To Our Shareholders and Friends......


On  behalf of the Board of  Directors  and  Officers  of the  Corporation,  I am
pleased to report that for 2003 we  continued to Advance our Company to a higher
level.  Managing  in these  difficult  economic  times,  to say the  least,  was
extremely  challenging.  Deposit  rates were the lowest we have seen in the last
fifty years of banking.  Despite these difficult rate structures,  we managed to
grow our deposit base by 55.85%.  Deposits  increased to $272.8  million at June
30, 2003 from $175.1 million at June 30, 2002. This increase  includes  deposits
of $88.7 million acquired in a branch purchase and assumption of deposits of two
Jefferson  County branches of the Second National Bank of Warren,  Ohio. We also
continued to show our strength in the communities we serve.  Loan growth was not
only a record for fiscal year 2003, it was phenomenal.  Our banking  subsidiary,
Advance  Financial  Savings  Bank,  originated a total of 4,141 loans for $180.7
million.  This resulted in a net growth of $57.1 million or 33.17%.  Total loans
were $229.2  million at June 30, 2003 as compared to $172.1  million at June 30,
2002. At June 30, 2003 total assets  increased  $107.6  million,  or 50.21%,  to
$321.9 million from $214.3 million at June 30, 2002.

Company  earnings  continued  to remain  strong.  For 2003,  earnings  per share
remained  relatively the same at $2.11. This compares with earnings per share of
$2.12 for 2002. This was  accomplished  despite the increase in expenses related
to a de novo branch and the deposit  assumption.  Return on equity  increased to
9.86% at June 30,  2003  from  9.69% at June 30,  2002 and book  value per share
increased  10.2% to $21.55 per share at June 30,  2003 from  $19.55 per share at
June 30, 2002. Our stock price increased 31.88% for fiscal year 2003.

The  completion  in  February  2003 of the branch  purchase  and  assumption  of
deposits of the  Jefferson  County,  Ohio  branches of Second  National  Bank of
Warren,  Ohio was a very  positive  addition  to  Advance.  The assets  acquired
included two branch locations in

Steubenville,  Ohio. One was a leased facility in downtown Steubenville that was
closed on June 30, 2003 and the deposits transferred to our new de novo facility
in Hollywood  Shopping  Center that was completed in September  2002 and located
just 1.1 miles away on Dunbar Ave. The other full service  branch located in the
west end of  Steubenville  will remain open.  With the addition of these two new
branch locations we have significantly  expanded our presence in the communities
we serve.  We now operate seven full service branch offices in West Virginia and
Ohio. To complement  and deliver the quality  service our customers  expect,  we
added twenty-four new employees to our staff in fiscal year 2003.


<PAGE>

To enhance our  presence  in our primary  market area and also expand our access
throughout the  communities we serve,  we added  "internet  banking" to our long
line of products  and  services.  Our  customers  now have the ability to access
their account information and balances at anytime or anywhere. They can also pay
their  bills or  transfer  funds  between  accounts.  We also now  provide  loan
services and cash management via the internet. Our commitment to quality service
and products remains a high priority.

In  summary,  2003 has proven to be a  successful  year for the  Company and its
shareholders.  We not only completed a successful branch purchase and assumption
of deposits, we added a de novo branch, internet banking,  twenty-four employees
and also increased dividends by 25% in the fourth quarter of 2003. This all adds
up to our continuous  effort in providing quality community banking services and
enhancing shareholder values.

I acknowledge the continued support and direction of the Board of Directors, the
focus and  dedication of our Senior  Management  team and the officers and staff
who  continue to support the vision of ADVANCE  through  quality  service to our
customers and shareholders.

The challenges of the current economy and interest rate  environment will be met
with our continuous  commitment to achieve a new level of excellence.  We remain
committed  to provide  the best in  community  banking  services  and  enhancing
shareholder value.


/s/Stephen M. Gagliardi

Stephen M. Gagliardi
President & CEO




<PAGE>

                            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.. 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, 2001 to September 30, 2001          14.00    11.80       .10
      October 1, 2001 to December 31, 2001        13.95    12.80       .12
      January 1, 2002 to March 31, 2002           16.60    13.50       .12
      April 1, 2002 to June 30, 2002              18.00    15.96       .12
      July 1, 2002 to September 30, 2002          18.70    16.70       .12
      October 1, 2002 to December 31, 2002        18.89    17.51       .12
      January 1, 2003 to March 31, 2003           21.32    19.04       .12
      April 1, 2003 to June 30, 2003              23.90    21.25       .15

     The number of  stockholders of record of common stock as of the record date
of September 3, 2003, was approximately 427. This does not reflect the number of
persons or entities who held stock in nominee or "street"  name through  various
brokerage  firms. At September 3, 2003,  there were 932,285 shares  outstanding.
The Company's  ability to pay dividends to  stockholders  is dependent  upon the
dividends  it  receives  from the Bank.  The Bank may not  declare or pay a cash
dividend  on any of its stock if the  effect  thereof  would  cause  the  Bank's
regulatory  capital  to be  reduced  below  (1)  the  amount  required  for  the
liquidation  account  established in connection with the conversion,  or (2) the
regulatory capital requirements imposed by the OTS.

Selected Financial Ratios and Other Data

                                                            For  the Years Ended
                                                                   June 30
                                                              -----------------
                                                               2003 %    2002 %
                                                              -----------------
        Return on average assets
             (net income divided by average total assets)       .72        .86
        Return on average equity
             (net income divided by average equity)            9.86       9.69
        Average equity to average assets ratio
             (average equity divided by average assets)        7.30       8.85
        Equity to assets at period end                         6.24       8.50
        Net interest spread                                    2.93       3.07
        Dividend payout ratio                                 24.05      21.68
        Net yield on average interest-earning assets           3.14       3.45
        Non-performing loans to total assets                    .96        .94
        Non-performing loans to total loans                    1.30       1.14
        Allowance for loan losses to non-performing assets    28.02      36.23

                                       1
<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.

FISCAL 2003 HIGHLIGHTS

On September 18, 2002,  the Bank began  operations in its newly  constructed  de
novo branch  located in the Hollywood  Plaza in  Steubenville,  Ohio.  This full
service branch is staffed by nine full time employees.  The cost of the facility
totaled  approximately  $850,000  and  was  paid  for  with  cash  from  current
operations.

At the close of  business,  February  7, 2003,  the  Company  completed a branch
purchase and deposit  assumption of the two  Steubenville,  Ohio branches of The
Second National Bank of Warren, Ohio. The assumption included  approximately $88
million in  deposits,  $85,000 in loans and real and  personal  property  with a
value of approximately  $370,000.  The Company paid a premium on the deposits of
approximately $5.9 million. One of the two branch offices acquired was closed on
June 30, 2003 due to the acquired branch's close proximity  (approximately  1.1.
miles) to the de novo branch opened in Steubenville in September 2002. Following
the closure, the Bank operates seven full service facilities.


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.

                                       2
<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, 2003.


                 Changes in rates        NPV Ratio (1)         Change(2)
                 ----------------        -------------         ---------
                     +300 bp                 6.21 %             (199) bp
                     +200 bp                 7.30               ( 90) bp
                     +100 bp                 8.00               ( 20) bp
                        0 bp                 8.20
                     -100 bp                 7.70               ( 50) bp
                     -200 bp                 7.14               (106) bp
                     -300 bp                 6.92               (128) 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.

                                        3

<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,
                                          ----------------------------------------------------------------  ----------------------
                                                     2003                             2002                           2003
                                          ------------------------------   -------------------------------  ----------------------
                                           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)                    $193,733   $13,347     6.89%    $157,557  $12,209         7.75%  $229,311         6.57%
  Investment securities (2)                 40,863     1,084     2.65%      20,165      832         4.12%    48,108         2.59%
  Mortgage-backed securities                14,817       666     4.50%       9,490      582         6.14%    27,116         3.65%
                                          --------   -------   ------     --------  -------       ------   --------       ------
     Total interest-earning assets         249,413    15,097     6.05%     187,212   13,623         7.28%   304,535         5.68%
                                                      ------   ------               -------       ------                  ------
Non-interest-earning assets                 12,464                           7,789                           18,086
                                          --------                        --------                         --------
     Total assets                         $261,877                        $195,001                         $322,621
                                          ========                        ========                         ========

Interest-bearing liabilities:
  Interest-bearing demand deposits         $39,465       627     1.59%     $25,010     $608         2.43%   $55,257         1.17%
  Certificates of deposit                  127,871     4,606     3.60%      95,157    4,577         4.81%   157,728         3.19%
  Savings deposits                          41,066       685     1.67%      29,966      812         2.71%    49,147         1.35%
  FHLB borrowings                           20,291     1,163     5.73%      20,000    1,164         5.82%    20,000         5.73%
  Other borrowings                           3,900       178     4.56%           -        -            -      7,200         4.80%
                                          --------   -------   ------     --------  -------       ------   --------       ------
     Total interest-bearing liabilities    232,593     7,259     3.12%     170,133    7,161         4.21%   289,332         2.71%
                                                      ------   ------               -------       ------                  ------
Non-interest bearing liabilities            10,170                           7,608                           13,352
                                          --------                        --------                         --------
     Total liabilities                     242,763                         177,741                          302,684
Stockholders' equity                        19,114                          17,260                           19,937
                                          --------                        --------                         --------
     Total liabilities and stockholders'
       equity                             $261,877                        $195,001                         $322,621
                                          ========                        ========                         ========

Net interest income                                  $ 7,838                        $ 6,462
                                                     =======                        =======
Interest rate spread (3)                                         2.93%                              3.07%                   2.97%
                                                               ======                             ======                  ======
Net Yield on interest-earning assets (4)                         3.14%                              3.45%                   3.10%
                                                               ======                             ======                  ======
Ratio of average interest-earning assets  to
  Average interest-bearing liabilities                         107.23%                            110.04%                 105.25%
                                                               ======                             ======                  ======
</TABLE>


-------------------------------------------------------------
(1)  Average balances are net of deferred loan fees.
(2)  Includes interest-bearing deposits , taxable and nontaxable investments 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.


