.



21.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

     The estimated carrying amounts and fair values are as follows:

<TABLE>
<CAPTION>
                                                               2001                                  2000
                                                --------------------------------    ----------------------------
                                                                   Estimated                       Estimated
                                                    Carrying         Fair           Carrying         Fair
                                                    Amount           Value          Amount           Value
                                                --------------   ---------------   -------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial assets:
              Cash and cash equivalents          $   8,553,178     $   8,553,178     $  5,751,624  $   5,751,624
              Investment securities
                    Held to maturity                   749,934           742,057        1,249,672      1,187,625
                    Available-for-sale              11,147,919        11,147,919        8,234,637      8,234,637
              Mortgage-backed securities:
                   Held to maturity                  1,595,349         1,601,960        2,089,010      2,027,016
                   Available for sale                8,383,075         8,383,075        1,556,172      1,556,172
              Loans receivable                     130,035,491       131,710,542      119,721,308    119,150,000
              Federal Home Loan Bank Stock           1,075,000         1,075,000          800,000        800,000
              Accrued interest receivable            1,017,024         1,017,024          870,955        870,955
                                               ---------------    --------------   --------------  -------------
                  Total                          $ 162,556,970     $ 164,230,755     $140,273,378   $139,578,029
                                                 =============     =============     ============   ============
</TABLE>

<TABLE>
<CAPTION>

                                                              2001                              2000
                                                --------------------------------    ----------------------------
                                                                  Estimated                         Estimated
                                                    Carrying         Fair           Carrying          Fair
                                                    Amount           Value          Amount            Value
                                                --------------   ---------------   -------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial liabilities:
              Deposits                           $ 130,499,131     $ 131,393,000     $118,930,939  $ 118,299,000
              Advances from Federal
               Home Loan Bank                       20,000,000        20,565,000       10,500,000     10,418,000
              Advance payment by borrowers
               for taxes and insurance                 146,095           146,095          203,320        203,320
              Accrued interest payable                  75,488            75,488          189,508        189,508
                                                 -------------     -------------     ------------   ------------
                  Total                          $ 150,720,714     $ 152,179,583     $129,823,767   $129,109,828
                                                 =============     =============     ============   ============
</TABLE>
33
<PAGE>
21.  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 6.

34

<PAGE>

22.  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,  2000 the  Company  and the Bank  meet  all  capital  adequacy
     requirements to which they are subject.

     As of June 30, 2001,  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,
                                               2001              2000             2001              2000
                                             -----------      -----------       -----------      -----------
<S>                                        <C>              <C>               <C>              <C>
         Total equity                        $16,342,717      $15,068,274       $15,587,143      $14,241,112
         Unrealized gain (loss) - securities      61,742         (301,080)           61,742         (284,163)
                                             -----------      ------------       ----------      ------------

         Tier I, core, and tangible capital   16,280,975       15,369,354        15,525,401       14,525,275

         Allowance for loan losses               779,170          682,103           779,170          682,103
                                             -----------      -----------       -----------      -----------

         Risk-based capital                  $17,060,145      $16,051,457       $16,304,571      $15,207,378
                                             ===========      ===========       ===========      ===========
</TABLE>

35
<PAGE>
22.  CAPITAL REQUIREMENTS (CONTINUED)

     The actual capital amounts and ratios were as follows:
<TABLE>
<CAPTION>
                                                                             Company at June 30,
                                                        --------------------------------------------------------
                                                                      2001                        2000
                                                        -----------------------------   ------------------------
                                                             Amount           Ratio         Amount         Ratio
                                                        ---------------     ---------   -------------    -------
<S>                                                     <C>                 <C>         <C>             <C>
     Total Capital to Risk-Weighted Assets
     -------------------------------------

         Actual                                           $  17,060,145       15.34%      $16,051,457     16.06%
         For Capital Adequacy Purposes                        8,898,599        8.00         7,994,160      8.00
         To be "Well Capitalized"                            11,123,249       10.00         9,992,700     10.00

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

         Actual                                           $  16,280,975       14.64%      $15,369,354     15.38%
         For Capital Adequacy Purposes                        4,449,300        4.00         3,997,080      4.00
         To be "Well Capitalized"                             6,673,950        6.00         5,995,620      6.00

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

         Actual                                           $  16,280,975        9.72%      $15,369,354     10.56%
         For Capital Adequacy Purposes                        6,697,013        4.00         5,822,620      4.00
         To be "Well Capitalized"                             8,371,266        5.00         7,278,280      5.00

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

         Actual                                           $  16,280,975        9.72%      $15,369,354     10.56%
         For Capital Adequacy Purposes                        2,511,380        1.50         2,183,480      1.50
         To be "Well Capitalized"                             N/A               N/A           N/A           N/A
</TABLE>

<TABLE>
<CAPTION>
                                                                                Bank at June 30,
                                                        --------------------------------------------------------
                                                                       2001                          2000
                                                        -----------------------------   ------------------------
                                                             Amount           Ratio         Amount         Ratio
                                                        ---------------     ---------   -------------    -------
<S>                                                       <C>                <C>       <C>              <C>
     Total Capital to Risk-Weighted Assets
     -------------------------------------

         Actual                                             $16,304,571        14.71%    $15,207,378      15.23%
         For Capital Adequacy Purposes                        8,868,743         8.00       7,987,760       8.00
         To be "Well Capitalized"                            11,085,929        10.00       9,984,700      10.00

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

         Actual                                             $15,525,401        14.00%    $14,525,275      14.55%
         For Capital Adequacy Purposes                        4,434,372         4.00       3,993,880       4.00
         To be "Well Capitalized"                             6,651,558         6.00       5,990,820       6.00

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

         Actual                                             $15,525,401         9.20%    $14,525,275       9.94%
         For Capital Adequacy Purposes                        6,746,730         4.00       5,846,400       4.00
         To be "Well Capitalized"                             8,433,412         5.00       7,308,000       5.00

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

         Actual                                             $15,525,401         9.20%    $14,525,275       9.94%
         For Capital Adequacy Purposes                        2,530,024         1.50       2,192,400       1.50
         To be "Well Capitalized"                                   N/A          N/A         N/A            N/A

</TABLE>
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