                                       4
<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,
                                                        ----------------------------
                                                                2003 vs 2002
                                                        ----------------------------
                                                              Increase (Decrease)
                                                                   Due to
                                                        ----------------------------
                                                         Volume     Rate        Net
                                                        ----------------------------
                                                            (Dollars in Thousands)
<S>                                                   <C>       <C>        <C>
              Interest Income:
                Loans receivable (1)                    $ 2,812   $(1,674)   $ 1,138
                Investment securities (2)                   835      (583)       252
                Mortgage-backed securities                  394      (310)        84
                                                        -------   -------    -------
                   Total interest-earning assets          4,041    (2,567)     1,474
                                                        -------   -------    -------
              Interest Expense:
                Interest-bearing demand
                 Deposits                                   331      (322)         9
                Certificates of Deposit                   1,570    (1,537)        33
                Savings Deposits                            299      (420)      (121)
                FHLB borrowings                              66       (67)        (1)
                Other borrowings                            178         -        178
                                                        -------   -------    -------
                   Total interest-bearing liabilities     2,444    (2,346)        98
                                                        -------   -------    -------

              Net change in interest income             $ 1,597   $  (221)   $ 1,376
                                                        =======   =======    =======
</TABLE>

(1)  Average  balances  are net of deferred  loan fees and  include  non-accrual
     loans.

(2)  Includes interest-bearing deposits , taxable and nontaxable investments and
     FHLB stock.

Comparison of Financial Condition

The  Company's  total  assets   increased  by   approximately   $107,596,000  to
$321,900,591 at June 30, 2003, from  $214,304,941 at June 30, 2002. The increase
is primarily due to the February 7, 2003, deposit assumption and branch purchase
of the Steubenville,  Ohio branch offices of The Second National Bank of Warren,
Ohio  ("the   Assumption  and  Purchase").   The  deposit   assumption   totaled
$88,260,000,  which was  comprised of  $37,312,000  in core savings and checking
products and  $50,948,000  in  certificates  of deposit.  Net loans,  investment
securities and mortgage-backed securities increased $57,094,000, $13,482,000 and
$18,435,000,, respectively from June 30, 2002 to June 2003. The net increases in
loans, investment securities,  and mortgage-backed securities were funded by the
increase in deposits,  primarily as a result of the Assumption and Purchase, and
by the issuance of $7,200,000 of Capital Trust  Securities by Advance  Statutory
Trust I, a wholly owned subsidiary of the Company.

Investment securities increased $13,482,000 to $26,481,176 at June 30, 2003 from
$12,999,362  at June 30,  2002.  The  increase is due in part to the purchase of
five  municipal  securities  totaling  $3,100,000  with a weighted  average  tax
equivalent  yield  of 6.43%  and an  average  maturity  of 15  years  with  call
provisions  ranging  from 7 to 10 years.  The increase is also due in part to an
increase in callable  agency  securities of  $10,500,000.  During the year ended
June 30, 2003, the Company had all of their agency  securities  ($10.5  million)
called. These investments were replaced by similar agency securities in terms of
amounts and maturities.  The weighted average yield on the securities called was
3.61% while the average yield on the investments  replacing these securities was
2.76%. The decrease in yield is due to the decreasing  interest rate environment
prevalent during the fiscal period.

                                       5
<PAGE>

Mortgage-backed securities increased $18,435,000 to $27,622,430 at June 30, 2003
from  $9,187,872  at June 30,  2002.  The  increase  is due to the  purchase  of
securities totaling $24,400,000. These securities have an average yield of 4.78%
and  average  lives  ranging  from  2.0 to 5.25  years.  The  purchase  of these
securities was offset by accelerated  prepayments of higher yielding  securities
of $5,965,000 due to the decreasing  interest rate environment  prevalent during
fiscal 2003.

Loans held for sale  increased  $5,109,000  to  $5,687,708 at June 30, 2003 from
$578,647 at June 30,  2002.  The  increase is  primarily  due to the increase in
mortgage  production  as a result of  mortgage  refinancing  in  response to the
decreasing  interest rate environment  prevalent  during the fiscal period.  The
increase at June 30, 2003 is due to management's  change in strategy used during
much of the  fiscal  year to retain  interest-earning  assets as a result of the
Assumption  and Purchase.  At June 30, 2003,  management has indicated that they
have made near 100%  utilization  of the funds  received in the  Assumption  and
Purchase,  as a result,  the Company,  at this point in time,  intends to resume
selling all new fixed rate  long-term 1-4 family  mortgages in order to mitigate
the effects of interest rate risk.

Loans  receivable,  net increased  $57,094,000 to  $229,239,547 at June 30, 2003
from $172,145,867 at June 30, 2002. The increase in net loans consists primarily
of 1-4 family mortgages,  construction  loans, land development loans,  indirect
automobile  loans  and  automobile  dealer  floor  plan  loans  which  increased
$34,444,000,  $5,736,000,  $1,135,000,  $12,342,000 and 1,181,000, respectively.
The increase in 1-4 family  mortgages was  concentrated in the period  following
the agreement for the Assumption  and Purchase.  A total of 96% of the increase,
or  $33,236,000,  came during the period  October 2002 to May 2003. The increase
over this  period is due to a change in  management  strategy  to  increase  the
Company's  interest-earning  assets as a result of the  Assumption and Purchase.
The majority of these 1-4 family  mortgage loans would have been sold in periods
prior to this change in strategy.  As indicated above in the discussion of Loans
held for sale,  the Company has currently  reverted its strategy back to selling
all 1-4 family fixed rate mortgage loans.

The increase in indirect automobile loans includes approximately  $8,600,000 for
the three-month period April 2003 to June 2003. The increase over this period is
due primarily to the Company's  development of an Indirect Lending department to
market our existing automobile floor plan customers, as well as, other potential
customers  in our  new  market  areas.  Office  properties  and  equipment,  net
increased  $1,167,000 to $5,069,073 at June 30, 2003 from $3,901,592 at June 30,
2002.  The increase is primarily  the result of two  projects.  The first is the
construction  and  furnishing  of the  Bank's  de novo  branch  facility  at the
Hollywood Plaza in Steubenville, Ohio which opened for business on September 18,
2002 with a total cost of approximately $850,000. The second is the market value
assessment  for $370,000 for the purchased  fixed assets from the Assumption and
Purchase.

Goodwill and Other  Intangibles,  net  increased  $4.7 million and $1.7 million,
respectively  at June 30, 2003 from $0 at June 30, 2002.  The  increases are the
result  of the  calculated  premium  paid to as a result of the  Assumption  and
Purchase. The other intangibles, net represents the Core Deposit Intangible from
the business  combination.  The value was derived from an independent core study
performed  after the  acquisition.  This  intangible is being  amortized over an
estimated ten (10) calendar years.

Other assets  increased  $691,000 to $2,193,526 at June 30, 2003 from $1,502,749
at June 30,  2002.  The  increase is due to  increases  in an  intangible  asset
created from the  origination  costs of the Capital Trust  Securities  issued by
Advance  Statutory  Trust I, the increase in prepaid  dealer  reserves  paid for
indirect loans,  the increase in mortgage loan servicing rights and the increase
in OREO assets of $201,000, $278,000, 69,000 and $157,000, respectively. Each of
these  increases are the result of operations  dictated by the current  interest
rate environment and local economic conditions,  therefore, any change in future
business activity could increase or decrease these balances accordingly.

Deposits   increased   $97,770,000  to   $272,828,932  at  June  30,  2003  from
$175,058,743  at June 30,  2002.  The  increase  includes  $88,260,000  from the
Assumption  and  Purchase as discussed  above.  Net of these  assumed  deposits,
regular  deposits have  increased  $9,510,000  for the year ended June 30, 2003.
This  increase in regular  deposits of $9,510,000 is net of a loss of $6,493,000
in deposits from the Assumption and Purchase.  This decrease in assumed deposits
is  comprised  primarily  of high  cost  money  market  accounts  and high  cost
certificate specials of $4,025,000 and $3,161,000, respectively.

The gross  change  in  deposits,  after  considering  the  decrease  of  assumed
deposits,  is  estimated  at  $16,003,000  ($9,510,000+$6,493,000).  This change
includes  an  increase  of  approximately  $7,885,000  in core  savings  and NOW
accounts and $7,769,000 in certificates of deposit. The increase in core savings
and NOW accounts is consistent  with the Company's  deposit growth strategy over
the fiscal year by developing  account  relationships with existing customers as
opposed to offering certificate specials to create growth from noncustomers. The
certificate  of  deposit  growth  is  primarily  in long term (5 and 7 year) IRA
accounts.  Due to  volatility  in the equity  markets,  the  Company  has seen a
tremendous  growth in IRA accounts  with  retirement-age  customers  seeking the
safety and  stability  of the longer-  term bank  deposit  products  over equity
accounts.

                                       6
<PAGE>

On December  19, 2002,  the Company  participated  in a pooled  trust  preferred
offering for $7,200,000.  The rate on the Capital Trust Securities is at 3-month
LIBOR plus 3.25% adjusted quarterly,  the beginning rate was 4.66%. On March 26,
2003,  the effective rate of the securities was lowered to 4.54% and on June 26,
2003,  the effective  rate was lowered to 4.26% until  September  26, 2003.  The
securities are written with a 30 year maturity and a five year call provision.

Stockholders' equity increased  approximately  $1,864,000 to $20,087,953 at June
30, 2003 from  $18,223,746 at June 30, 2002. This increase was the result of net
income of $1,884,000 for the period,  the  recognition of shares in the Employee
Stock  Ownership Plan and  Restricted  Stock Plan of $183,000 and an increase in
the net unrealized  gain on securities of $250,000.  These increases were offset
by the payment of cash dividends of $453,000.

Comparison  of the Results of  Operations  for the Years Ended June 30, 2003 and
2002

     Net  Interest   Income.   The  Company's  net  interest  income   increased
$1,375,000,  or 21.28%,  to  $7,837,000  for the year  ended June 30,  2003 from
$6,462,000 for 2002. 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
2.93% for the period ended June 30, 2003 from 3.07% for 2002.  The average yield
on interest  earning assets  decreased 123 basis points to 6.05% for fiscal 2003
from 7.28% for 2002.  The average  cost of funds  decreased  109 basis points to
3.12% for the year ended June 30, 2003 from 4.21% for 2002. See Average  Balance
Sheet Table included herein for additional detail.

     Interest and Dividend Income.  Total interest and dividend income increased
$1,474,000,  or 10.82%,  to  $15,097,000  for the year ended June 30,  2003 from
$13,623,000  for 2002. The increase was primarily due to an increase in earnings
on loans of $1,138,000 as the average principle balance increased $36,176,000 to
$193,733,000  for fiscal 2003 from  $157,557,000  for fiscal 2002.  Interest and
dividend  income  on  investments,  mortgaged-backed  securities,  and  interest
bearing  deposits  with  other  financial  institutions  increase  approximately
$336,000 as the average principle balances increased  $26,025,000 to $55,680,000
for fiscal 2003 from  $29,655,000  for fiscal 2002 . See Average  Balance  Sheet
Table included herein for additional detail.

     Interest  Expense.  Total interest  expense  increased  $99,000 or 1.38% to
$7,259,000  for the year ended June 30, 2003 compared to $7,160,000 for the same
period ended 2002.  The increase  was  primarily  due to an increase in interest
paid on Other Borrowings of $178,000 due to the Company's issuance of the pooled
trust  preferred  securities on December 19, 2002. This increase was offset by a
decrease in interest paid on deposits of $78,000 as the average cost of deposits
decreased  115 basis points to 2.84% for the year ended June 30, 2003 from 3.99%
for 2002 as the average  balance of deposits  increased  $58,269,000 for 2003 as
compared to 2002.  See Average  Balance  Sheet  included  herein for  additional
detail.

     Provision for Loan Losses.  For the year ended June 30, 2003, the provision
for loan losses was  $399,000 as compared to $245,000 for 2002 . The increase in
the provision for loan losses for the year ended June 30, 2003 was  precipitated
by higher net charge-offs,  as well as, higher  concentrations  of risk enhanced
loan products.

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

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

                                       7
<PAGE>

Noninterest  Income.  Noninterest  income  increased  $282,000,  or  22.27%,  to
$1,550,000 for the year ended June 30, 2003 compared to $1,268,000 for 2002. For
the year ended June 30, 2003,  gains on sales of fixed rate mortgages  increased
$117,000  due the Bank's  customer  demand for fixed rate 1-4 family  mortgages.
This increase in gains was offset by a decrease in income from loan servicing of
$43,000  due to the  refinancing  nature of the fixed rate 1-4  family  mortgage
market  prevalent  during  fiscal  2003.  The gains on the sale of loans and the
income  from  servicing  sold loans for the year ended  June 30,  2003,  are not
necessary  indicative of anticipated trends for future periods.  Fees on deposit
accounts, consumer card income and ATM fee income increased by $133,000, $14,000
and  $25,000,  respectively  due to an  increase in core  customers  and related
consumer  activity.  Rent  from  property  owned  increased  $15,000  due to the
increased OREO activity in comparison to the period ended June 30, 2002.

     Noninterest Expense. Noninterest expense increased $1,116,000 or 22.41%, to
$6,095,000  for  the  year  ended  June  30,  2003  from  $4,979,000  for  2002.
Compensation and benefits  increased $421,000 for the period ended June 30, 2003
primarily as the result of the hiring of twenty-four  additional  employees as a
result of adding the branches  created by the Assumption and Purchase and the de
novo opening of the  Steubenville,  Ohio branch, in addition to a cost of living
increase for other full-time  employees.  Occupancy and equipment,  professional
fees, and advertising  expenses have increased by $285,000  primarily due to the
operation of the new branches  discussed  above.  Data processing  expenses have
increased  $135,000 due to the increased  customer  activity  related to the new
branches  discussed above, and costs associated with offering  internet banking.
Other  expenses  have  increased  $275,000  for the year  ended  June  30,  2003
primarily as a result of the operating the new branches, as well as, an increase
of  $75,000  in  amortization  expense  of the Core  Deposit  Intangible  and an
increase of $39,000 in expenses associated with repossessed property.

     Liquidity and Capital Resources.  Liquidity  represents our ability to meet
normal  cash  flow  requirements  of our  customers  for  funding  of loans  and
repayment  of  deposits.  Both  short  term and long  term  liquidity  needs are
generally  derived from the  repayments  and  maturities of loans and investment
securities,  and the receipt of deposits.  Management  monitors liquidity daily,
and  on  a  quarterly   basis   incorporates   liquidity   management  into  its
asset/liability  program.  The  assets  defined  as  liquid  are:  cash and cash
equivalents and available for sale securities.  The Company also has a borrowing
limit  with the FHLB of  approximately  $145,000,000  of  which  $20,000,000  is
currently outstanding. The availability of these funds is also incorporated into
the Company's liquidity management.

     Net cash used in operating  activities  increased  $5,154,000 to $2,640,554
for the year ended  June 30,  2003  compared  to  $2,513,261  cash  provided  by
operations  for 2002.  This  increase was primarily the result of an increase in
fixed rate mortgage  loans held for sale but not yet sold of  $5,109,000.  These
loans were subsequently sold in July 2003.

     Net cash used for  investing  activities  for the year ended June 30,  2003
decreased  $3,882,000 to $9,419,322 from  $13,301,426 for 2002. This decrease is
primarily the net result of the funds  provided by the  Assumption  and Purchase
and  subsequent  funding  of loans  and  investment  purchases  over the  period
following the business combination.

     Net cash provided by financing  activities for the year ended June 30, 2003
increased  $2,354,000 to $16,359,757  from $14,005,427 for 2002. The increase is
primarily a result of the issuance of $7,200,000  in Capital  Trust  Securities.
This  increase  is  primarily   offset  by  the  decrease  in  new  deposits  of
$10,790,000.

     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.

                                       8
<PAGE>


                         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,  2003  and  2002,  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, 2003 and 2002,  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
August 18, 2003

                                        9

<PAGE>



                            ADVANCE FINANCIAL BANCORP
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>


                                                                                                       June 30,
                                                                                              2003                  2002
                                                                                         ---------------       ---------------
<S>                                                                                     <C>                  <C>
ASSETS
Cash and cash equivalents:
     Cash and amounts due from banks                                                      $    2,906,568       $     1,775,051
     Interest-bearing deposits with other institutions                                        13,163,753             9,995,389
                                                                                          --------------       ---------------
              Total cash and cash equivalents                                                 16,070,321            11,770,440
                                                                                          --------------       ---------------

Investment securities:
     Securities held to maturity (fair value of $15,298,606
      and $0)                                                                                 15,086,475                     -
     Securities available for sale                                                            11,394,701            12,999,362
                                                                                          --------------       ---------------
              Total investment securities                                                     26,481,176            12,999,362
                                                                                          --------------       ---------------

Mortgage-backed securities:
     Securities held to maturity (fair value of $18,751,018
      and $1,449,641)                                                                         18,642,532             1,396,306
     Securities available for sale                                                             8,979,898             7,791,566
                                                                                          --------------       ---------------
              Total mortgage-backed securities                                                27,622,430             9,187,872
                                                                                          --------------       ---------------

Loans held for sale                                                                            5,687,708               578,647
Loans receivable (net of allowance for loan losses of
 $1,095,822 and $969,088)                                                                    229,239,547           172,145,867
Premises and equipment, net                                                                    5,069,073             3,901,592
Federal Home Loan Bank stock, at cost                                                          1,679,400             1,058,100
Accrued interest receivable                                                                    1,447,525             1,160,312
Goodwill                                                                                       4,700,472                     -
Other intangibles, net                                                                         1,709,413                     -
Other assets                                                                                   2,193,526             1,502,749
                                                                                          --------------        --------------

              TOTAL ASSETS                                                                  $321,900,591          $214,304,941
                                                                                            ============          ============

LIABILITIES
Deposits                                                                                    $272,828,932          $175,058,743
Advances from Federal Home Loan Bank                                                          20,000,000            20,000,000
Other Borrowings                                                                               7,200,000                     -
Advance payments by borrowers for taxes and insurance                                            507,049               404,220
Accrued interest payable and other liabilities                                                 1,276,657               618,232
                                                                                          --------------       ---------------
              TOTAL LIABILITIES                                                              301,812,638           196,081,195
                                                                                            ------------         -------------

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, 2003 and 2002                                               108,445               108,445
Additional paid in capital                                                                    10,467,559            10,380,430
Retained earnings - substantially restricted                                                  11,705,306            10,274,004
Unallocated shares held by Employee Stock Ownership Plan (ESOP)                                 (250,634)             (337,394)
Unallocated shares held by Restricted Stock Plan (RSP)                                          (206,756)             (215,775)
Treasury stock (152,165 shares at cost)                                                       (2,233,265)           (2,233,265)
Accumulated other comprehensive income                                                           497,298               247,301
                                                                                         ---------------      ----------------
              TOTAL STOCKHOLDERS' EQUITY                                                      20,087,953            18,223,746
                                                                                           -------------        --------------

              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $321,900,591          $214,304,941
                                                                                            ============          ============

</TABLE>

See accompanying notes to the consolidated financial statements.


                                       10

<PAGE>



<TABLE>
<CAPTION>

                            ADVANCE FINANCIAL BANCORP
                        CONSOLIDATED STATEMENT OF INCOME

                                                                            Year Ended June 30,
                                                                            2003          2002
                                                                        -----------   -----------
<S>                                                                   <C>           <C>
INTEREST AND DIVIDEND INCOME
     Loans                                                              $13,346,912   $12,208,847
     Investment securities- taxable                                         387,804       320,195
     Investment securities- non-taxable                                     385,505       307,950
     Interest-bearing deposits with other institutions                      269,692       144,990
     Mortgage-backed securities                                             666,336       582,365
     Federal Home Loan Bank stock                                            40,886        58,432
                                                                        -----------   -----------
              Total interest and dividend income                         15,097,135    13,622,779
                                                                        -----------   -----------
INTEREST EXPENSE
     Deposits                                                             5,918,577     5,996,723
     Advances from Federal Home Loan Bank                                 1,162,662     1,163,855
     Other Borrowings                                                       178,196             -
                                                                        -----------   -----------
              Total interest expense                                      7,259,435     7,160,578
                                                                        -----------   -----------
NET INTEREST INCOME                                                       7,837,700     6,462,201

Provision for loan losses                                                   398,700       245,430
                                                                        -----------   -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                       7,439,000     6,216,771
                                                                        -----------   -----------
NONINTEREST INCOME
     Service charges on deposit accounts                                    665,055       532,301
     Income from loan servicing activity                                    161,765       204,426
     Gain on sale of loans                                                  376,989       260,050
     Other income                                                           346,411       271,103
                                                                        -----------   -----------
              Total noninterest income                                    1,550,220     1,267,880
                                                                        -----------   -----------
NONINTEREST EXPENSE
     Compensation and employee benefits                                   2,757,312     2,336,380
     Occupancy and equipment                                              1,093,434       862,705
     Professional fees                                                      143,430       125,434
     Advertising                                                            162,457       126,299
     Data processing                                                        437,884       302,433
     Amortization of intangible asset                                        74,322             -
     Other operating expenses                                             1,426,721     1,226,093
                                                                        -----------   -----------
              Total noninterest expense                                   6,095,560     4,979,344
                                                                        -----------   -----------
Income before income taxes                                                2,893,660     2,505,307
Income taxes                                                              1,009,197       832,991
                                                                        -----------   -----------
Income before extraordinary item                                          1,884,463     1,672,316
Extraordinary item- Excess over cost on net assets acquired in merger             -       201,206
                                                                        -----------   -----------
NET INCOME                                                              $ 1,884,463   $ 1,873,522
                                                                        ===========   ===========

EARNINGS PER SHARE - INCOME BEFORE EXTRAORDINARY ITEM
     Basic                                                               $     2.11   $      1.89
     Diluted                                                             $     2.10   $      1.89

EARNINGS PER SHARE - NET INCOME
     Basic                                                               $     2.11   $      2.12
     Diluted                                                             $     2.10   $      2.12

See accompanying notes to the consolidated financial statements.
</TABLE>


                                       11

<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        Income     Equity
                              --------  -----------   -----------    ---------  ---------   -----------   ---------  -----------
<S>                         <C>       <C>           <C>            <C>        <C>         <C>           <C>        <C>
Balance, June 30, 2001        $108,445  $10,339,790   $ 8,806,639    $(424,154) $(316,480)  $(2,233,265)  $  61,742  $16,342,717

Comprehensive income:
   Net income                                           1,873,522                                                      1,873,522
   Net unrealized gain on
    securities, net of tax
    of $95,592                                                                                              185,559      185,559
                                                                                                                      ----------
Comprehensive income                                                                                                   2,059,081
Accrued compensation expense
  for RSP                                                                         124,298                                124,298
RSP forfeited shares                                                              (23,593)                               (23,593)
Release of earned ESOP shares                40,640                     86,760                                           127,400
Cash dividends declared
   ($.46 per share)                                      (406,157)                                                      (406,157)
                              --------  -----------   -----------    ---------  ---------   -----------   ---------  -----------

Balance, June 30, 2002         108,445   10,380,430    10,274,004     (337,394)  (215,775)   (2,233,265)    247,301   18,223,746
Comprehensive income:
   Net income                                           1,884,463                                                      1,884,463
   Net unrealized gain on
    securities, net of tax
    of $128,886                                                                                             249,997      249,997
                                                                                                                     -----------
Comprehensive income                                                                                                   2,134,460
Accrued compensation expense
  for RSP                                                                          12,102                                 12,102
RSP forfeited shares                                                               (3,083)                                (3,083)
Release of earned ESOP shares                87,129                     86,760                                           173,889
Cash dividends declared
   ($.51 per share)                                      (453,161)                                                      (453,161)
                              --------  -----------   -----------    ---------  ---------   -----------   ---------  -----------

Balance, June 30, 2003        $108,445  $10,467,559   $11,705,306    $(250,634) $(206,756)  $(2,233,265)  $ 497,298  $20,087,953
                              ========  ===========   ===========    =========  =========   ===========   =========  ===========

</TABLE>
See accompanying notes to the consolidated financial statements.


                                       12
<PAGE>

                            ADVANCE FINANCIAL BANCORP
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                         Year Ended June 30,
                                                                         2003            2002
                                                                    ------------    ------------
<S>                                                               <C>             <C>
OPERATING ACTIVITIES
     Net income                                                     $  1,884,463    $  1,873,522
     Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation, amortization and accretion, net                   484,611         526,615
         Provision for loan losses                                       398,700         245,430
         Extraordinary gain on net assets acquired in merger                   -        (201,206)
         Gain on sale of loans                                          (376,989)       (260,050)
         Origination of loans held for sale                          (33,279,462)    (22,263,762)
         Proceeds from the sale of loans                              28,547,390      22,385,116
         Increase in accrued interest receivable                        (287,213)       (143,288)
         (Decrease) increase in accrued interest payable                    (622)         11,093
         Other, net                                                      (11,432)        339,791
                                                                    ------------    ------------

              Net cash (used in) provided by operating activities     (2,640,554)      2,513,261
                                                                    ------------    ------------

INVESTING ACTIVITIES
     Investment securities held to maturity:
         Purchases                                                   (18,587,601)              -
         Maturities and repayments                                     3,500,000         750,000
     Investment securities available for sale:
         Purchases                                                    (5,507,886)     (3,268,931)
         Maturities and repayments                                     7,536,997       4,507,061
     Mortgage-backed securities held to maturity:
         Purchases                                                   (19,142,043)              -
         Maturities and repayments                                     1,856,087         525,399
     Mortgage-backed securities available for sale:
         Purchases                                                    (5,756,301)     (2,512,706)
         Maturities and repayments                                     4,494,423       3,216,138
     Purchases of Federal Home Loan Bank Stock                          (621,300)       (173,100)
     Redemption of Federal Home Loan Bank Stock                             --           635,900
     Net increase in loans                                           (57,565,028)    (16,481,398)
     Purchases of premises and equipment                              (1,322,534)       (499,789)
     Branch Acquisition:
         Loans purchased                                                 (85,347)              -
         Purchase of premises and equipment                             (440,592)              -
         Premium paid on deposits                                     (5,853,373)              -
         Deposits assumed                                             88,260,100               -
         Other, net                                                     (184,924)              -
                                                                    ------------    ------------

              Net cash used in investing activities                   (9,419,322)    (13,301,426)
                                                                    ------------    ------------

FINANCING ACTIVITIES
     Net increase in deposits                                          9,510,089      20,300,060
     Increase in long term borrowings                                  7,200,000               -
     Net change in advances for taxes and insurance                      102,829         152,531
     Net cash purchase of OSFS stock                                           -      (6,041,007)
     Cash dividends paid                                                (453,161)       (406,157)
                                                                    ------------    ------------

         Net cash provided by financing activities                    16,359,757      14,005,427
                                                                    ------------    ------------

         Increase in cash and cash equivalents                         4,299,881       3,217,262

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                        11,770,440       8,553,178
                                                                    ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                            $ 16,070,321    $ 11,770,440
                                                                    ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements

                                       13

<PAGE>

                            ADVANCE FINANCIAL BANCORP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

     Debt and Equity  securities  consist of  mortgage-backed  securities,  U.S.
     Government and federal agency  obligations,  obligations of state and local
     governments  and, money funds.  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  $5,687,708  and  $578,647  in loans held for sale at June 30, 2003 and
     2002, respectively.


                                       14

<PAGE>

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

     Mortgage  Servicing rights ("MSR") are the rights to service mortgage loans
     for others and are acquired  primarily through loan sales.  Capitalized MSR
     are  reported in other  assets.  After the  serviced  residential  mortgage
     portfolio  is  stratified  by interest  rate,  the fair value of the MSR is
     determined  using the  present  value of the  estimated  future cash flows,
     assuming a market discount and certain  forecasted  prepayment  rates based
     upon industry experience.  MSR are amortized in proportion to, and over the
     period of, the estimated net servicing  income of the underlying  financial
     assets.  The  assessment  of the  impairment on MSR is based on the current
     fair  value of those  rights.  Such  impairment  is  recognized  through  a
     valuation  allowance  established  through a charge  against  gains on loan
     sales.  Total  income from  servicing  was  $161,765  and  $204,426 for the
     periods ended June 30, 2003 and 2002, respectively.

     Loans
     -----

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

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

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

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

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

                                       15

<PAGE>

            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

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

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

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

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

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

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

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

     Other Intangibles, net
     ----------------------

     Other intangibles,  net include core deposit intangibles.  The core deposit
     intangibles are being amortized over a ten year life. The recoverability of
     the carrying  value of intangible  assets is evaluated on an ongoing basis,
     and permanent declines in value, if any, are charged to expense.

                                       16

<PAGE>

            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Goodwill
     --------

     Goodwill  is the  excess  cost over the fair  value of assets  acquired  in
     connection  with a  business  acquisition.  On July 1,  2001,  the  Company
     adopted  Statement  of  Financial  Accounting  Standards  ("FAS")  No. 142,
     Goodwill and Other  Intangible  Assets,  which changed the  accounting  for
     goodwill from an amortization method to an impairment-only  approach.  This
     statement  calls for a two-step  process  for  testing  the  impairment  of
     goodwill  on at least an annual  basis.  This  approach  could  cause  more
     volatility in the Company's  reported net income because impairment losses,
     if any,  could  occur  irregularly  and in  varying  amounts.  The  Company
     performed  its  impairment  analysis of goodwill  and  determined  that the
     estimated fair value exceeded the carrying amount.


     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 is comprised  exclusively of unrealized holding gains
     on the available for sale securities portfolio.  The Company has elected to
     report the effects of other  comprehensive  income 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, 2003 and
     2002 were $7,258,813 and $7,156,302, respectively. Cash payments for income
     taxes for the fiscal years ended June 30, 2003 and 2002 were $1,038,195 and
     $985,537, respectively.

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

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

                                       17
<PAGE>

            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Stock Options (Continued)
     -------------------------

     The following  table  represents  the effect on net income and earnings per
     share had the stock-based employee compensation expense been recognized:

                                                             Year Ended
                                                               June 30
                                                        2003            2002
                                                  -------------   -------------
Net Income, as reported:                          $   1,884,463   $   1,873,522
Less pro forma expense related to stock options               -         (16,265)
                                                  -------------   -------------
Pro forma net income                              $   1,884,463   $   1,857,257
                                                  =============   =============


Basic net income per common share:
    As reported                                   $        2.11   $        2.12
    Pro forma                                     $        2.11   $        2.10

Diluted net income per common share:
    As reported                                   $        2.10   $        2.12
    Pro forma                                     $        2.10   $        2.10


     For the purposes of computing pro forma results, the Company estimated fair
     values of stock options using the Black-Scholes  option-pricing  model. The
     model requires the use of subjective assumptions that can materially affect
     fair value  estimates.  Therefore,  the pro forma  results are estimates of
     results of operations as if  compensation  expense had been  recognized for
     the stock option  plans.  The fair value of each stock  option  granted was
     estimated  using the following  weighted-average  assumptions for grants in
     2002: (1) expected dividend yield of 2.71%, (2) risk-free  interest rate of
     1.68%, (3) expected  volatility of 6% and (4) expected life of 5 years. The
     Company issued no stock options that were exercisable during 2003.


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

     In August 2001, the Financial  Accounting  Standards  Board ("FASB") issued
     FAS No. 143,  Accounting for Asset Retirement  Obligations,  which requires
     that the fair value of a liability  be  recognized  when  incurred  for the
     retirement of a long-lived asset and the value of the asset be increased by
     that amount.  The statement  also requires that the liability be maintained
     at its present value in subsequent periods and outlines certain disclosures
     for such obligations.  The adoption of this statement,  which was effective
     January 1, 2003, did not have a material effect on the Company's  financial
     position or results of operations.

     In April 2002,  the FASB issued FAS No. 145,  Recission  of FASB  Statement
     No.4,  44 and 64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
     Corrections.  FAS No. 145 rescinds FAS No.4,  which  required all gains and
     losses from  extinguishment  of debt to be  aggregated  and,  if  material,
     classified as an extraordinary item, net of related income tax effect. As a
     result, the criteria in Opinion 30 will now be used to classify those gains
     and losses.  This  statement  also  amends FASB FAS No. 13 to require  that
     certain  lease   modifications   that  have  economic  effects  similar  to
     sale-leaseback  transactions  be  accounted  for  in  the  same  manner  as
     sale-leaseback   transactions.   This   statement   also  makes   technical
     corrections to existing  pronouncements,  which are not  substantive but in
     some cases may change  accounting  practice.  FAS No. 145 is effective  for
     transactions  occurring after May 15, 2002. The adoption of FAS No. 145 did
     not have a material effect on the Company's  financial  position or results
     of operations.

     In July 2002, the FASB issued FAS No. 146,  Accounting for Costs Associated
     with Exit or Disposal  Activities,  which  requires  companies to recognize
     costs  associated  with exit or disposal  activities when they are incurred
     rather than at the date of a commitment to an exit or disposal  plan.  This
     statement replaces EITF Issue No. 94-3,  Liability  Recognition for Certain
     Employee   Termination  Benefits  and  Other  Costs  to  Exit  an  Activity
     (Including  Certain Costs Incurred in a  Restructuring).  The new statement
     will be effective for exit or disposal activities  initiated after December
     31,  2002,  the  adoption  of which did not have a  material  effect on the
     Company's financial position or results of operations.

                                       18

<PAGE>

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

     On  December  31,  2002,  the  FASB  issued  FAS No.  148,  Accounting  for
     Stock-Based Compensation - Transition and Disclosure,  which amends FAS No.
     123,  Accounting  for  Stock-Based  Compensation.  FAS No.  148  amends the
     disclosure  requirements  of FAS No. 123 to require more prominent and more
     frequent   disclosures  in  financial   statements  about  the  effects  of
     stock-based  compensation.  Under the provisions of FAS No. 123,  companies
     that adopted the preferable, fair value based method were required to apply
     that method  prospectively for new stock option awards. This contributed to
     a "ramp-up"  effect on  stock-based  compensation  expense in the first few
     years following adoption,  which caused concern for companies and investors
     because of the lack of  consistency  in reported  results.  To address that
     concern,  FAS No. 148 provides two  additional  methods of transition  that
     reflect an entity's full  complement of  stock-based  compensation  expense
     immediately upon adoption,  thereby eliminating the ramp-up effect. FAS No.
     148 also improves the clarity and prominence of  disclosures  about the pro
     forma  effects  of using the fair  value  based  method of  accounting  for
     stock-based  compensation for all  companies--regardless  of the accounting
     method used--by  requiring that the data be presented more  prominently and
     in  a  more  user-friendly   format  in  the  footnotes  to  the  financial
     statements.  In addition,  the statement  improves the  timeliness of those
     disclosures  by requiring  that this  information be included in interim as
     well as annual  financial  statements.  The transition  guidance and annual
     disclosure  provisions of FAS No. 148 are effective for fiscal years ending
     after  December 15, 2002,  with  earlier  application  permitted in certain
     circumstances.   The  interim  disclosure   provisions  are  effective  for
     financial  reports  containing  financial  statements  for interim  periods
     beginning after December 15, 2002.


     In April,  2003, the FASB issued FAS No. 149, Amendment of Statement 133 on
     Derivative  Instruments and Hedging  Activities.  This statement amends and
     clarifies   accounting  for  derivative   instruments,   including  certain
     derivative  instruments  embedded  in  other  contracts,  and  for  hedging
     activities  under FAS No.  133.  The  amendments  set forth in FAS No.  149
     improve  financial  reporting by requiring that  contracts with  comparable
     characteristics be accounted for similarly.  In particular,  this statement
     clarifies  under  what   circumstances  a  contract  with  an  initial  net
     investment meets the characteristic of a derivative as discussed in FAS No.
     133. In  addition,  it  clarifies  when a  derivative  contains a financing
     component that warrants  special  reporting in the statement of cash flows.
     FAS No. 149 amends  certain other  existing  pronouncements.  Those changes
     will result in more consistent  reporting of contracts that are derivatives
     in  their  entirety  or that  contain  embedded  derivatives  that  warrant
     separate accounting. This statement is effective for contracts entered into
     or modified  after June 30,  2003,  except as stated  below and for hedging
     relationships  designated  after  June 30,  2003.  The  guidance  should be
     applied prospectively.  The provisions of this statement that relate to FAS
     No. 133 Implementation  Issues that have been effective for fiscal quarters
     that  began  prior to June 15,  2003,  should  continue  to be  applied  in
     accordance with their  respective  effective  dates.  In addition,  certain
     provisions relating to forward purchases or sales of when-issued securities
     or other  securities  that do not yet exist,  should be applied to existing
     contracts as well as new  contracts  entered into after June 30, 2003.  The
     adoption of this  statement  has not and is not expected to have a material
     effect on the Company's reported equity.


     In May 2003, the FASB issued FAS No. 150,  Accounting for Certain Financial
     Instruments  with  Characteristics  of Both  Liabilities  and Equity.  This
     statement  establishes  standards for how an issuer classifies and measures
     certain financial  instruments with characteristics of both liabilities and
     equity. It requires that an issuer classify a financial  instrument that is
     within its scope as a liability (or an asset in some  circumstances).  Such
     instruments may have been previously  classified as equity.  This statement
     is effective for financial  instruments  entered into or modified after May
     31, 2003,  and otherwise is effective at the beginning of the first interim
     period  beginning  after June 15, 2003.  The adoption of this statement has
     not and is not expected to have a material effect on the Company's reported
     equity.

                                       19

<PAGE>

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

     In  November,  2002,  the FASB issued  Interpretation  No. 45,  Guarantor's
     Accounting and Disclosure  requirements for Guarantees,  Including Indirect
     Guarantees of Indebtedness of Others. This interpretation elaborates on the
     disclosures  to be made by a guarantor in its interim and annual  financial
     statements  about its  obligations  under  certain  guarantees  that it has
     issued.  This  interpretation  clarifies  that a  guarantor  is required to
     disclose (a) the nature of the guarantee, including the approximate term of
     the guarantee,  how the guarantee  arose,  and the events or  circumstances
     that would require the guarantor to perform  under the  guarantee;  (b) the
     maximum  potential  amount of future payments under the guarantee;  (c) the
     carrying amount of the liability,  if any, for the guarantor's  obligations
     under  the  guarantee;  and (d)  the  nature  and  extent  of any  recourse
     provisions  or  available  collateral  that would  enable the  guarantor to
     recover the amounts  paid under the  guarantee.  This  interpretation  also
     clarifies that a guarantor is required to recognize,  at the inception of a
     guarantee, a liability for the obligations it has undertaken in issuing the
     guarantee,  including its ongoing obligation to stand ready to perform over
     the term of the guarantee in the event that the specified triggering events
     or  conditions  occur.  The  objective of the initial  measurement  of that
     liability is the fair value of the guarantee at its inception.  The initial
     recognition and initial  measurement  provisions of this interpretation are
     applicable on a prospective  basis to guarantees  issued or modified  after
     December 31, 2002,  irrespective of the guarantor's  fiscal  year-end.  The
     disclosure  requirements in this interpretation are effective for financial
     statements of interim or annual periods ending after December 15, 2002. The
     adoption of this  standard did not have a material  effect on the Company's
     financial statements.

     In January,  2003, the FASB issued  Interpretation No. 46, Consolidation of
     Variable  Interest  Entities,  in an effort to expand  upon and  strengthen
     existing  accounting  guidance that addresses when a company should include
     in its  financial  statements  the assets,  liabilities  and  activities of
     another entity.  The objective of  Interpretation 46 is not to restrict the
     use of variable  interest  entities but to improve  financial  reporting by
     companies involved with variable interest entities.  Until now, one company
     generally  has  included  another  entity  in  its  consolidated  financial
     statements  only if it  controlled  the entity  through  voting  interests.
     Interpretation  46 changes that by requiring a variable  interest entity to
     be  consolidated  by a company if that  company is subject to a majority of
     the risk of loss from the variable interest entity's activities or entitled
     to  receive a  majority  of the  entity's  residual  returns  or both.  The
     consolidation  requirements  of  Interpretation  46  apply  immediately  to
     variable   interest   entities   created  after   January  31,  2003.   The
     consolidation requirements apply to older entities in the first fiscal year
     or interim period beginning after June 15, 2003.  Certain of the disclosure
     requirements  apply in all  financial  statements  issued after January 31,
     2003, regardless of when the variable interest entity was established.  The
     adoption of this  statement  has not and 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 COMBINATIONS

     Purchase of outstanding stock of Ohio State Financial Services
     --------------------------------------------------------------

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

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

                                       20
<PAGE>


2.   BUSINESS COMBINATIONS (Continued)

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

<TABLE>
<CAPTION>

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

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

              SHAREHOLDERS' EQUITY                                                             7,861,147
              --------------------                                                           -----------
                   Total Liabilities and Shareholders' equity                                $32,544,376
                                                                                             ===========
</TABLE>

     Branch acquisition from The Second National Bank of Warren
     ----------------------------------------------------------

     At the close of business,  February 7, 2003, the Company completed a branch
     purchase  and deposit  assumption  of The Second  National  Bank of Warren,
     Ohio's two Steubenville, Ohio branches. The assumption and purchase had the
     following  net  classifications  on the  Company's  Balance Sheet as of the
     close of business February 7, 2003:

<TABLE>
<CAPTION>
              ASSETS
              ------
<S>                                                                                      <C>
              Cash on hand and in banks                                                      $   403,482
              Interest-bearing deposits with other institutions                               81,569,300
              Loans, net                                                                          85,347
              Office Properties and Equipment, net                                               368,650
              Goodwill                                                                         4,700,472
              Core Deposit Intangible                                                          1,783,735
                                                                                             -----------
                  Total Assets                                                               $88,910,986
                                                                                             ===========

              Liabilities
              -----------

              Deposits                                                                       $88,665,696
              Accrued interest payable                                                           182,189
              Accounts payable and other liabilities                                              63,101
                                                                                            ------------
                  Total Liabilities                                                          $88,910,986
                                                                                             ===========
</TABLE>

     The "Core Deposit  Intangible" noted above is included on the Balance Sheet
     in the  line  item  "Other  Intangibles,  net".  The  total  amount  of the
     intangible  amortized  for the year ended June 30,  2003 was  $74,322.  The
     estimated life of the Core Deposit Intangible is 120 months.

     On March 31, 2003, the Bank notified the Office of Thrift  Supervision  and
     the customers of the Market Street branch of the Company's  intent to close
     that branch  effective June 30, 2003. The Market Street location was one of
     the two branches  acquired  from the Second  National  Bank of Warren as of
     February  7, 2003.  The closure was due to this  branch's  close  proximity
     (approximately  1.1 miles) to the de novo branch built on Dunbar  Avenue in
     Steubenville, Ohio and opened in September 2002.

                                       21


<PAGE>

3.   EXTRAORDINARY ITEM

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

4.   EARNINGS PER SHARE

     There were no convertible securities, which would affect the denominator 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>
                                                                              2003             2002
                                                                          -----------       ---------
<S>                                                                      <C>              <C>
         Weighted-average common shares outstanding                        1,084,450        1,084,450
         Average treasury stock shares                                      (152,165)        (152,165)
         Average unearned ESOP and RSP shares                                (40,233)         (47,873)
                                                                          -----------      -----------
         Weighted-average common shares and
             common stock equivalents used to calculate basic EPS            892,052          884,412

         Additional common stock equivalents (65,061 options granted,
           none exercised) used to calculate diluted EPS                       4,188                -
                                                                           -----------   ------------
         Weighted-average common shares and
             common stock equivalents used to calculate
              diluted EPS                                                    896,240          884,412
                                                                           =========        =========
</TABLE>

5.   INVESTMENT SECURITIES

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

<TABLE>
<CAPTION>
                                                                     2003
                                             ------------------------------------------------------
                                                              Gross         Gross
                                              Amortized     Unrealized    Unrealized       Fair
                                                 Cost         Gains        Losses         Value
                                             -----------   -----------   -----------    -----------
<S>                                        <C>            <C>          <C>            <C>
Held-to-maturity
    U.S. Government and Agency Obligations   $11,998,214    $   90,088   $         -    $12,088,302
    Municipal Bond Obligations                 3,088,261       122,043             -      3,210,304
                                             -----------   -----------   -----------    -----------
         Total held to maturity               15,086,475       212,131             -     15,298,606
                                             -----------   -----------   -----------    -----------

Available-for-sale
    U.S. Government and Agency Obligations     3,000,000        31,508             -      3,031,508
    Municipal Bond Obligations                 5,759,116       545,736             -      6,304,852
    Corporate Bond Obligations                 1,995,418        47,878             -      2,043,296
    Money Fund Securities                         15,392             -          (347)        15,045
                                             -----------   -----------   -----------    -----------
         Total available for sale             10,769,926       625,122          (347)    11,394,701
                                             -----------   -----------   -----------    -----------

         Total Investment Securities         $25,856,401   $   837,253   $      (347)   $26,693,307
                                             ===========   ===========   ===========    ===========
</TABLE>


                                       22

<PAGE>

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

         Total Investment Securities         $12,793,886   $   261,202   $   (55,726)   $12,999,362
                                             ===========   ===========   ===========    ===========
</TABLE>
     The weighted average  interest rate on investment  securities was 3.85% and
     5.36% at June 30, 2003 and 2002, respectively.

     The amortized cost and estimated fair value of debt  securities at June 30,
     2003, 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                        $ 1,995,418    $ 2,043,296
         After one through five years             14,015,392     14,127,803
         After five through ten years                998,214      1,007,052
         After ten years                           8,847,377      9,515,156
                                                ------------   ------------
              Total                              $25,856,401    $26,693,307
                                                 ===========    ===========

     Proceeds  received on securities as a result of maturities  and calls prior
     to maturity were  $11,036,997  and  $4,507,061 for the years ended June 30,
     2003 and 2002, respectively. There were no gains or losses on sales for the
     years ended June 30, 2003 and 2002, respectively.

6.   MORTGAGE-BACKED SECURITIES

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

<TABLE>
<CAPTION>
                                                                                2003
                                                         ------------------------------------------------------
                                                                          Gross         Gross
                                                          Amortized     Unrealized    Unrealized       Fair
                                                             Cost         Gains        Losses         Value
                                                         -----------   -----------   -----------    -----------
<S>                                                      <C>            <C>          <C>            <C>
     Held-to-maturity
         Government National Mortgage Association         $ 5,193,798    $   44,823    $       -     $ 5,238,621
         Federal Home Loan Mortgage Corporation             9,669,740        28,705            -       9,698,445
         Federal National Mortgage Association              3,778,994        34,958            -       3,813,952
                                                           ----------   -----------    ---------     -----------
              Total held to maturity                       18,642,532       108,486            -      18,751,018
                                                           ----------     ---------    ---------      ----------
     Available-for-sale
         Government National Mortgage Association           5,835,216       113,113      (18,299)      5,930,030
         Federal Home Loan Mortgage Corporation               259,153        12,665            -         271,818
         Federal National Mortgage Association              2,754,986        23,064            -       2,778,050
                                                         ------------     ---------    ---------     -----------
              Total available for sale                      8,849,355       148,842      (18,299)      8,979,898
                                                         ------------     ---------    ---------     -----------

              Total mortgage backed securities            $27,491,887      $257,328    $ (18,299)    $27,730,916
                                                          ===========      ========    =========     ===========
</TABLE>
                                       23

<PAGE>

6.   MORTGAGE-BACKED SECURITIES (Continued)


<TABLE>
<CAPTION>
                                                                                   2002
                                                           ------------------------------------------------------
                                                                            Gross         Gross
                                                            Amortized     Unrealized    Unrealized       Fair
                                                               Cost         Gains        Losses         Value
                                                          -----------   -----------   -----------    -----------
<S>                                                      <C>            <C>         <C>            <C>
     Held-to-maturity
         Government National Mortgage Association          $  299,120      $ 16,564   $        -     $   315,684
         Federal Home Loan Mortgage Corporation               160,369        12,707            -         173,076
         Federal National Mortgage Association                936,817        24,064            -         960,881
                                                           ----------      --------   ----------      ----------
              Total held to maturity                        1,396,306        53,335            -       1,449,641
                                                           ----------     ---------   ----------      ----------
     Available-for-sale
         Government National Mortgage Association           5,634,980       136,007            -       5,770,987
         Federal Home Loan Mortgage Corporation               654,598        20,815            -         675,413
         Federal National Mortgage Association              1,332,119        13,047            -       1,345,166
                                                           ----------      --------   ----------      ----------
              Total available for sale                      7,621,697       169,869            -       7,791,566
                                                           ----------      --------   ----------      ----------

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

     Mortgage-backed   securities  provide  for  periodic,   generally  monthly,
     payments of principal and interest and have contractual  maturities ranging
     from  three to thirty  years at June 30,  2003.  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, 2003,  mortgage-backed  securities
     with a book value of $2,570,995 and a fair value of $2,629,418 are one-year
     adjustable types currently paying a weighted average 3.759%.  The remaining
     instruments  are all fixed  rate types  with a  weighted  average  yield of
     5.00%. Certain instruments have been classified as available for sale based
     on 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, 2003 or 2002.

7.   LOANS RECEIVABLE

     Loans receivable are comprised of the following at June 30:

                                                2003           2002
                                            ------------   ------------

           Mortgage loans:
                1 - 4 family                $126,106,815   $ 91,663,132
                Multi-family                   8,227,328      6,864,328
                Non-residential               39,099,195     36,146,829
                Construction                  10,074,633      4,338,936
                                            ------------   ------------
                     Total mortgage loans    183,507,971    139,013,225
                                            ------------   ------------
           Consumer loans:
                Home improvement                 900,060        943,384
                Automobile - Direct            8,761,516      7,377,763
                Automobile - Indirect         22,140,818      9,798,701
                Share loans                    1,914,628      1,589,842
                Other                          2,687,302      2,613,243
                                            ------------   ------------
                     Total consumer loans     36,404,324     22,322,933
                                            ------------   ------------

           Commercial loans                   17,383,993     14,824,483
                                            ------------   ------------
           Less:
                Loans in process               6,844,741      2,966,039
                Net deferred loan fees           116,178         79,647
                Allowance for loan losses      1,095,822        969,088
                                            ------------   ------------
                                               8,056,741      4,014,774
                                            ------------   ------------

                    Total loans             $229,239,547   $172,145,867
                                            ============   ============

                                     24
<PAGE>


7.   LOANS RECEIVABLE (Continued)


     Single  family  mortgage  loans  serviced  for Freddie  Mac,  which are not
     included  in  the  Consolidated  Balance  Sheet,  totaled  $42,152,677  and
     $35,009,670 at June 30, 2003 and 2002, 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:

                                               2003          2002
                                           -----------   -----------

          Commitments to originate loans
               Fixed rate                  $ 7,340,000   $ 1,149,575
               Variable rate               $ 1,921,900   $   943,700
          Loans in process                 $ 6,844,741   $ 2,966,039
          Unused lines of credit           $15,013,399   $10,506,511
          Letters of credit                $   126,305   $    94,305

     The range of  interest  rates on fixed rate loan  commitments  was 4.75% to
     6.75% at June 30, 2003.

     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,  2003 is as
     follows:

            Balance                              Amount          Balance
              2002           Additions          Collected          2003
           -----------       ----------         ---------      -----------
            $1,573,204       $1,413,130         $1,511,381      $1,474,953

     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, 2003 and 2002,
     loans  outstanding  to  individuals  and  businesses are dependent upon the
     local economic conditions in its immediate trade area.

                                       25
<PAGE>


8.   ALLOWANCE FOR LOAN LOSSES

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

                                                 2003         2002
                                             ----------   ----------

Balance, beginning of period                 $  969,088   $  779,170
Add:
     Provisions charged to operations           398,700      245,430
     Acquired through business combination            -      170,759
     Loan recoveries                             38,343       15,529
                                             ----------   ----------
         Total                                1,406,131    1,210,888
Less: loans charged off                         310,309      241,800
                                             ----------   ----------

Balance, end of period                       $1,095,822   $  969,088
                                             ==========   ==========

     Nonperforming  loans totaled $3,080,446 and $2,012,560 at June 30, 2003 and
     2002,  respectively.  Impaired loans totaled  $589,659 and $890,178 at June
     30, 2003 and 2002, respectively. Such amounts have been subject to specific
     allowances  for loan  losses of $80,104  and  $48,202 at June 30,  2003 and
     2002,  respectively.  The average investment in impaired loans for the year
     ended June 30, 2003 was $848,693.  The interest income potential based upon
     the original terms of the contracts of these impaired loans was $83,192 for
     the year ended June 30, 2003, of this amount,  $50,087 has been  recognized
     as income for the period ended June 30, 2003.

9.   PREMISES AND EQUIPMENT, NET

     Premises and equipment are summarized by major classification as follows:

                                                   2003         2002
                                                ----------   ----------

           Land                                 $  416,857   $  303,857
           Buildings and improvements            4,639,219    3,656,304
           Furniture, fixtures, and equipment    3,195,790    2,601,056
                                                ----------   ----------
                Total                            8,251,866    6,561,217
           Less accumulated depreciation         3,182,793    2,659,625
                                                ----------   ----------

                Premises and equipment, net     $5,069,073   $3,901,592
                                                ==========   ==========

     Depreciation  charged to  operations  amounted to $526,906 and $426,492 for
     the years ended June 30, 2003 and 2002, respectively.

10.  GOODWILL

     As of June 30, 2003 , Goodwill had a gross  carrying  amount of $4,700,472.
     The gross  carrying  amount of  goodwill  is tested for  impairment  in the
     fourth quarter of the fiscal period,  after the annual forecasting process.
     Due to an  expected  retention  of  assumed  deposits  associated  with the
     premium  paid  creating  the  goodwill,  no  goodwill  impairment  loss was
     recognized in the current year.

11.  OTHER INTANGIBLES, NET

     As of June 30, 2003 , Other intangibles, net had a gross carrying amount of
     $1,783,735  and  accumulated  amortization  of $74,322  for a net amount of
     $1,709,314.  The estimated  amortization  of the  intangible  asset for the
     years ending June 30, 2004 through 2012 is expected to be $178,374 for each
     year.

12.  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.  Currently,  the  required  investment  is
     determined to be 5% of outstanding borrowings to the Federal Home Loan Bank
     of Pittsburgh plus .75% of the Bank's unused borrowing capacity. The amount
     may vary between 4.5% -6% of outstanding  borrowings plus 0%-1.5% of unused
     borrowing  capacity  as  determined  by  the  Federal  Home  Loan  Bank  of
     Pittsburgh's Board of Directors routinely throughout the calendar year.

                                       26
<PAGE>

13.  ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable consists of the following:

                                            2003         2002
                                      ----------   ----------

         Investment securities        $  240,342   $  144,336
         Mortgage-backed securities      110,314       45,885
         Loans receivable              1,096,869      970,091
                                      ----------   ----------
              Total                   $1,447,525   $1,160,312
                                      ==========   ==========

14.  DEPOSITS

     Deposit accounts are summarized as follows:
<TABLE>
<CAPTION>

                                                                 2003                              2002
                                                    ----------------------------     ------------------------------
                                                                       Percent of                        Percent of
                                                        Amount          Portfolio         Amount         Portfolio
                                                    --------------    -----------      -----------     ------------

<S>                                               <C>                   <C>        <C>                   <C>
         Non-interest-bearing                       $   11,502,265        4.2%       $    7,299,438        4.2%
                                                    --------------    -------        --------------    -------
         Savings accounts                               49,058,886        18.0           36,030,981       20.6
         NOW accounts                                   12,813,920         4.7           10,829,261        6.2
         Money market accounts                          42,048,231        15.4           19,049,726       10.9
                                                     -------------     --------       -------------     ------
                                                       103,921,037        38.1           65,909,968       37.7
                                                     -------------     -------        -------------     ------

         Time certificates of deposit:
              0.00 -  2.00%                             41,540,868        15.2                    -        -
              2.01 -  4.00%                             69,369,394        25.4           59,590,853       34.0
              4.01 -  6.00%                             42,750,722        15.7           31,149,561       17.8
              6.01 -  8.00%                              3,744,646         1.4           11,108,923        6.3
                                                     -------------     -------        -------------     ------
                                                       157,405,630        57.7          101,849,337       58.1
                                                      ------------     -------        -------------     ------

                  Total                               $272,828,932       100.0%        $175,058,743      100.0%
                                                      ============       =====         ============      =====


</TABLE>

     The scheduled  maturities of time  certificates of deposit at June 30, 2003
are as follows:

                                                  Amount

Within one year                                            $ 77,594,330
Beyond one year but within two years                         36,357,768
Beyond two years but within three years                      17,555,939
Beyond three years but within five years                     12,519,245
Beyond five years                                            13,378,348
                                                           ------------

     Total                                                 $157,405,630
                                                           ============

     The Company had time certificates  with a minimum  denomination of $100,000
     in the amount of approximately $20,798,171 and $15,475,283 at June 30, 2003
     and 2002  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:

                                                    2003               2002
                                              -----------        -----------

Passbooks                                     $   685,340        $   811,947
NOW and Money Market Deposit accounts             634,213            625,139
Time certificates                               4,599,024          4,559,637
                                               ----------         ----------
                                               $5,918,577         $5,996,723
                                               ==========         ==========



                                      27


<PAGE>


15.  ADVANCES FROM FEDERAL HOME LOAN BANK

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

<TABLE>
<CAPTION>
                                Principal       Interest       Interest
                                    Due           Due            Rate                2003                 2002
                               -----------      --------       --------         -------------      -------------
<S>                          <C>             <C>               <C>            <C>                 <C>
         Advance               06-30-2005       Monthly          6.36%          $  5,000,000        $  5,000,000
         Advance               11-03-2010       Monthly          6.05%              5,000,000          5,000,000
         Advance               12-20-2010       Monthly          5.54%              5,000,000          5,000,000
         Advance               02-28-2011       Monthly          4.96%              5,000,000          5,000,000
                                                                                 ------------       ------------
                                                                                  $20,000,000        $20,000,000
                                                                                  ===========        ===========
</TABLE>


     These  borrowings  are subject to the terms and conditions of the Advances,
     Collateral Pledge and Security Agreement between the Federal Home Loan Bank
     of Pittsburgh and the Bank. All advances, at June 30, 2003 have fixed rates
     with putable options. In the event the advances are called, the Company has
     the right to payoff the advance without penalty. The putable options are as
     follows:

                        Principal      Putable     Interest
                           Due          Date        Rate      Renewable Terms
                        ----------   ---------     ------    ------------------
Advance                 06-30-2005    9-30-2003    6.36%    3 month Libor +.15
Advance                 11-03-2010   11-03-2003    6.05%    3 month Libor +.20
Advance                 12-20-2010   12-20-2004    5.54%    3 month Libor +.20
Advance                 02-28-2011    8-27-2003    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,
     2003 the Bank has a borrowing  limit of  approximately  $145 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.

16.  OTHER BORROWINGS

     Other  borrowings  at June 30, 2003  consisted  of $7.2 million of floating
     rate trust capital securities. In December 2002, the Company formed Advance
     Statutory Trust I (the "Trust"). On December 19, 2002, the Trust issued and
     sold $7.2  million of floating  rate capital  securities  in a pooled trust
     offering.  The  interest  rate resets every  quarter to 3-month  LIBOR plus
     3.25% with an  initial  rate of 4.66%.  The  current  rate in effect  until
     September 26, 2003 is 4.26%. The capital securities mature in 2032, and the
     Company has the right to redeem the  securities  prior to the maturity date
     but no sooner than five years after the issuance.

17.  INCOME TAXES

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

                                                  2003              2002
                                              -----------        -----------
         Currently payable:
              Federal                         $   848,056        $   853,590
              State                               201,423            192,909
                                              -----------        -----------
                                                1,049,479          1,046,499
              Deferred                            (40,282)          (213,507)
                                             -------------        -----------

                  Total                        $1,009,197         $  832,992
                                               ==========         ==========


                                       28

<PAGE>


17.  INCOME TAXES (Continued)


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

                                                         2003         2002
                                                    ---------    ---------
          Deferred tax assets
               Allowance for loan losses            $ 372,579    $ 329,490
               Loan origination fees, net               6,338        7,256
               Other, net                              30,468        7,692
                                                    ---------    ---------
                   Deferred tax assets                409,385      344,438
                                                    ---------    ---------

          Deferred tax liabilities
               Premise and equipment depreciation     136,743      111,102
               Tax reserve for loan losses             12,203       36,610
               Net unrealized gain on securities      256,184      127,398
               Other, net                             125,648      102,217
                                                    ---------    ---------
                   Deferred tax liabilities           530,778      377,327
                                                    ---------    ---------
                   Net deferred tax liability       $(121,393)   $ (32,889)
                                                    =========    =========

     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.  Subject  to  prevailing
     corporate tax rates,  the Bank owes $12,203 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>

                                                                             2003                2002
                                                                 ---------------------   ----------------------
                                                                  Amount      Percent     Amount        Percent
<S>                                                            <C>            <C>        <C>            <C>
         Provision at statutory rate                             $  983,844     34.0%      $851,804       34.0%
         State income tax expense, net of federal
          tax benefit                                               132,939      4.6        127,320        5.0
         Tax exempt interest                                       (108,465)    (3.8)      (103,017)      (4.1)
         Other, net                                                     879      -.1        (43,115)      (1.7)
                                                                 -----------   -----       ---------      ----
              Actual expense and effective rate                  $1,009,197     34.9%      $832,992       33.2%
                                                                 ==========     ====       ========       ====

</TABLE>

18.  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  $51,360  and  $42,711  for the  years  ended  June 30,  2003 and  2002,
     respectively.

19.  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.

                                       29

<PAGE>


19.  RESTRICTED STOCK PLAN (RSP) (Continued)

     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, 2003,
     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 41,424  shares  were  vested as of June 30,  2003.  Total
     operating  expense  attributed  to the RSP amounted to $12,102 and $124,298
     for the years ended June 30, 2003 and 2002.

20. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

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

     The Bank makes quarterly  contributions  to the trust to allow the trust to
     make the required  loan  payments to the Company.  Shares are released from
     collateral based upon the proportion of annual  principal  payments made on
     the loan each year and  allocated  to  qualified  employees.  As shares are
     released from collateral,  the Bank reports compensation expense based upon
     the amounts  contributed or committed to be  contributed  each year and the
     shares become  outstanding for earnings per share  computations.  Dividends
     paid on  allocated  ESOP shares are  recorded  as a  reduction  in retained
     earnings.  Dividends  paid on  unallocated  shares  were used to reduce the
     company's  contribution  to the ESOP plan for the years ended June 30, 2003
     and 2002.  Compensation  expense for the ESOP was $173,889 and $127,402 for
     the years ended June 30, 2003 and 2002, respectively.

     The following table represents the components of the ESOP shares:

                                                       2003            2002
                                                    ---------      ---------

         Allocated shares                              56,280         47,604
              Shares released for allocation            4,338          4,338
         Shares distributed                            (1,056)        (1,056)
         Unreleased shares                             26,138         34,814
                                                    ---------      ---------
         Total ESOP share                              85,700         85,700
                                                    =========      =========
         Fair value of unreleased shares             $594,640       $616,208
                                                     ========       ========

21.  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,  2003 the  initial  stock
     options granted remain outstanding with none being exercised.

     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 $33,181
     and $29,928 for the years ended June 30, 2003 and 2002.

                                       30
<PAGE>
22.  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.

23.  COMMITMENTS AND CONTINGENT LIABILITIES

     Lease  Commitments
     ------------------
     The future lease commitments as of June 30, 2003 for all
     noncancellable equipment and land leases follows:

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

                       2004                            $    108,600
                       2005                                 108,600
                       2006                                 112,560
                       2007                                 112,160
                       2008                                  83,160
                2009 and thereafter                       2,187,450
                                                        -----------
                                                        $ 2,702,530
                                                        ===========
     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.

24   FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

     The estimated carrying amounts and fair values at June 30 are as follows:

<TABLE>
<CAPTION>

                                                               2003                                  2002
                                                --------------------------------    ----------------------------
                                                                   Estimated                        Estimated
                                                    Carrying         Fair           Carrying          Fair
                                                    Amount           Value          Amount            Value
                                                --------------   ---------------   -------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial assets:
              Cash and cash equivalents          $  16,070,321     $  16,070,321     $ 11,770,440  $  11,770,440
              Investment securities
                    Held to maturity                15,086,475        15,298,606                -              -
                    Available for sale              11,394,701        11,394,701       12,999,362     12,999,362
              Mortgage-backed securities:
                   Held to maturity                 18,642,532        18,751,018        1,396,306      1,449,641
                   Available for sale                8,979,898         8,979,898        7,791,566      7,791,566
              Loans held for sale                    5,687,708         5,772,410          578,647        636,512
              Loans receivable                     229,239,547       235,999,547      172,145,867    176,106,943
              Federal Home Loan Bank Stock           1,679,400         1,679,400        1,058,100      1,058,100
              Accrued interest receivable            1,447,525         1,447,225        1,160,312      1,160,312
                                               ---------------    --------------   --------------  -------------
                  Total                          $ 308,228,107     $ 315,393,126     $208,900,600   $212,972,876
                                                 =============     =============     ============   ============
</TABLE>

                                       31


<PAGE>


24   FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (Continued)

<TABLE>
<CAPTION>
                                                               2003                                  2002
                                                --------------------------------    ----------------------------
                                                                   Estimated                         Estimated
                                                    Carrying         Fair             Carrying        Fair
                                                    Amount           Value             Amount         Value
                                                --------------   ---------------   --------------   -------------
<S>                                            <C>               <C>               <C>           <C>
         Financial liabilities:
              Deposits                           $ 272,828,932     $ 276,541,932     $175,058,743  $ 176,154,743
              Advances from FHLB                    20,000,000        22,989,000       20,000,000     21,539,000
              Other borrowings                       7,200,000         8,192,160                -              -
              Advance payment by borrowers
               for taxes and insurance                 507,049           507,049          404,220        404,220
              Accrued interest payable                  85,963            85,963           86,583         86,583
                                              ----------------  ----------------   --------------   ------------
                  Total                          $ 300,621,944     $ 308,316,104     $195,549,546   $198,184,546
                                                 =============     =============     ============   ============
</TABLE>

     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, Advances from Federal Home Loan Bank, and Other Borrowings
     ---------------------------------------------------------------------------

     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.

                                       32

<PAGE>


24   FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (Continued)


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

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

25.  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 to  maintain a minimum  amount and ratio of
     Total capital, 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, 2003
     the Company and the Bank meet all capital  adequacy  requirements  to which
     they are subject.

     As of June 30, 2003, the most recent  notification  from the 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 Bank 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  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,
                                                    2003           2002                  2003            2002
                                               -----------    -------------         -----------     ------------
<S>                                          <C>              <C>                 <C>              <C>
         Total equity                          $20,087,953      $18,223,746         $25,995,905      $16,642,895
         Intangibles                             6,336,047          445,160           6,336,047          445,160
         Unrealized gain (loss) - securities       497,298          247,301             497,298          247,301
                                             -------------   --------------       -------------   --------------

         Tier I, core, and tangible capital     13,254,608       17,531,285          19,162,560       15,950,434

         Allowance for loan losses               1,095,822          969,088           1,095,822          969,088
                                             -------------    -------------       -------------    -------------

         Risk-based capital                    $14,350,430      $18,500,373         $20,258,382      $16,919,522
                                               ===========      ===========         ===========      ===========

</TABLE>
                                       33

<PAGE>



25.  CAPITAL REQUIREMENTS ( Continued)

     The actual capital amounts and ratios were as follows:

<TABLE>
<CAPTION>
                                                                            Company at June 30,
                                                           ----------------------------------------------------
                                                                    2003                            2002
                                                           -----------------------         --------------------
                                                               Amount       Ratio           Amount        Ratio
                                                               ------       -----           ------        -----

<S>                                                     <C>                <C>          <C>              <C>
     Tangible Capital to Adjusted Assets
     -----------------------------------
         Actual                                           $  13,254,608      4.12%        $17,531,285      8.21%
         For Capital Adequacy Purposes                        4,825,706      1.50           3,202,276      1.50
         To be "Well Capitalized"                                   N/A       N/A                 N/A       N/A


</TABLE>

<TABLE>
<CAPTION>
                                                                                Bank at June 30,
                                                           ----------------------------------------------------
                                                                    2003                            2002
                                                           -----------------------         --------------------
                                                               Amount       Ratio           Amount        Ratio
                                                               ------       -----           ------        -----
<S>                                                     <C>               <C>        <C>                <C>
     Total Capital to Risk-Weighted Assets
     -------------------------------------
         Actual                                           $  20,258,382     10.24%     $  16,919,522      11.94%
         For Capital Adequacy Purposes                       15,820,836      8.00         11,340,560       8.00
         To be "Well Capitalized"                            19,776,045     10.00         14,175,700      10.00

     Tier I Capital to Risk-Weighted Assets
     --------------------------------------
         Actual                                           $  19,162,560      9.69%     $  15,950,434      11.25%
         For Capital Adequacy Purposes                        7,910,241      4.00          5,670,280       4.00
         To be "Well Capitalized"                            11,865,362      6.00          8,505,420       6.00

     Core Capital to Adjusted Assets
     -------------------------------
         Actual                                           $  19,162,560      6.09%     $  15,950,434       7.48%
         For Capital Adequacy Purposes                       12,576,597      4.00          8,524,507       4.00
         To be "Well Capitalized"                            15,720,746      5.00         10,655,634       5.00

     Tangible Capital to Adjusted Assets
     -----------------------------------
         Actual                                           $  19,162,560      5.96%     $  15,950,434       7.48%
         For Capital Adequacy Purposes                        4,822,567      1.50          3,196,690       1.50
         To be "Well Capitalized"                                   N/A       N/A                N/A        N/A


</TABLE>


                                       34